There’s a dirty little secret in Australia’s social enterprise sector, and it goes like this: the vast majority of organisations calling themselves social enterprises aren’t generating enough revenue to survive without grants.

I’ve spent the last few months talking to founders across Melbourne, Sydney, and regional Victoria. The pattern is depressingly consistent. They launch with a mission-driven product or service. They win an early grant. They get some media coverage. Then they spend the next three years scrambling for the next funding round while pretending their earned revenue is growing.

It isn’t. Not for most of them.

The numbers tell the story

According to the most recent Social Enterprise Census from the Centre for Social Impact, around 40% of Australian social enterprises generate less than $250,000 in annual revenue. A significant chunk of that comes from government contracts or philanthropic grants, not market-based sales. When you strip out the grant income, many of these organisations are operating at a loss.

That’s not a social enterprise. That’s a nonprofit with a shopfront.

I don’t say this to be cruel. I say it because the constant cheerleading in this space — the awards nights, the accelerator programs, the glossy impact reports — is actually doing harm. It’s encouraging people to start social enterprises without any real understanding of what it takes to build a viable business.

The grant trap

The fundamental issue is structural. In Australia, we’ve built an ecosystem that rewards mission statements and impact narratives over business fundamentals. You can win a $50,000 social enterprise grant without ever demonstrating product-market fit. You can get into an accelerator program without a credible path to profitability.

The result? A sector full of well-meaning founders who are brilliant at writing grant applications but hopeless at pricing strategy, customer acquisition, or financial modelling.

I spoke to one founder in Brisbane who told me she’d spent more time on grant applications in 2025 than on product development. She’s not unusual. She’s the norm.

What would actually help

First, we need to stop conflating social impact with commercial viability. They’re related but different things. An organisation can have enormous social impact and still be financially unsustainable. That matters because when the grants dry up, the impact disappears with them.

Second, funders need to get more rigorous. Instead of asking “what’s your theory of change?”, they should be asking “what’s your unit economics?” instead. If a social enterprise can’t explain its gross margin, it shouldn’t be receiving growth funding.

Third, we need more honest post-mortems. In the startup world, people write about their failures. In the social enterprise space, failed ventures just quietly disappear. Nobody learns anything.

The bright spots

Not all of it is doom and gloom. There are Australian social enterprises doing genuinely impressive work with viable business models. Think of organisations like Thankyou, which built a consumer brand that competes on shelf space, or STREAT, which runs commercially successful hospitality venues while training disadvantaged young people.

What these organisations have in common isn’t just a good mission. It’s commercial discipline. They treat their business like a business, because that’s the only way the mission survives long-term.

Where to from here

The Australian social enterprise sector is at a crossroads. We can keep pretending that passion and purpose are substitutes for business fundamentals, or we can get serious about building organisations that are financially sustainable enough to deliver on their promises.

I know which option I’d prefer. The question is whether the sector has the stomach for it.