Small charities are facing some big problems, but with flexibility, resourcefulness and a focused approach, they can succeed in weathering the storm, as Rick Pearson discovers

“To put it simply, we’re being asked to do more with less”, says John McLaughlin, chief executive of mental health charity Response, when asked about the big challenges facing small charities. “Funding has been cut while the demand for our services continues to rise.”

His charity is not alone in this; the National Council for Voluntary Organisations’ recent Charity Forecast Survey showed that 89 per cent of respondents expect to increase or maintain their level of services over the next quarter, despite the fact that 43 per cent predict a decrease in their expenditure over the next 12 months.

While the largest organisations may be able to fall back on their reserves during tough times, this luxury isn’t open to small or even most medium-sized charities. “Everyone’s reserves are proportional”, says Hannah Christie, head of fundraising at ReachOut!, a mentoring charity for disadvantaged children. “Ours wouldn’t carry us along forever – it’s not millions upon millions of pounds.”

Similarly, while large organisations may be able to make savings here and there, this can be more difficult at small charities, where entire areas of the business, such as marketing, are often looked after by just one person (who may even be covering that as part of the day job). Simply put, there are only so many things you can cut before the charity stops functioning.

A crowded marketplace

Among small charities, competition for funding is fierce. According to charityfinancials.com, of the UK’s 160,000-plus registered charities only xxx per cent have an income of over £5m. Of the remainder, 64,000 have an income of less than £10,000 – and that doesn’t include those charities with no income at all. There’s a lot of small charities out there, and not a lot of money to go around.

Luke Squires, head of partnerships and philanthropy at Bowel Cancer UK, knows this situation well. “There are a lot more hospital charities being created, which in one sense is wonderful,” he says. “But it also makes it harder for other health charities in terms of securing funding.”

When it comes to raising funds, certain avenues are closed to small charities, as Squires explains. “Cancer Research’s recent Stand Up To Cancer event was a huge success for a brilliant cause”, he says. “But those kinds of things are outside the realms of possibility for a smaller charity. We need to think on a much smaller scale.”

Christie concurs: “ReachOut! is respected in its field, but it’s not a household name. We couldn’t put a big campaign out there and expect a lot of money to come in, as we don’t have the huge supporter base that some other charities enjoy.”

Getting focused

It may appear, then, that the options for smaller charities are limited. But there are plenty of charities out there that, in spite of having limited resources, are surviving and even thriving. “Success comes by taking a more focused approach: targeting sections of society most likely to be sympathetic to your cause; making your donors feel special; and getting out there to talk to people”, says Squires.

Some causes are easier to talk about than others, of course. “Bowel cancer is not a nice thing to have or to talk about”, says Squires. “But the reality is that it’s the second biggest cancer killer in the UK – and, if you catch it early enough, the survival rates are very high.”

Many smaller charities feel their ability to raise income is influenced by the popularity of their cause. McLaughlin believes that certain causes are held in higher regard by certain sectors of society. “For whatever reason, mental health charities don’t appear to be a priority for big businesses”, he says. “They’re much more inclined to donate to children’s charities. The media’s portrayal of mental health – focusing on the negative stories, rather the positive ones – certainly hasn’t helped here. This is starting to change, though, thanks to sports stars speaking out about things like depression.”

Christie says ReachOut! has had more success, with a recent influx in funding from the corporate sector. “The majority of our funding is from grant-making bodies”, she says. “But we’ve seen a huge increase in corporates, particularly in the banking sector. And not just giving money: mentors make up about 95 per cent of our workforce, and lots of organisations have come forward to get involved in this.”

Christie says that there’s also been an increase in donations from businesses based in Manchester, the location of one of ReachOut!’s offices. “While London has more of a longstanding relationship with the private sector, we’re now seeing a lot more interest from businesses based here”, she says. “As a lot of companies look to cut their costs and move their HQs out of London, I think we could see more funding like this in the future.”

Small is beautiful

While small charities are certainly up against it, there are some advantages to being petite. “Being small means we can also be nimble,” says Christie. “It’s not like steering a massive ship with a huge turning circle: we can be really responsive. As an organisation, we’re also financially prudent; we don’t have any substantial ongoing financial commitments, so we can adapt to changing circumstances.”

