If your social enterprise can’t survive without grants, don’t kid yourself, you’re running a charity.

This is the harsh truth the social enterprise sector needs to face if it wants to deliver on its original promise. Social enterprises have been hailed as champions of change for decades, tackling the world’s most pressing issues, including climate change, poverty and gender equality, while blending purpose with profit and making a unique connection with customers. But their track record of delivering on their lofty goals is spotty at best.

A study from Buy Social Canada revealed that just 11 percent of 132 social enterprises surveyed were meaningfully profitable, while 89 percent were struggling to grow. Of those struggling, many rely on grants and donations to stay afloat, with 63% either breaking even or losing money. Meanwhile, the majority serve only a single neighbourhood or city and employ fewer than 15 people.

These findings expose a troubling reality within a sector that boasted so much promise: social enterprises are often resource-starved, local in reach, and unsustainable in the long term. This can mean a lot of well-meaning effort for very little impact.

This isn’t just about numbers. It’s about a fundamental misunderstanding of what it takes to translate a passion for changing the world into a scalable impact. As someone who spent nearly two decades in this space, leading ME to WE and now advising organizations on sustainability and scalability, I’ve seen firsthand why so many social enterprises falter: they don’t think like businesses.

The Charity Mindset Is Killing Social Enterprise

Most social enterprises operate with the same mentality as charities. They prioritize their noble mission while failing to ground it in sound business practices. Consider the foundational promise of many social enterprises: the practice of reinvesting as much as 51% of their profits into their mission. This sounds admirable, but it’s often a straitjacket, leaving little room for growth or innovation.

Over the last 2 years, I’ve interviewed 173 social entrepreneurs and leaders of purpose-driven businesses. Many told me they put communities and beneficiaries first until they failed to thrive. By not prioritizing profit, they’d inadvertently paralyzed their ability to invest in research and development, measurement, adequate staffing and expansion. Some told me they couldn’t even get bank loans or find investors.

Profit as a Moral Imperative

For social enterprises to thrive, profit must be a priority. It’s the engine that drives sustainability, growth, and long-term impact. Successful social enterprises align their mission with their business model, ensuring every transaction advances their bottom line and purpose.

Consider Someone Somewhere, a Mexican social enterprise and B-Corp that collaborates with Indigenous artisans to create sustainable, on-trend products. They didn’t start by just focusing on their social mission. Instead, they asked the complex consumer-centric questions: “Do you want to buy this product? Does it meet your needs? Why choose this over the competition?” They built trust and loyalty by satisfying core consumer demands for quality and design. Only after delivering on these essentials did the benefits of supporting artisan communities and advancing social impact become a compelling feature, amplifying the brand’s halo effect. The result? Someone Somewhere has grown 7.2X in 4 years. They’ve worked with brands like Adidas, Delta Airlines and Apple and have sold over 20 million products while reducing 80% of carbon emissions in the process. This is the next version of Social Enterprise: a model where profit fuels purpose and purpose enhances profit.

The Rise of Purpose-Driven Companies

Increasingly, social enterprises face competition from a new category: purpose-driven companies. These businesses integrate impact into their core operations without sacrificing profitability or committing to financial impact.

The death of the traditional social enterprise isn’t something to mourn. It’s an opportunity to innovate, evolve and build businesses that can change the world and endure.

EverDriven provides transportation for vulnerable students, including those in foster care, homeless programs or with disabilities and other special needs. It’s a tech-driven company that started as a family-owned business and has been sold to private equity-owned while still blending purpose with profit. When I spoke with CEO Mitch Bowling he articulated this essential link. “We’ve built a business model where the mission of making a difference complements our need for sustainability and growth,” he said. This perspective underscores that for EverDriven, financial health is not a separate goal but the vital engine required to fulfill and expand their critical mission of serving more students effectively.

What sets their offer apart? They put customers first, align impact with profitability, and then watch the returns grow. In contrast, many traditional social enterprises struggle to attract capital because they prioritize mission over financial viability.

A Wake-Up Call for Social Entrepreneurs

The term “social enterprise” has lost its lustre. To some, it’s synonymous with greenwashing or performative activism. To others, it signals a lack of business acumen. If the sector is to survive, it must evolve.

Here’s what needs to happen:

1. Think Like a Business: If you’re committed to making an impact, you must prioritize profit as the foundation of sustainability. The impact cannot exist without financial viability.
2. Serve the Customer: Social enterprises must meet customer needs first and integrate their mission seamlessly into their offerings. If customers don’t buy in, the mission doesn’t matter.
3. Diversify Funding Streams: Relying on grants and donations is a recipe for instability. Pursue bank loans, impact investments, venture capital, and strategic partnerships to ensure long-term growth.
4. Challenge Outdated Regulations: Rules requiring social enterprises to reinvest 51% of profits can stifle innovation. Advocate for policies that balance accountability with the flexibility to scale.
5. Redefine Success: Stop celebrating mediocrity. Breaking even isn’t success; it’s survival. Success is profitability, scalability, and measurable impact.

Conclusion

Build to Last Social enterprises were born from a desire to do good. But good intentions aren’t enough. To truly address the world’s most pressing challenges, the sector must embrace a new paradigm where profit and purpose coexist. As I’ve learned through my own experiences, impact only scales when built on a sustainable business model.

The death of the traditional social enterprise isn’t something to mourn. It’s an opportunity to innovate, evolve and build businesses that can change the world and endure. The choice is clear: adapt or risk irrelevance. The future of social impact depends on it.