When the three co-founders set up Umbo, we started with a problem in mind – the lack of allied health services in rural communities. We identified that there was a gap in these areas due to market failure. As such, setting up a traditional company seemed illogical. Market failure existed because with limited demand (ie, less people), there was less ability to profit in these rural communities.
In the end, we decided to start a social enterprise. We don’t classify Umbo as a run of the mill company, because at the core of Umbo’s mission is delivering social impact – through giving people in rural communities access to allied health services.
Here are the top five reasons why Umbo became a social enterprise.
1) There’s a sustainable business model
A social enterprise has two facets to it, evident in its name. Social – it sets out to deliver some kind of social purpose. Enterprise – it is a business.
For Umbo to succeed, it has to have a sustainable business model which works and allows Umbo to continue delivering social impact.
At the time, we noted that there are available pools of funding, such as the NDIS, to deliver these services. There was also the ability of some clients to pay, which could sustain or even cross -subsidise services to people in poorer communities.
If we could make the business work, we could help a huge amount of people lacking access to services.
2) It would give us control over how we deliver good
If we were to set up a charity, this would involve year on year fundraising. While this is possible, it not only involves a huge amount of effort, but also reporting. This can be a potential distraction from the core work of actually helping people.
Having had considerable experience in the non-profit sector, we knew there would also be strict donor requirements about how funds could be used. A typical issue is the inability to pay for administration costs, core costs which are required to run a successful operation.
While well intentioned, donor control over use of funds can be highly damaging to the effectiveness of an operation.
As a social enterprise is effectively a business with a social purpose, there is much more freedom over how funds are used.
3) We can attract not just philanthropists, but also investors
A charity can attract philanthropists – generous people who want to donate money to support a cause. With the exception of a tax deduction, there is nothing stopping philanthropists from giving to social enterprises. In fact, Umbo has been the recipient of a generous grant from the Snow Foundation in 2019.
On top of philanthropists, a social enterprise can attract investors, especially if there is the potential for the business to scale and return even greater profit in the future.
We see the divide between rural and urban communities in many countries, not just Australia, and we think that Umbo can help these communities through scaling.
As such, socially conscious investors are able to help us deliver this impact.
4) We can pay decent wages for people to survive!
Ask anyone who has worked for a considerable time in the non-profit sector what their number one frustration is, and lower pay will probably be one of the first thing they’ll say. This is why the average career span of someone working in a charity is low.
It’s simply not a career path that most people can keep up.
For me personally, over 10 hours of my weeks has been spent volunteering for OIC Cambodia, six years after starting it.
With a social enterprise, if our business model works, we can not only pay our staff a decent wage, we can pay ourselves.
5) It doesn’t restrict us in the future to do what we like
By starting off as a social enterprise, in some ways, a less complex structure than a charity, there is always the possibility to make changes to the structure in the future.
For starters, Umbo has every intention of pursuing B Corporation Certification which indicates that the business balances purpose and profit. We would be legally required to consider the impact of decisions on workers, customers, suppliers, community, and the environment.
If the need arises, there is also the possibility of establishing a charity, perhaps a separate entity to the current structure. This could have a different and yet aligned mission to the current structure.
Ultimately, being a social enterprise allows us to focus on the most important part of our work at this stage – building something of social value to people in rural and remote communities.