Having already launched four organic food stores, Deborah Wan Lai-yau probably shouldn't be so keyed up about opening a fifth. But the chief executive officer of the New Life Psychiatric Rehabilitation Association is clearly excited. The latest Healthy Living Specialty Shop, which opens in Discovery Bay in September, is an important milestone for her and the association. Wan sees the outlet as an important step in New Life's bid to run its social enterprises as commercially viable operations. All the chain's other shops are located inside KCRC stations, where they've benefited from the relatively cheap rents offered to the association. 'Our appeal lies in the fact that the organic vegetables in the shops come straight from our own farm,' says Wan. 'The Discovery Bay management believes our products will satisfy a genuine demand from their residents - and this means we have a real niche in the market here and can do as well as any private business.' New Life, which helps people coping with mental illness, runs some of the city's biggest social enterprises. It employs 500 trainees and 200 full-time workers, including people with a history of schizophrenia, psychosis or other mood disorders. The businesses range from cleaning services and gift shops to market gardens and catering. Wan has a good eye for consumer trends, and seven years ago made a decision to convert the association's 40-year-old farm in Tuen Mun to organic vegetables. That in turn led to the opening of the first Healthy Living shop in 2003 - and a commercial success story. Not all New Life ventures make money, so profitable ones such as Healthy Living chain also play a vital role by subsidising the other, loss-making, operations. Business ventures such as Healthy Living, which are set up to provide employment opportunities and raise funds for disadvantaged groups, can be an excellent complement to fully funded welfare programmes run by the government or charities. But in Hong Kong many of these enterprises fail to address market needs and merely limp along, surviving only because they occupy subsidised premises. The businesses are often unimaginative, says Wong Chack-kie, a social work professor at the Chinese University, with many charities taking the conventional route and simply operating convenience stores and cafes in government-owned venues. Choi Hoi-wai, business director of the Hong Kong Council of Social Service, concedes social enterprises here tend to be limited in scope. A fifth of the council's 300 members operate such businesses, mainly in catering, retail, cleaning and handcrafts. Most are small scale. Many were started less than five years ago and are consequently less developed than similar ventures in a country like Britain, some of which have been going for more than a decade, Choi says. 'I also don't count sheltered workshops, which have existed for decades in Hong Kong,' he says. 'Although many of them are very effective and play an important role, they're run more as a social service than businesses.' But Wong blames the stunted development on the welfare groups' poor business acumen and marketing skills. 'They're experienced in running social services, but not commercial ventures,' he says. 'To carve a niche in business, they must be more market sensitive and think ahead.' The council recognises that need, and last September launched a scheme to recruit private firms as advisers. About 20 companies, mostly from the Small and Medium Enterprises Mentorship Association, have agreed to help guide some 40 social enterprises. Representatives meet at least once a month for advice. 'Changing the mindset of the managers is a major challenge,' says association chairman Anders Wong Siu-leung. 'Many run social enterprises like charities instead of businesses,' he says. 'We can't change that mentality simply by teaching them business skills.' Over-employment is common, Wong says, and this can kill a business. 'Some hire seven or eight people to do the work of five. But the end result is a business that can't be sustained, and eventually the whole team is out of work. 'It would be more prudent to run it like an ordinary business and make a profit. You then hire more workers as the business expands. But many socially based enterprises are complacent, and survive by holing up in government-owned venues with very cheap rent. I don't see why they couldn't open an eatery in Mong Kok to compete with other canteens in the area instead of looking for sheltered environments such as public hospitals or tiny food stalls at public swimming pools. The key is a change of mindset and a readiness to make changes,' he says. However, Wong concedes the ventures are lumbered with fundamental constraints, such as the abilities and skills of their workers and the public image of the charity. 'A charity obviously shouldn't go into a business which may be contrary to its mission,' he says. 'Also, their workers often have limitations such as health problems and poor education.' Wan, despite her business successes, is another who doesn't want to be too preoccupied with profit. She believes social enterprises must strike a balance between their social and commercial objectives. 'Companies can simply close outlets to cut costs,' she says. 'However, we have to keep some posts open to give trainees a chance to reintegrate into the workforce - that's one of the difficulties in running these businesses. 'In this way, we need to be even more financially prudent than private firms to ensure that the enterprise can be sustained.' Some groups avoid these dilemmas by separating their commercial and charitable arms. Five years ago the Mental Health Association established a business selling health supplements and equipment such as wheelchairs and walking aids. Its team of trained managers now operates 10 outlets in public hospitals, and last month expanded into publishing with the launch of the bi-monthly magazine, Rehab Express. Aimed at recovering patients, the magazine contains articles on health matters contributed by doctors and nurses. It is distributed free of charge in public hospitals and generates advertising revenue from other suppliers of rehab products. 'We made a profit on the first issue,' says general manager Yvonne Yeung Tin-ha. Charities such as St James' Settlement have also been experimenting with less conventional ventures. Last year it went into the fashion accessories business by launching a line of handbags designed and made by former garment factory workers. Presented in a colourful window display at the agency's temporary outlet on Queen's Road East, the collection attracted many shoppers from nearby offices. The bags utilise textile scraps donated by curtain and furniture shops in the neighbourhood, so it's also a good way of recycling unwanted material, says project co-ordinator Dora Cheng Shuke-ching. Most of the revenue goes to the workers, though St James retains a small sum to cover operational costs. The dozen women sewing the bags earn about HK$1,000 a month, which isn't a substantial sum but gives a helpful cushion in low-income households. During the past year, St James' has started receiving orders for the bags from individuals and other charities, and although the venture is still in its infancy they plan to register the line under a trade name - Seamless in Chinese - as a step towards carving a niche in the accessories market. 'One day we hope our handbags will be found in major department stores - just like other popular brands,' Cheng says.