In celebration of SSE Ontario’s new membership in the DUCA Impact Lab, the School has released a study on the working capital needs of social entrepreneurs. DUCA wishes to support purpose-driven entrepreneurs in managing their need for working capital and seeks to understand entrepreneurs’ current cash management strategies, with or without the assistance of traditional financial service providers.
Toward this end, between August and October 2018, SSE undertook a series of 11 in-depth qualitative interviews with social entrepreneurs in the SSE community. The research captured stories yielding insights into the challenges that may be faced by the wider entrepreneurial community. More specifically, the study sought to uncover: the entrepreneurs’ top categories for operational expenditures; how venture operations are financed before sale completion and between sales; the process by which revenue is collected and becomes available to the entrepreneur; financial strategies entrepreneurs use to deal with cash flow irregularity; and, the impact of cash flow shortfalls.
After compiling and analyzing the interview results, SSE observed that no participant was being fully served by traditional financial service providers, and some were left out of formal financial services altogether. Every participant described a rich set of cash-flow workaround strategies that preserve their financial stability and minimize downside losses.
We were struck by how few had been able to optimize operations for maximum, rapid growth, and profit for reinvestment. The interviews suggest an unmet demand for low-cost financial instruments that help smooth venture cash flow. As such, we believe that DUCA Impact Lab would do well to test new financial products that speak to the unmet capital working needs of social entrepreneurs.
Photo credit: Thomas Hawk via Creative Commons