A guide to third sector trading - WCVA

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It’s an idea, but is it business? A guide to third sector trading • The third sector environment: The differences between the environment of the private and the third sectors radically affects the way the enterprise game is played. The following generalised distinctions are not universal, but they are sufficiently widespread to make the point. In the third sector: − Personal financial gain is not the main driver. There is no owner and there are usually no shareholders expecting to share in the profits. − Ultimate responsibility and often all the key decisions are in the hands of unpaid volunteers, rather than people who have a personal financial stake. − Volunteer directors are much less inclined to take risks. They are likely to be trustees of assets which belong to their community or charity, and there is little incentive to gamble with them. − Businesses run directly by volunteer committees on the whole don’t work, and it can be hard for groups to hand control to paid individuals and even harder to supervise them effectively. • The third sector market place: Many community and charity organisations trade on the margins, and have to make special management adaptations, such as using unpaid staff or exploiting public goodwill: − they work in markets which have been ignored by the private sector (and sometimes abandoned by the public sector) because they are unprofitable or too small − they often provide services for people who are the least able to pay, or work in communities already hampered by economic disadvantage. • Not special, but distinct: Some other, though certainly not all, forms of third sector trading have much more in common with the private sector because of their scale (eg public utilities) or their origins and management (eg environmental businesses started by visionary entrepreneurs). Others, like housing associations, are so well established that they do not need generalist guides to show them the way. The point about the third sector is that, despite its variety, its common characteristics mean that a comprehensive guide does make practical sense. 8
It’s an idea, but is it business? A guide to third sector trading The ‘non-trading third sector’ This guide uses the term ‘non-trading third sector’ to bracket together organisations which are not in the business of trading and enterprise. This is not intended to suggest that such organisations are not enterprising or that they never trade. Running jumble sales and coffee morning is a form of trading, and so is selling tickets to a choir concert and selling a fundraising calendar once a year. But these activities are small-scale and usually occasional, and raising money is not a major purpose of the group which is responsible. ‘Social enterprise’ Despite its widespread currency, the term ‘social enterprise’ has been kept to a minimum in this guide. It might be applied to much of the third sector trading described here. But it can also provoke unhelpful and irresolvable debates about definitions, areas of interest, and the ‘correct’ objectives of those who practise it. ‘Third sector trading’ is more to the point for the many charities and community groups who are now embarking on business activities for the first time, and hopefully less contentious. Table 1.1: Why third sector trading really is different Activity Reason for starting Who is ultimately in charge Decision taking Primary purpose of the business Secondary purpose of the business Private business to make money for the owner (and possibly shareholders) owner, MD or board – all paid owner or paid manager profit could be almost anything Community trading to make community activities more sustainable volunteer board volunteer board or paid manager social (or economic or environmental) benefit profit or sustainability Charity shop to increase charitable funds volunteer board volunteer board or paid manager to fund charitable activity profit Main personal motivation of directors financial gain no two directors will have the same motivations no two directors will have the same motivations 9
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