Coming up with business ideas — how can business model constraints help?

The Refugee Enterprise team is designing a new service to support refugees and asylum seekers into employment. Soon we will be moving onto phase two of our project and the design process — generating, prioritising and testing ideas. Our ambition is to design a self-sustaining service, one that supports service users at the same time as generating the income needed to run the service.

There are many tips and tricks a social entrepreneur can use to identify money-generating ideas (perhaps the subject of another blog?). Something that is often overlooked but can be helpful to consider is business model constraints.

What is a business model constraint?

Business model constraints are factors that limit the design of a business model. They are forces an entrepreneur must contend with when launching a business given the context she’s working in. It might sound negative to think of all the things your business can’t do — but that’s far from the case, understanding business constraints can help you to focus your ideas and help you more quickly arrive at feasible ideas.

How can we apply this to our project?

Next, I will explore the constraints our business model must work within and bring them to life with examples from the food and beverage industry.

Constraint 1: Alignment with the British Red Cross values.

Staff and volunteers at the British Red Cross are guided by seven fundamental principles. They mean that people we help can trust that we’re neutral, independent and impartial. Our supporters know that we help those most in need both in the UK and internationally, and our staff and volunteers can see they’re a part of something unique. The business we design must be aligned with these.

e.g. An alcohol brand wouldn’t be the most appropriate business for a charity such as the British Red Cross to launch. An ethically and sustainably produced chocolate bar, where we can guarantee staff across the supply chain are paid a fair wage would, however, fit more closely with our values.

Constraint 2: Low start-up costs

As a charity, we are not in a position where we can invest lots of money to get our business off the ground. Not only do we not have the funds, but it’s also a level of risk we would not be willing to take.

E.g. A business selling online cooking lessons will have lower start-up costs than a brick and mortar cookery school. And similarly, an e-cookery book would have lower start-up costs than a printed cookery book.

Constraint 3: Quick to market

With a small team and just 3 months to design and prove our concept, we need to choose an idea that can be launched fast. A business where staff can be trained and onboarded quickly and little time is needed to develop the product or service.

E.g. Setting up a business to sell pre-made wholesale ice cream is likely to be faster than inventing, manufacturing and selling a new type of frozen dessert.

Constraint 4: High gross profit margin

All entrepreneurs dream of finding a product with high gross profit margins but for us, it’s particularly important. Charities are traditionally risk-averse so we will need to demonstrate that we can quickly make a return on any money invested. Also, as a social enterprise, our fixed costs will be high, we will be supporting vulnerable people and integrating additional employability programmes into the venture.

e.g. Tea, coffee, pasta, breakfast foods, vegan food, baby food, pre-cut fruit are food products likely to have high gross profit margins.

Constraint 5: Meets our social mission

The business idea must meet our social mission — helping refugees and asylum seekers into employment. For example, if we wanted to support refugees and asylum seekers to build their confidence in speaking English and reduce their social isolation through work experience it would be preferable to create a business where customer-facing staff roles are needed.

e.g. A working on a market stall and interacting with customers would provide more opportunities to build confidence in speaking English than manufacturing jam alone at home.