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 Co-ordinated activities: Complex charities and voluntary organisations, including social enterprises often offer a range of different, unrelated services in combinations that would boggle many traders in conventional business. This demands a high degree of organisation, co-ordination and communication between the different parts of the enterprise. Without this: • economies of scale will be missed: work will be harder and earn less income • isolated staff may resist the introduction of social enterprise if they feel isolated or left in the dark – morale could be damaged. • monitoring and record keeping will be more difficult • further business development will seem too challenging or unachievable. Commercially minded leadership: All managers should be creative, flexible, alert to new opportunities, concerned about standards of performance, aware of targets, waste-conscious etc. But when they are in charge of business activities these are qualities which they are paid for; the earning capacity of their organisation depends on them. Managers need to be constantly conscious of: • what they have to sell, and what other services or commodities they could be selling • who might want to buy them, how valuable their services or products are, how people can be informed about them • the cost of the sales, in human as well as monetary terms • whether the prices are right, how much income could be generated, and how this could benefit the organisation • the way customers see them and the organisation, whether these customers will continue to do business with them, who is currently the competition. It is a tragedy that so many fine leaders in the third sector go into social enterprise activities with no awareness of the challenge which faces them, and then spend months or years discovering business management by trial and error. A focus on the value of staff: • All the assets of the business have a value. But you need to consider a reality which principled people in the third sector sometimes find unpalatable: the assets include the employees, and these have a business value (in addition to their value as work colleagues, deliverers of services, friends, etc) which is the equivalent to the income the enterprise generates as a result of employing them. 206
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 • In grant-funded projects with tight margins there will already be a direct connection between each worker and the level of grant you receive – it’s what they cost you to employ them. • But in business, the worker’s value may also include how much money they could earn for the organisation. This may sound exploitative, but how can you know what to charge customers when you are preparing bids, costing contracts, and calculating the price of products, if you don’t put the value of your employees’ time into the equations? • The implications in the simplest terms are that: − workers need to be supported to produce at least enough income to cover the costs of employing them and the costs of what they do – otherwise you will operate at a loss − workers could quite possibly increase what the business earns if they are managed well. Being taken seriously: Partners and supporters need to treat trading organisations as serious businesses too. It’s no good a local authority telling a community organisation to become more sustainable if officers never give it the chance to behave like a business. Trading organisations usually need to work hard to persuade others of the need for: • public authority grants and service level agreements to be replaced with formal contracts • proper lease or licence agreements on its accommodation • securing and developing property assets • the opportunity to bid for other public contracts • income streams which don’t outlaw provision for redundancy reserves and commercial profit • recognition of key skills and capabilities and wider local markets where these can be applied, possibly including its skills in helping others to develop enterprise • support to identify other new social enterprise opportunities. Keeping control Avoiding crisis management: Many conventional businesses and third sector organisations operate in a perpetual state of drama and near disaster under ‘crisis management’. Some managers are quite good at just keeping control. They deal with every problem, or most of them, at the point when they become a threat or distraction to the business. This is a situation you need to understand – and then deal with. 207
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A guide to third sector trading - WCVA

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