Over the last year I’ve becoming increasing saddened and equally frustrated that some charities are having to close as their trustee boards won’t entertain or assess the feasibility of a social enterprise model for their charity.
I’ve had ‘determined’ charity CEO’s come to me with evidence that a social enterprise model could work for them based on the assets they have available and/or initial test trading. They are desperate to develop new trading avenues as their normal income channels from public or third sector become completely cut or squeezed, and they are inspired by other social enterprise models.
The CEO’s understand the need to undertake a feasibility study, but the trustees have refused to even approve a grant or allocate resource needed to undertake an external market assessment and feasibility study to explore the idea. I find this quite baffling, as surely finding ways to sustain the future of the organisation should be of optimum importance if the senior management staff are keen to give it a go, but instead the CEO is told to focus on business as usual, and I’ve seen many start to hit the wall!
So what are the issues that these CEO’s are potentially facing with convincing trustees;
Overall if a feasibility study isn’t undertaken, the trustees will lack understanding and confidence in the social enterprise model as no data or evidence is yet to be presented around the future sales potential in the market place. This is going to be hurdle for any board to approve, until some evidence is in black and white.
However, some charities have deeper issues in managing change. It’s apparent that some trustees can have a traditional view on charities and believe they should continue to be reliant on grants and donations to continue their core mission. They don’t understand the extent to which the market place is changing and are oblivious or dismissive of the challenges ahead. They fear that the social enterprise model is a distraction from the charities mission and an unnecessary risk to bear, especially if social investment is needed. They believe that the charities destiny should be too close if the normal channels of income are no longer available.
What is the business case for social enterprise?
The Social Enterprise UK’s State of Social Enterprise Report 2015, highlighted the following:
- ‘Government statistics identify around 70,000 social enterprises in the UK, contributing £24 billion to the economy and employing nearly a million people.’
- ‘50% of social enterprises reported a profit, with 26% breaking even. Almost all use the majority of those profits to further their social or environmental goals.’
- ‘The proportion of social enterprises that grew their turnover over the past 12 months is 52%. A greater proportion of social enterprises are growing than mainstream SMEs (40%).’
- ‘73% of social enterprises earn more than 75% of their income from trade.’
- ‘The median turnover of start-ups is £36,000, whilst the median turnover of established social enterprises over 11 years old is £500,000’
- ‘The most common main customer for social enterprises is the general public: for 30% it is the primary source of income.’
The trading options are diverse, whether it’s trading directly to the general public, businesses, public or third sector in a range of industries. Some examples are below:
- National Childbirth Trust – Have an online shop directly selling products to consumers. https://www.nct.org.uk
- Cockpit Arts – Directly trade with businesses by operating a creative business incubator. cockpitarts.com
- Crisis – Run a series of cafes across the UK, which also support their disadvantaged beneficiaries back into work. https://www.crisis.org.uk/pages/cafes-from-crisis.html
- Catch 22 – Run Auto22 in Kent providing a car servicing and repair business whilst also supporting young people into work. https://www.catch-22.org.uk/programmes-services/auto22/
So what can CEO’s do to tackle this challenge or create reassurance? I have listed some ideas below:
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- Having one or more trustees with a commercial mind-set on the board who understand social enterprise and trading options, can be useful so they can advise others on the potential of the model.
- Identify case studies or speakers from other charities at the board meeting who have successfully created a social enterprise model that helps to sustain their charity.
- Find a potential business leader with the right skills and experience within the appropriate industry who could help the charity to set up a social enterprise model, as this can provide guidance and confidence to the trustee board.
- Prepare a business case with evidence of robust test trading to show that there is traction and a clear potential to grow the market further.
- Identify financial resource e.g. grant or social investment to help undertake a feasibility study or development of the social enterprise model, if other financial resource isn’t available.
- Undertake a feasibility study with competitor analysis and research other aspects of the industry sector and related costs e.g. compliance, quality standards, resource, marketing strategy, income potential etc.
- Once a feasibility study is complete and it looks promising, it will be necessary to invest time in a business plan to lay the foundations of a financial, marketing, sales, operational and resourcing strategy.
Adopting some of these ideas, will hopefully help win over some minds and help CEO’s to realise a new business strategy with a social enterprise model.
Financial and Business Support
At Economic Change, we support charities working with vulnerable groups to apply for Big Potential, a grant to help social ventures undertake a feasibility study and explore whether social investment and a social enterprise model is the right approach for them. To find out contact us
We are also running an event on this topic on the 27th May for Charity CEO’s, with expert advice on social enterprise development for charities and expert insight from a range of charities, including Catch 22 and Crisis about their social enterprise models, alongside charities with community assets.
To register for the event click here