How to Be a Social Entrepreneur

Is it possible to do good and do well? Businesspeople with a goal to better society—known as social entrepreneurs—think so. Unlike traditional nonprofits, these do-gooder companies turn a buck while pushing for environmental and social goals, like helping people out of poverty or reducing the use of harmful pesticides. And the idea seems to have caught on; the sector is currently pumping out millions of dollars in revenue each year. So how can aspiring social entrepreneurs get in on the success? Newsweek spoke to Blake Mycoskie, founder of TOMS Shoes, a company that gives away a pair for every pair it sells, and to George Siemon, a founding farmer of Organic Valley, a dairy co-op, to find out. Their advice:

TOMS

Build Around the Problem

You don't need a perfect solution to offer long-term help. Mycoskie was in Argentina when he first noticed rural children running around barefoot. Volunteers donated shoes, but kids didn't always get the right size. To provide the correct sizes, over time, he created a constant revenue stream, making sure each donated pair was backed with a purchase.

Start Small

"People get scared [about starting a business] because they think they need a giant loan, but you can start on a very small scale," Mycoskie says. He began with 250 pairs of shoes. A small leap lets you test the product so you can work out kinks. You can also be creative about marketing, which TOMS still does largely through word of mouth.

Help Your Customer Help You

Customers like to get behind a product they love. That's why Mycoskie kept the focus of his company simple—so customers knew what they were doing with every purchase. "Because we incorporated giving [into our mission], customers helped spread the word, [that] got media attention, and retailers even helped market us," he says.

Don't Change What Works

Mycoskie made a near-fatal error by pushing to sell his shoes in small linen bags instead of boxes. At Nordstrom, the bags tangled badly, causing the retailer to cancel most of its orders. "This almost put us out of business," Mycoskie recalls. TOMS switched to boxes, and Nordstrom is now a big customer. The lesson: don't reinvent everything.

ORGANIC VALLEY

Cut Out the Middlemen

George Siemon and other farmers realized that allowing the middlemen who sold their milk to determine prices left many farmers broke. So they cut them out, and went straight to customers. They found that consumers who wanted organic milk were willing to pay a fair price for it and that connection led to Organic Valley's success.

Take on Partners with Power

Partners are a great idea when they bring something specific to the table. When Siemon banded together with other farmers to create their organic cooperative farming business, they shared profits and losses. Working as a group of farmers also gave Organic Valley more bargaining power and expanded their reach and influence.

Break Parts of the Model

If you have a special or unique product, consider coming up with a new selling model if the current model isn't working. In Organic Valley's case, the farmers decided to throw out milk's old sales model. They then replaced it with one that set the price based on what farmers needed to live rather than market demand.

Have a Backup Plan

You should have a plan to help maintain your product's worth. When farmers could not get the price they needed for their organic milk, they relabeled it regular milk and sold it for less. That meant less money in the short term, but helped preserve the value of the organic label, ensuring higher prices for it in the long term.