Wednesday 25 February 2015

[Straits Times] To survive, social enterprises must be allowed to fail

THE well-intentioned, pilot mentoring programme for social enterprises - by the Ministry of Social and Family Development (MSF) - may have been a "get out of jail free" card for struggling food business Laksania, yet its sustainability and effectiveness are less clear ("Painful advice the recipe to save failing business"; last Saturday).

Aspiring social entrepreneurs should not have mistaken perceptions that they will be bailed out by the Government when their financial situations go south, or that consumers will necessarily pay a premium on the goods and services provided by a social enterprise.

In other words, where these businesses are concerned, perhaps the Government should get out of the way.

Already, government agencies disburse funds to such businesses, and mentorship schemes - especially for the newer social enterprises - are in place.

Asking for more with these support systems in place would appear unreasonable, even if the company was incorporated for a good cause.

And it takes more than just business nous to run a successful social enterprise. Laksania founder Sim Sin Sin has a background in accountancy and was the former chief executive of cafe chain Secret Recipe.

The reality is that keeping a business in the black is tough, and it is even tougher for a social enterprise.

Four of the five social enterprises under the recent

MSF mentoring programme are in the food and beverage industry, and it is well documented that such establishments in Singapore - with greater competition, a tight labour market and the exhaustion of selling propositions - suffer from high closure rates.

In the absence of proper definitions and regulations concerning social enterprises, and the corresponding inability to carve out a marketable niche, these companies cannot rely on goodwill or charity to stay afloat.

So, leaving them to fend for themselves, after that initial boost of funds or advice through the Government, seems to be the best recourse.

This community will expand not with additional hand-holding, but with more instances of failures and, thereby, more opportunities for frank assessment and consequent rejuvenation.

Kwan Jin Yao