With the recent changes in the economy, charities are taking a serious look at how they can earn income in new ways. Many are considering becoming – or have already become – social enterprises (for example, read this case study of how CAYSH became a social enterprise).
Like charities, social enterprises are driven by a social purpose. The key difference is that they generate the majority of their income through trading, rather than traditional grants and donations.
For those charities looking to adopt a social enterprise approach, here are some key things to consider:
1. Understand the marketplace
Before you begin your social enterprise journey, there are several questions you must ask yourself: Who are our core customers? How are we going to reach them? Does demand exist for our product/service? Do we have a significantly unique offering that is better than any competitor? Answering these questions will help inform your next steps. If possible, mix up your trading activity – having different services, customers and types of income helps with sustainability. But don’t deviate away from what your organisation is best at.
2. Get your organisation’s culture right
Making the move from a charity model will require a change in culture. You’ll be trying to generate a profit that can be reinvested to further your social mission, so you’ll need to start thinking in a more entrepreneurial manner. You’ll also need to be crystal clear about governance and decision making. Make sure that the social enterprise has a strong leader, supported by a focused and skilled board that is separated from the charity. Take every step to understand and address any cultural pushback you may encounter in order to get all your stakeholders on board.
3. Develop a clear strategy – and write it down
Ensure you get your key stakeholders to participate in the development of the strategy; this will help create ownership, which in turn increases the chances of successful implementation. A common error is that organisations spend a lot of time discussing what they are going to do, but don’t always put pen to paper. It is not a strategy unless it is written down. Don’t forget that your strategic plan is a ‘living’ document that is likely to change over time. Constantly review your strategy and update it if necessary.
4. Embrace the numbers
You’ll need to have a firm grip on your finances when you start trading, so make sure you have good finance staff in place who understand the numbers and the business. You need to know not only what you’re going to charge for your products or services, but also how much it costs you, and what margin you’re trying to achieve. Bear in mind that when you start trading you will require an injection of capital, whether to develop or market your product, or invest in infrastructure – so stay on top of your cash flow.
5. Measure and communicate your impact
When selling goods and services to the general public, your organisation must be able to clearly communicate its offer and its impact in a way that is clear and straightforward. You don’t need a complicated model; you only need to measure what is really important. But make sure you involve your stakeholders, and link to your organisation’s objectives.Measuring your impact will also help you better understand and target your work. Furthermore, it can attract social investors and retain investor confidence – which are just as important as financial returns.
6. Don’t give up!
Finally, be persistent. Moving a charity from being wholly reliant on grants and donations to one that trades is not an easy journey. But, if done well, the move to social enterprise can create sustainability for your charity, allowing you to continue the invaluable work you do.
Craig Carey is head of operations at Social Enterprise UK
More information is available in a guide written for charities interested in trading