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 • risk aversion − unwillingness of public bodies to allow or encourage community organisations to take up challenges which might involve risks – most obvious in persistently negative attitudes towards asset transfer initiatives − unwillingness of community organisations to ‘gamble with’ (ie to invest) the public money they are responsible for − the necessary restrictions on the use of charity funds • the isolation of innovative projects and their leaders, who may mistakenly feel they − don’t have time for networking or attending conferences − are ‘too different’ to fit into other people’s funding criteria − don’t need others telling them how to develop. • the unrealistic expectations of quick or unachievable results for businesses which are sometimes cultivated by public officials and politicians • lack of skills among enterprise which have taken the plunge into loan finance but have failed to understand the importance of sound market research, business planning, risk management and financial management • obstacles presented by legal structures – the widespread use of charities as social enterprise vehicles and the failure of the Community Interest Company legislation to provide anything radically better for emerging enterprises • lack of coherent leadership across what is sometimes referred to as the ‘social enterprise sector’, where − a variety of support agencies have promoted different and not always consistent approaches to sustainability, grants funding, development, asset transfer, investment etc − proactive advice and encouragement for entrepreneurial thinking is sometimes less accessible than sources of information for those who already know what they need to do • confusing finance options – where it is not the lack of finance but the difficulty for inexperienced people to understand and locate the arrangements they need, which can be caused by: − limited support for enterprises in making complex finance decisions − the variety of financial scheme with different levels of funding and different conditions 174
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 − unhelpful marketing; what does it actually mean if a finance organisation says it ‘invests in social enterprises’ when there are so many types of third sector business? − limited finance packages suitable for small and emerging enterprises • the clash of cultures: a combination of the suspicion of some community entrepreneurs for the financial investment industry (enflamed by the 2008-09 banking collapse), and the reality that some private sector funders really don’t and can’t understand third sector enterprise. Bad risks: Of course, in many cases it would be plainly foolhardy for an institution to provide and a voluntary organisation to accept loan funding. The operation of so many enterprises in disadvantaged communities and in activities which the private and public sectors cannot sustain produces a massive barrier. But if doubts are unfounded, it is up to social enterprise organisations to make their case more vigorously and more convincingly. Overcoming the obstacles What does this mean? This daunting catalogue of obstacles also points to what people who are new to business finance ought to do to improve their prospects. Free up your thinking: Be imaginative and creative with your enterprise: • third sector business are often astonishingly creative; so use your imagination to dream about what organisation could become with the right sort of help • have regular review meetings for directors and staff (at least once a year) and include sessions on longer term possibilities: if some ideas keep coming back each time you meet, maybe you should be pursuing them more seriously • don’t be constrained by always thinking about what you could do if you had the grant – there are other ways to make things happen • visit other projects regularly, home in on the initiatives which inspire you, and find out how they were achieved. 175
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