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 Fostering an enterprising culture: There is little point in attempting to take the social enterprise route, unless your whole organisation is committed to the sustainability goal, and unless you mobilise all the resources at your disposal. Among the steps you need to take are: • Identifying every potential enterprise prospect in what you are already doing – even if you dismiss them all, the act of analysing the possibilities can get you all to think commercially. • Put existing projects on a more businesslike footing – your nursery or café or social centre probably need to market themselves better; examine the way they are staffed, the way services are costed, the charges which users pay, how you apply for and use grant money. • Identify new trading ideas, start the business planning, build up a programme of possible enterprise launches for the next three years. • Negotiate with local authority and other funders to substitute grants and service level agreements with more commercially orientated contracts. • Get optimum value from the accommodation you are using – sublet to earn rental income, fill spare space with your trading ventures. • Explore options for acquiring property assets – they are probably your best prospects for a sustainable future. • Make management freer, more opportunistic, flexible and business-orientated. • Give adequate support to the new ventures you establish. • Communicate the urgency and ethos of enterprise to junior staff who have no experience of business. • Separate commercial activities from the work of any associated charity. Spend grants like a business: Grant dependency in the nontrading third sector is unwelcome but it is an almost universal necessity. In trading organisations it may at times be essential, but it can also be a will-sapping evil that should be fought off with the energy of the best vampire hunters. Do whatever you can to: • stretch grants to go further than they are intended • use working capital grants to wean your business off dependency with ruthless self-discipline – if you still need heavy financial support at the end of the funding period the enterprise has usually failed (community groups and charities which retain a grant-dependent mentality have the capacity to use business investments in absurdly profligate ways) 214
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 • even if the funder has not awarded a tapering grant (with spending gradually reducing to zero over time) try to budget as if they did. Managing negative consequences: Directors and managers should: • plan with the expectation that grant funding will decline (it will be a bonus if it doesn’t, but you could be goners if you don’t plan for it) • be prepared to drop business ideas that fail to take off without delay, before they cause damage • expect staff, volunteers and trustees to become nervous, frustrated and upset (change is always painful); keep people properly informed, use your diplomatic skills to dissipate any aggravation, and avoid getting involved in arguments which no one can win. Securing appropriate support: Enterprises often fail after two or three years at the point when initial support disappears. Try to establish the best possible support structures for your organisation, internally and externally: • but don’t cultivate all the support agencies in your vicinity – that will just lead to confusion • identify and follow good practice in the sector • get involved in networking with other social enterprises – if you don’t you are very likely to start reinventing wheels • make sure others know what you are doing, and don’t disguise your problems (which is the best way of ensuring they you won’t get help when you need it). Setting targets and measuring progress: • The approach: Public bodies which are funding social enterprises are increasingly expecting grant applicants to set targets for raising the level of earned income compared with grant funding which they receive. This might take the form of a written target to ‘generate 50 per cent of funds by earned income in three years and 75 per cent in five years’. • Monitoring targets: Targets can be a helpful way for trading organisations to start measuring their progress year by year if the sole objective is to abandon grant income. • consult one of the social enterprise support agencies, and keep in touch with them 215
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A guide to third sector trading - WCVA

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