# Social Entrepreneurs: Definition, Types, and Impact on Society

## What Is a Social Entrepreneur?

Social entrepreneurs drive positive change by innovating solutions to community challenges. Unlike traditional business owners who focus on profit, these changemakers prioritize social impact, leveraging ethical practices like impact investing and corporate social responsibility. This article explores different types of social entrepreneurs, from community-focused to global initiatives, and examines their unique contributions to society.

### Key Takeaways

*   Social entrepreneurship prioritizes creating societal impact over financial gain through innovative solutions to community challenges.  
    
*   Community, non-profit, transformational, and global models represent different types of social entrepreneurs, each with unique approaches and scopes.  
    
*   Financial sustainability is a significant challenge for social entrepreneurs, requiring innovative funding solutions like impact investing and corporate social responsibility.  
    
*   Social entrepreneurship involves several stages, including identifying a problem, planning a solution, prototyping, and scaling efforts.  
    
*   Social entrepreneurs often use technology and innovative practices to address unmet community needs and drive positive social change.

![Social Entrepreneur](https://www.investopedia.com/thmb/NQC6URV-4uEHiVgGd_mZ0Ro19d4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/social-entrepreneur.asp-final-4ac86e3c90124f4aa484e352820ee61e.png)

*— Investopedia / NoNo Flores*

## The Role and Influence of Social Entrepreneurs

Entrepreneurs are often [profit-driven](https://www.investopedia.com/terms/p/profit-motive.asp), but they can still positively impact society. In his book "The Wealth of Nations", the economist [Adam Smith](https://www.investopedia.com/updates/adam-smith-economics/) explained, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest."

Smith believed that when individuals pursued their own best interests, they would be guided toward decisions that benefited others. The baker, for example, wants to earn a living to support their family. To accomplish this, they produce a product—bread—which feeds and nourishes hundreds of people.

Social entrepreneurs may address resource imbalances and the root causes of social problems, or tackle stigma associated with certain communities.  A social [entrepreneur's](https://www.investopedia.com/terms/e/entrepreneur.asp) main goal is to create broad societal improvements rather than profit. However, financial savvy is essential for achieving these goals.  

## Exploring Types of Social Entrepreneurship Models

### Community Social Entrepreneur

A community social entrepreneur prioritizes the needs of a small geographical region, usually the community they live in. This type of social entrepreneur is less concerned about the specific nature of their endeavor; the primary purpose of their entrepreneurship is to benefit their local area.

This type of social entrepreneur often builds strong relationships in their community, taking advantage of relationships to leverage how resources flow within their town. Community members, local organizations, and the community social entrepreneur work together to make sure the needs of the community are met and partnerships that make sense are created.

### Non-Profit Social Entrepreneur

Non-profit social entrepreneurs often have broad goals that benefit people beyond their direct community. With the introduction of remote or online social entrepreneurship, it is now easier to create entities with broader mission-driven purposes.

Non-profit social enterprises usually operate very similarly to a business. In non-profits, any profits usually go back into the program for further development. Instead of there being investors to make money, a non-profit social entrepreneur strives to spend as much money as it can towards its mission.

### Transformational Social Entrepreneur

As a start-up non-profit social enterprise grows, it often shifts into becoming a transformational social entrepreneur. As local non-profits grow, so can their mission. A transformational social entrepreneur aims to expand a single program to help more areas. For instance, Goodwill began as a small nonprofit and grew into a large global entity with more rules and regulations.  

### Global Social Entrepreneur

Sometimes, social entrepreneur endeavors aren't limited by borders or geography. Sometimes, people may try to solve overarching social concepts such as poverty, depression, or lack of living conditions.

Usually, the social entrepreneur may try to solve an issue in a specific region. However, these deep-rooted issues are often not specific to a region. Solutions found in one area can often apply to others.

These organizations often have the widest reach. For example, consider the breadth of the [Bill & Melinda Gates Foundation](https://www.investopedia.com/articles/personal-finance/111214/where-does-bill-gates-keep-his-money.asp). Their endeavors to find vaccinations for various diseases impacting those around the world are a clear example of global social enterprises.

> **Important**
>
> Social entrepreneurship continually evolves; what may be a local communal non-profit one year may model into a global social enterprise the next.

## Key Pillars that Underpin Successful Social Entrepreneurship

Social entrepreneurs often focus on these six areas to turn their ideas into successes. Each of these categories has different resources, roadblocks, or stages a social entrepreneur must often encounter.

### People

Most social entrepreneurs start their endeavors by identifying what people they want to benefit. Sometimes, this is the people in their specific geographical region. Other times, this is people within a certain demographic (i.e. people with low income). Without a clear definition of who the social entrepreneur wants to serve, they will face difficulty in appropriately defining the scope of their enterprise. This puts the yet-to-be-created entity at risk of not having a clear vision.

### Problem

Social entrepreneurs try to fix problems. More specifically, social entrepreneurs identify a problem that the people in the previous section face. Usually, during the brainstorming phase of an entity, the social entrepreneur will link the two together. For example, social entrepreneurs may try to defeat homelessness in their region. Here, a social entrepreneur may help low-income individuals find housing.

