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 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support Achieving sustainability in practice: The best route to sustainability in a third sector organisation is through increased diversification of activities and improved flexibility in operations. You might still achieve it by winning a single lucrative longrunning contract, or stumbling on a sure-fire business idea that will make your fortune. But few organisations are that clever or lucky – and no one has time to wait and see. • Sustainability: Sustainability is simply about being here next year and in three and five years time; it is not only, or necessarily, about running profitable businesses (no matter what sceptical professional advisors, economic development officers and statutory service providers may tell you). Profits help a lot, but there are other ways to get there. • Flexibility: Flexibility is what the third sector is almost always good at (although it does sometimes get tied up in knots by political correctness and impractical employment practices). The ability to change quickly and take on challenges are precisely the qualities that trading organisations need. • Diversification: People working in industries in crisis like farming and fishing are typically urged to find additional ways to top up limited incomes, and it works for many of them. − Diversification can also work extremely well for organisations such as community regeneration charities which have varied objectives and multiple projects, whether or not they are already seriously involved in trading. − Single-purpose and social charities (which serve the needs of, say, pre-school children, elderly or disabled people) have much less scope, but they can often still diversify the type of facilities they offer, the particular target clients, the geographical areas where they operate, and sometimes even the range of organisations which award them contracts. What has to change? Being flexible and diverse is not an easy route. It probably involves changing what you do and how you do it, and possibly changing the whole culture of your organisation (or at least the trading parts of it) and working as best you can to change the culture of those you work for so they will understand your needs. Section 8.2 describes five key steps in managing this process overall: • creating a stable core organisation • fostering an enterprising culture • dealing with the negative reactions to change • securing support and working with partners • setting targets and measuring progress. 118
It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support Key steps: Here’s what you need to do: • get rid of waste, which includes stopping money from leaking away in trading activities which cannot support themselves • protect the core of the organisation so that there are managers in place to lead you (making the chief executive of finance officer redundant can save you plenty of money, but who is going to make sure you have any income at all next year?) • use your existing assets to the full: whether they are activities, facilities, people or buildings; explore every possible advantage you can get from the way you use them • diversify sources of income so that you are not over dependent on any one funder, customer or activity. Practical steps to improving sustainability Planning for flexible funding and resources: More specifically, the direct steps to improve your financial and trading position will include: • taking hard decisions on some unsustainable activities • making better use of existing assets − identifying additional products and services which can be added to the current ones − generating extra income from buildings you occupy • identifying options and preparing plans for new income generating activities. • increasing the fund raising effort – but to broaden the funding base, not to increase grant dependency • identifying and taking life-saving business gambles if you really are facing financial disaster and have nothing left to lose (yes this can sometimes pay off). Axing subsidised activities: • Unaffordable cross-subsidies: It may be painful, but you must seriously consider abandoning loss-making activities which could drag down other activities which are subsidising them. The third sector generally thrives brilliantly in its many activities partly because it is often able to support under-resourced projects from surpluses elsewhere. But this will not work with your businesses unless and until you can create a sustainable organisation to start with. − identifying ways of generating income from current activities 119
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A guide to third sector trading - WCVA

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