Throughout my career, I’ve been privileged to work with many private health organisations, which early on shaped my interest and passion for how to design programs to maximise sustainability and, equally important, how to support organisations in their transition toward organisational and financial sustainability.

Not surprisingly, there are a growing number of nonprofits that have embraced a social entrepreneurship model as a means of ensuring the longevity of their mission-driven work. For many, their interest in social entrepreneurship stems from the desire to continue serving their target audience—rather than closing up shop—in the face of decreasing external support. While this shift presents numerous opportunities for increasing sustainability and social impact, it also comes with its own set of challenges.

I recently led an in-depth qualitative study for the USAID-funded NPI EXPAND project with nine different social entrepreneurial and social enterprises to learn from their experiences transitioning to or applying social enterprise business models. Much of NPI EXPAND’s work has been focused on empowering local partners with organisational and technical capacity strengthening support.

This study sought to contribute to thought leadership around social entrepreneurship and identify key factors and critical elements that enabled them to adopt such a model along with the challenges organisations may face in achieving financial sustainability.

Here are a few key cross-cutting issues that they shared:

The Mindset Shift

Central to the success of this transition is the capability and commitment of senior leadership to steer the organisation towards a more entrepreneurial mindset. Leaders must champion the mission while also driving strategic initiatives that support financial sustainability. To support the transition in mindset, leaders stated that this often-included recruiting new staff with more direct private sector experience who could foster a culture of innovation, creative thinking, and the identification of new opportunities.

“Changing mindset was key,” says Susana Barrios, Director of the Pan American Social Marketing Organisation. “We had worked for 15 years with donor funding where there were strong controls to guarantee the correct use of funding, but for commercial activities, you need to have control of your resources, and you also need to make faster decisions.”

Access to Capital

One of the key challenges faced by social entrepreneurial and social enterprises is access to financing for business expansion and diversification. Service delivery entities also mentioned the constraints to investing in new medical technologies that would modernise diagnostics and service capabilities—allowing them to compete with other for-profit entities.

Accessing private finance and demonstrating a viable and scalable business model can be particularly challenging for those in the nascent stages of their revenue-generating model and navigating the complex landscape of private finance remains a significant barrier for many. “Access to appropriate funding and finance is seen as the main barrier to social enterprise growth in Pakistan, including access to grant funding as well as lack of capital and cash flow issues,” Sara Saeed Khurram, Co-Founder and CEO of Sehat Kahani.

Balancing Social Impact and Financial Performance

Social entrepreneurial organisations and social enterprises often find themselves competing in a marketplace with other commercial entities while maintaining relatively low margins to serve their target audiences. A critical consideration is finding the balance between social impact and financial performance.

While commercial entities prioritise profit, social enterprises must also fulfil their social mission, often at the expense of higher margins. Striking this balance requires careful governance structures and robust financial management systems.

Being Ready to Pivot

Despite these challenges, the experiences of social entrepreneurial organisations highlight the opportunities for innovation and impact in the transition to financial sustainability. Organisations also need to be ready to pivot. “If you’re going to do anything innovative, there will be as a matter of definition, many roadblocks…you have to be comfortable pivoting instead of giving up. Think of it as an investment rather than a stumbling block,” says Naa Akwetey, Senior Vice President, Strategy and Business Development, mPharma.

Transitioning toward a self-financed social entrepreneurial model is a journey that requires time, resources, and a strategic approach. Despite these challenges, the experiences of social entrepreneurial and social enterprises highlight the opportunities for innovation and impact in the transition to financial sustainability.

Ultimately, transitioning to financial sustainability is both a challenge and an opportunity to pave the way for their long-term impact and success.

For more information, read the full study or contact info@thepalladiumgroup.com.