Pauline Broomfield, chief executive of the Foundation for Social Improvement (FSI), believes this is a huge advantage for small charities. “Small charities can regroup and make quick decisions”, she says. “There isn’t the same level of bureaucracy as there is at a big charity, where decisions have to be signed off by dozens of people. If a small charity wants to make some changes, it can do so in the blink of an eye. That’s a big advantage.” 

However, Bloomfield believes that small charities need to adapt to survive. And that means getting innovative. Joining forces with organisations that have synergies with your own business is one way to go, she suggests. “Have a look around, identify companies that are similar to your own and try to work together”, she says. “A lot of small charities like to say they’re unique, but this isn’t often the case. By partnering with another similar charity, you can combine resources, offer a better service and improve your chances of survival.”

This is exactly what Response has done. Teaming up with Oxfordshire Mind, it has helped to launch the Mind Response Housing Partnership, which provides supported accommodation options for people with mental health and housing needs in Oxfordshire. “We’re pooling our resources to help provide the best service to vulnerable people in the region”, says McLaughlin. “The support will promote recovery and empower people to move towards independent living.”

Working closely with Mind has also helped McLaughlin to think about how Response might approach fundraising in the future. “Mind is very good at getting small, individual donations from thing like fun runs”, he says. “And they have a dedicated fundraising team. Response is yet to employ a full-time fundraiser, but it’s certainly something we’d consider in the future.”   

Other avenues small charities could be exploring include building new income streams through such activities as community fundraising, approaching local business and even charging for services. “Charities are sources of knowledge, which some people will be happy to pay for”, says Broomfield. “The police, for instance, spend millions of pounds each year on trying to better understand the problems of immigration. For a fraction of that price, they could pay an immigration charity to offer them a training course.”

Some small charities – particularly the older, more established ones – may also be sitting on an asset. “Are your premises empty all weekend? Do you have a basement room you could rent out? All these things will help in diversifying your income at a difficult time”, says Broomfield.

Help from the government 

At times like this, small charities might expect a little more help from those in charge. But aside from increasing funding – which doesn’t seem likely – what more could the government be doing to assist? It could start, say many, by opening the lines of communication.

“I’d like to see the government talking more to smaller charities”, says McLaughlin. “For instance, a lot of the people we help have had problems with the government’s benefits reform. Some of the people we help are losing benefits, but we’re winning 99 per cent of appeals on their behalf. There’s obviously something wrong. The government sends a letter out to these people explaining the benefits reform, but the people we help often don’t open them, and then it’s a long process trying to get these benefits back. Lots of these problems could be quickly resolved through better communication on the part of the government.”

Squires also believes the Department of Health could work more collaboratively with charities like Bowel Cancer UK. “At present, there’s still a slightly fragmented approach to addressing issue of bowel cancer”, he says. “The disparity between services at a regional level, for instance, is quite profound. I’d like to see the government make its decisions in consultation with charities like Bowel Cancer UK. It would be mutually beneficial, and ultimately provide people with a better service.”

And what about the ‘Big Society’, that buzzword of the coalition? “There’s been a lot of talk about the Big Society, and everyone has their own opinion about that”, says Christie. “Personally, though, where we’ve received most help is through capacity-building initiatives. For example, Manchester Community Central was funded to deliver capacity-building around the city, and supported me on a fundraising bid. That kind of assistance from the government is very helpful – it’s not just helping you get funding in now, but also building up your organisation for the future.”

Broomfield is less positive about the government’s attitude to small charities, particularly in light of the recent report by Lord Hodgson. “We need to look at that report sensibly and ask: ‘How much of this is just tosh?’” she says. “What we really need is to alleviate some of the red tape around Gift Aid and VAT. We have to get a system in place in which small charities aren’t filling in VAT forms all hours of the day.”

She’d also like to see a move towards fiscal sponsorship, similar to the system used in the US, which involves non-profit organisations offering their tax-exempt status to similar groups in exchange for a fee.

Above all, Broomfield wants the government to remember what small charities are really all about. “Small charities do good stuff,” she says. “And the government should be making it easier, not harder, for them to do so.”

This article first appeared in The Fundraiser magazine, Issue 23, November 2012