### Plan

With the people and problems identified, a social entrepreneur must devise a plan to solve the problem. Social entrepreneurs not only strive to create a [business plan](https://www.investopedia.com/terms/b/business-plan.asp) to operate an entity, but they must also determine how this type of entity will receive funding and remain financially sustainable. The social entrepreneur must also evaluate how external parties can help it achieve its social goals.

### Prioritize

One of the largest challenges for a social entrepreneur is a lack of available resources to tackle the problem they wish to solve. Whether that means not enough money, not enough specialized knowledge, or external forces that cannot be controlled, social entrepreneurs face many constraints. This means they must prioritize what they try to solve, how they go about operating, and what expansion looks like.

### Prototype

Because resources are limited, social entrepreneurs often test out solutions in small markets before expanding. This means creating prototype products, services, or processes. It also tests out how different funding and resources can help it achieve its goals. Though this stage may not foster trust in those who have provided an upfront investment with the social entrepreneur, other upfront investors may appreciate seeing a minimum viable product or prototype.

### Pursue

After testing, social entrepreneurs learn what works and what doesn't. It often surveys those who helped put the solution together as well as those receiving the benefit. This last step closes the full loop of activity, though a social entrepreneur should periodically evaluate each aspect and continually monitor for ways to better make their social change.  

## How Social Entrepreneurs Stand Out from Other Initiatives

Social entrepreneurship is related to [socially responsible investing](https://www.investopedia.com/terms/s/sri.asp) (SRI) and [environmental, social, and governance](https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp) (ESG) investing. SRI is the practice of investing money in companies and funds that have positive social impacts. SRI has also grown in popularity in recent years.

Socially responsible investors will often eschew investments in companies that produce or sell addictive substances (like alcohol, gambling, and tobacco). They may also seek out companies that are engaged in social justice, environmental sustainability, and alternative energy or clean technology efforts.

Socially conscious investors screen potential new investments for environmental, social, and governance (ESG) criteria. This set of standards considers how a company performs as a steward of nature, how it manages relationships with employees, suppliers, customers, and the communities where it operates, and how it treats its company’s leadership, compensates its executives, and approaches [audits](https://www.investopedia.com/terms/a/audit.asp), [internal controls](https://www.investopedia.com/terms/i/internalcontrols.asp), and shareholder rights.

> **Fast Fact**
>
> According to ZipRecruiter, the average annual salary as of May 2024 for a social entrepreneur was just above $40,000 per year.

## Examples of Social Entrepreneurship

The introduction of freshwater services through the construction of new wells is another example of social entrepreneurship. A social entrepreneur may have the goal of providing access to communities that lack stable utilities of their own.

In the modern era, social entrepreneurship is often combined with technology assets: for example, bringing high-speed internet connectivity to remote communities so that school-age children have more access to information and knowledge resources. Another example is microfinance institutions that provide banking services to unemployed or low-income individuals or groups who otherwise would have no other access to financial services.

The development of mobile apps that speak to the needs of a particular community is another way social entrepreneurship is expressed. This can include giving individuals ways to alert their city administrations to problems such as burst water mains, downed power lines, or patterns of repeated traffic accidents. There are also apps created to report infractions committed by city officials or even law enforcement that can help give a voice to the community through technology.  

Other examples of social entrepreneurship include educational programs and helping children orphaned by epidemic disease. All of these efforts are intended to address unmet needs within communities that have been overlooked or not granted access to services, products, or basic essentials available in more developed communities.

## How Do You Become a Social Entrepreneur?

You can become a social entrepreneur by considering who you want to help and what problem you want to solve. Once you have a targeted idea, it's often best to gather resources, understand where your limitations are, and decide what external parties you want to help craft the enterprise.

## How Do Social Entrepreneurs Make Money?

Social entrepreneurs raise capital for their enterprises by connecting with other members of the community. "Community" does not necessarily need to mean physical location, as some enterprises may collaborate around the world for a common social cause. A social entrepreneur may collect grants, upfront donations from major donors (in exchange for public recognition), or use personal capital.

## Do Social Entrepreneurs Pay Taxes?

It depends. Social entrepreneurs are usually not personally exempt from paying taxes. This means that almost all individuals are taxed on the income they make, regardless of whether or not the enterprise they work for is a social enterprise. On the other hand, most social entrepreneurs incorporate their enterprises as non-profit entities so their enterprises can operate tax-free.

## The Bottom Line

Social entrepreneurs innovate to address community-based challenges, prioritizing societal impact over financial gain. They often use ethical practices, such as impact investing and corporate social responsibility, to support their missions. Key types include community, non-profit, transformational, and global social entrepreneurs, each with distinct goals and scales of operation. Successful social entrepreneurship involves identifying a specific problem, planning a solution, and testing prototypes before expanding efforts. By focusing on creating broad societal improvements, social entrepreneurs distinguish themselves from traditional profit-driven business ventures.

> **Article Sources**
>
> 1.  Adam Smith. "An Inquiry Into the Nature and Causes of the Wealth of Nations," Pages 6-7. Harvard University, 1827.
>     
> 2.  Internet Encyclopedia of Philosophy. "[Adam Smith (1723—1790)](https://iep.utm.edu/smith/)."
>     
> 3.  ZipRecruiter. "[Social Entrepreneur Salaries](https://www.ziprecruiter.com/Salaries/Social-Entrepreneur-Salary)."