As part of our Big Lottery ‘Awards for All’ project we’ve been on the hunt for interesting news stories from newer, younger social enterprises that help illustrate new, changing and emerging trends in the sector.
We’ve been posting these stories on the blog under the overall title of ‘The changing face of social enterprise’ and you can read all the stories we’ve covered so far.
Developing these stories has been a fascinating experience because it has also required us to reflect on social enterprise — and especially on the difficulties new-starts face in a period of public spending cuts, massively reduced access to business advice and support, and increasingly complex social and financial pressures.
We thought it would be interesting to take a step back from gathering stories and reflect more generally on the experience to date.
One of the things we have found most interesting — and most significant — is the level of discussion we have had with some of those who have approached us.
Some of the newest enterprises approaching us are at very early stages of development and we have found ourselves discussing some of the most fundamental issues:
» How best to increase income-generation.
» Whether the social mission of the enterprise — the social value it can deliver — represents a sufficiently strong ‘offer’ to attract potential customers or users.
» Even the core focus of the business — after discussion one person told us that she now realised that she needed to completely change the central emphasis of the business as its primary business idea would not generate sufficient revenue.
We’ve said before that the current scarcity of specialist advice and business support for social enterprises — particularly at the new-start, pre- and early-trading stages — means that many new social entrepreneurs are of necessity adopting an almost completely DIY approach. They are having to think deeply about what it is they want to do and how it can be done, and they are prepared to learn from their mistakes. This is a new and much more grassroots approach to social enterprise formation and development.
While not all of the cases we have so far considered have turned into stories that we can cover we don’t consider this time wasted. Far from it. The entrepreneurs have found the exchange useful — and in some cases plan to make fundamental changes in their business plans as a consequence. On the other hand, we are finding the process offers invaluable insights into social enterprise development in a new and challenging environment.
But one thing that really does merit a particular mention is this. The social enterprise ‘model’ is about trading for a social purpose and it is this trading activity that makes something a social enterprise.
We’re not saying this is being forgotten, exactly, but it does seem that the current widespread usage of the Community Interest Company legal form — which obviously has a very strong focus on community benefit — is causing some to focus disproportionately on the ‘social’ at the expense of ‘enterprise’. In these cases one tends to see a clear plan for delivering on a particular social mission, but much less clarity regarding the goods or services that will enable the enterprise to become sustainable through trading.
While many enterprises depend on a mix of revenue sources — both income from trading and grants and philanthropic funding — the assumption when adopting a social enterprise business model should be that income from trading will grow to become the dominant source of revenue.
Doing something that is socially useful but which will always require grant or philanthropic funding is not wrong or bad, however. But if this is the route you adopt then you need to have a very clear understanding of where that funding is, how it is accessed, who controls it, and whether you can (or will be able to) meet the requirements of those funders — such as quality thresholds, legal structure, governance, insurances, financial track record, capacity and capability.
So do bear in mind:
» Not all activities necessarily offer a viable basis for trading.
» In developing your social enterprise be ruthless in testing the assumptions you have made about the commercial potential of what you do (or plan to do), and where your future income will come from.
» Whether trading or accessing grants — or indeed doing both, as many social enterprises do as a means of meeting the costs of different strands of the business — you need to understand how your marketplace works and how you will operate within it.
We’ll write more here about some of these broader issues in social enterprise development, but for the moment we would like to thank all of the new social enterprises that have participated — they have been patient and helpful and unfailingly receptive — and we hope that readers who are following these posts are finding them as instructive and as interesting as we are.