Business planning and the sustainability of social enterprises in Hong Kong

Social enterprises (SEs) are emerging rapidly in many countries. They help fill the gaps in service needs that arise because of governmental unresponsiveness or the inadequacy of the markets. One of the many challenges faced by social enterprises is sustainability. Numerous articles and social enterprise practitioners have recognized the importance of business planning for small and medium-sized businesses. It seems that little empirical work has examined the relationship between the business planning and performance of social enterprises. Therefore, the main purpose of this study is to explore whether business planning leads to enhanced financial performance and sustainability in SEs. This study analyses the performance of 20 SEs of different types of ownership and business with regard to their start-up planning in Hong Kong. These social enterprises had been in operation for at least two years and were selected through purposive sampling. Face-to-face semi-structured interviews with the founders and/or managers of these social enterprises, official documents and newspaper cuttings related to these social enterprises were used in data collection. The study found that business planning helps SEs clarify social objectives rather than economic objectives and it can help them achieve better financial performance if the founders have adequate knowledge and solid experience of the proposed industry. There is evidence that business planning does not seem to have helped reduce discrepancies between the outcome and the target, especially since most of the SEs did not prepare their business plans appropriately. Business planning helps SEs communicate their goals, strategies and operational tasks to both internal and external stakeholders. Besides, a business plan serves the function of attracting new investors to support the social enterprise in its sustainability, especially for those SEs that do not have a formal business plan. Finally, the study suggests that SEs’ founders should have adequate knowledge of their proposed industry and suggests that funding bodies extend the gestation period from the existing three-year period to five years or more.