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Growing social enterprise through the holding company model

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Groupe SOS – An international case study.

Mention the term ‘social enterprise’ and the word ‘scale’ won’t be far behind. Despite the fact that social enterprises have high growth expectations, they are often smaller than their counterparts in the conventional SME sector. For instance, UK government research has found that, on average, small social enterprises generated around £650k in turnover, roughly one third less than the turnover of the average conventional SME (which was over £1 million). Collectively, the five thousand Community Interest Companies registered in the UK generate around £900 million in turnover – less than most single FTSE 250 companies.

The small scale of social enterprises often prevents them from enjoying the benefits of larger organisations such as:

• Operational leverage (overhead costs often represent a smaller portion of large businesses)

• Financing advantages (larger organisations can gain ‘critical mass’ by attracting larger amounts of capital)

• Diversification benefits (large organisations can spread their activities and risk across different sectors and activities) • Innovation (more diversified businesses can grow via cross-fertilisation between businesses)

• Ability to attract and grow talent (large companies can offer a greater variety of career paths and developmental opportunities)

How might the benefits of smaller innovative organisations be married with the benefits of large-scale organisations? The answer could lie in the social enterprise holding company model.

Groupe SOS, a holding company based in France, has developed an approach to managing social enterprises in a network that acts as a hybrid between a large corporate and independent mission-driven social organisations. Consolidating over 45 businesses into a single group, they run enterprises ranging from hospitals to retail stores to drug rehabilitation centres. The Groupe SOS holding company model ‘frees up’ social entrepreneurs to focus on running their businesses by pooling common support services behind these ventures into the holding company. In the words of the Chairman and Founder, Jean-Marc Borello, “we want to create a school of fish, not a whale”.

Last updated | 
18 June 2014