Beyond Profit recently published data regarding profitability of Social Enterprises.
Their study shows that of all recently started SE (less than 2 years old), 20% make profits, 35% break even, and 45% make losses. Of SEs that are older than 10 years, these proportions are ~ 27%, 60%, 13%.
For SEs older than 10 years, I am not sure what conclusions to draw. Clearly, we cannot conclude that 27% of SE that were started >10 years ago ended up making profits because the ones that were in dire straits would have closed down and not been part of this survey.
Also, I am not sure what to make of the fact that 73% of SEs are not making profits even after 10 years of existence. Does that mean that they are supported by grants or other forms of investors? In which case, are they really businesses in the true sense? Maybe the learning is that unlike mainstream businesses, where the entrepreneurs have to close businesses after sustained losses, Social Entrepreneurs are so attached to their ideas that it is difficult for them to let go?
The data for SEs under 2 years is also surprising. If their findings are really true, it beats all past statistics about profitability rates of new startups. More likely, it simply shows that many Social Enterprises in India are initiated by NGO grants which are used for initial product R&D or establishing rural networks in the form of SHGs etc. Plus, the grants often continue paying for the management salaries and capacity building initiatives. Thus the true cost of business is not reflected in these numbers.
Any other possible explanations?