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 • spreading the burden: Third sector trading organisations usually succeed because they are flexible, not because they have businesses which make them rich or management systems which are brilliantly streamlined. When times are hard it may be to your advantage to try to meet wages costs or building overheads by diverting into several different small-scale income generating activities. The more willing you are to improvise the better your chances of survival. Increasing your fundraising efforts: • Yes, seriously: It’s counter-intuitive of course to increase your fundraising to become less dependent on grants, and some people may say it’s wrong headed. But this is about sustainability, not viability, and grants may temporarily or even permanently have an important role to play provided you use them wisely. (And don’t be made to feel guilty about your ‘serious business’ credentials: what conventional business turns down grant money when it’s available?) • What sort of grants? What you need is fewer ‘life-and-death’ grants, without which you have to start making key staff redundant and dropping services. This is the hand-to-mouth way the third sector has always been forced to live, and a social enterprise approach offers something better. It could be imperative, while grants remain important to you, to aim to: − diversify fundraising into raising a larger number of smaller grants which contribute to non-trading core costs, so you become less dependent on any single funder − stagger the funding periods to avoid the perennial crises when large grants come to an end − raise grants for activities to extend what you already do rather than to preserve your vulnerable projects − raise grants which encourage enterprise development, and give you breathing space while you turn existing or new initiatives into trading businesses − secure grants for any useful projects which pay overheads to help resource the management core of the organisation. (If you find this approach too cynical, fair enough. But someone else will bag the grant if you don’t, and may not produce such good results. It’s part of running a business, and it wouldn’t be necessary if the third sector was resourced more rationally.) Last-ditch survival strategies: Gambling is not normally a good course for hard-pressed third sector enterprises. You will seldom get something for nothing. But what if you have been careful, have accumulated reserves, and are planning ahead well enough to see that the end of your organisation is nigh? When you really do have nothing left to lose you can always consider: 122
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 • the make-or-break investment: This involves identifying a new business project which can save your organisation if it succeeds, but won’t do too much harm if it fails except leading to your otherwise inevitable closure. It has been known to work occasionally. (Some precautions are obligatory: don’t do anything like this if you are already in debt or if you will create new debt, and make sure everyone, including staff who may be affected is fully consulted.) • going into cold storage: Closing down most of your activity may not sound like a good sustainability strategy. But if the only alternative is operating at a loss until you finally run out of money and make staff redundant anyway, then pre-emptive cutbacks and closures may make sense. This way you can perhaps preserve the core of the organisation, some of your reserves and one or two key staff. Then you could be ready to rebuild when conditions improve, perhaps emerging in a totally different form. It happens. But not often. − This is wrong-headed. If organisations facing difficulties were more willing to look for partners before it is too late, many valuable projects and the years of effort and investment which have gone into them could be preserved. − If you are starting to doubt whether you will survive, start talking to organisations which might conceivably make suitable partners. Be open minded. Don’t expect an easy ride. But don’t be surprised if you find an unexpected fit with unlikely colleagues. An effective merger could just as well be with a very different project which complements your activities as with one which overlaps with them. Towards long-term sustainability: These suggestions particularly apply to third sector organisations making the transition to trading activity. Chapter 8, and Section 8.2 in particular, discuss ways of building long-term business sustainability. • partnerships and mergers: − The Charity Commission recognise there are too many charities doing the same jobs in the same areas, and encourage mergers where these are viable. But in the third sector, unlike conventional business, too many people believe that it is better for everyone to fail than to give in to a competitor. 123
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