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 7: Managing growth 7.1 What growth looks like Third sector enterprises may take years to evolve from vulnerable grant dependent deliverers of services to confident, sustainable organisations with business activities which must to some extent make a profit. Inevitably organisations change in many ways in this process, often haphazardly, and there is no single model of development. But if you understand what the options are and what evolutionary steps to watch out for in your own organisation you will be better equipped to recognise and respond to opportunities for growth as they emerge. Enterprise growth points The emergence of growth points: Successful enterprises tend to evolve as growth points in comparison with the third sector activity around them. (The current jargon is ‘community anchor organisations’) Typically: • By definition, they get bigger. • Additional resources give them more robust management structures – the chief executive officer or manager no longer has to act as the chief finance officer, personnel manager, quality control clerk and caretaker (though s/he probably still helps out when necessary). • They operate a wider range of activities, and may handle several different types of grant and earned income. • They undertake more demanding and substantial projects, and generate more income from them. • When new grant money has to be spent quickly (such as end of year slippage in the public sector) it often comes their way because they are sharp-witted, flexible, and have plans on the shelf which are ready to run. 168
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 • They are operating over a wider geographical area, because they have picked up contracts which might have previously gone to smaller organisations, or because they have persuaded councils and others that they are competent to do work which was once carried out by public sector bodies or private businesses. • The ratio of grant funding to earned income has significantly reduced. • They own or have long-term leases on property which makes them more secure. • They work in partnership with public sector bodies, and are treated with greater respect (though rarely as equals). • Their expertise is recognised by others, so they are sources of advice and support to other voluntary organisations (often formally as organisations which support and promote community development or social enterprise development), and they may sell their staff skills through consultancy work. • They arrive in their mature, independent, self-supporting form through a mixture of skill, hard work and blind chance helped by the willingness of directors and staff to be flexible and take measured risks. How growth points work: It is not particularly surprising that successful social enterprise organisations grow in this way. But it has taken government and other parts of the third sector to wake up to the significance of cultivating their success. • Growth points are not like old-style community businesses: Successful social enterprise growth points contrast vividly with the stand-alone community business model with just one or two key trading activities which developed in Scotland and in isolated pockets elsewhere in the 1980s and 1990s. Voluntary organisations are not good at replicating the single-mindedness of conventional business. • Growth is based on a mix of funding and a range of activities: − if one activity fails it can disappear without affecting the stability of the whole organisation, so they become more resilient over time − third sector enterprises often choose to subsidise their lossmaking activities while they are getting on their feet. • They extend into new markets wherever they can: As in the case of dynamic conventional businesses, − economies of scale make them more efficient 169
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