But it’s not easy to be a 4th Sector Entrepreneur

December 19, 2019

This is a follow up to our recent blog on Why we need 4th Sector Entrepreneurs. 

While the 4th Sector undoubtedly offers a real, vibrant and productive alternative approach, it can often be hard to find a balance between its many competing demands, particularly when it seems that the alternatives are much simpler. 

A recent study – ‘Can prosocial motivation harm entrepreneurs’ subjective well-being?’ – found that ‘prosocial motivation’ negatively affects the life satisfaction of social entrepreneurs via increased levels of stress. At the core of the paper is an argument that the desire to help others while running a social business can lead to entrepreneurs ‘pursuing too many activities, which can deplete personal resources that are important in achieving both organisational and personal goals.’ In other words, being a 4th Sector entrepreneur can negatively affect your physical and mental health.

The reality is that it’s lonely being an entrepreneur – but it’s even lonelier being a 4th Sector entrepreneur!

Entrepreneurs have to focus on only one thing – making money. 4th Sector entrepreneurs always have to focus on two – money and social value.

Entrepreneurs have a universally agreed way of keeping score, of measuring success – accounting, established over 500 years ago.  4th Sector entrepreneurs can use accounting but must also struggle with the multitude of ways of measuring social impact, none of which are as clear cut or as universally accepted.  

Not only that, they then have to pay two sets of auditors for the privilege of getting them to sign off two reports – their financial accounts and their social impact report.

When someone asks you what you do as an entrepreneur it’s simple to answer – I do this to make money. As a 4th Sector entrepreneur the chances are they will have fallen asleep by the time you start to explain your Theory of Change or the assumptions that go into your Social Value Index.

When an entrepreneur asks someone to invest money the transaction is simple, the options for an investor to exit long established and easy to compare with other options. A 4th Sector Entrepreneur has to balance all the various stakeholders, starting by educating the representatives of capital who have to get their heads around a whole new way of thinking.

When you ask an entrepreneur about ‘exit’ it’s easy to talk about selling for a multiple of earnings and walking away with a pocket full of money as a reward for all the hard work and sacrifices. When you ask a 4th Sector entrepreneur, such terminology is often considered to be off-limits, obscured by a feeling of guilt, the need to protect vulnerable people and to live up to the original inspiration.  

If someone is lucky, all the 70-hour weeks – the grit and determination and financial and emotional sacrifices essential to build any enterprise - might generate a little bit of money and maybe a few awards. But as a wise man once asked us, ‘Why would anyone choose this path?’

Our next blog resulted from a number of interviews we carried out with successful leaders in the sector but we would love to get any answers on a postcard...

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