Do charities need to become social enterprises to survive?

August 4, 2016 at 12:06

Heather Black at Economic Change asks “Is charity becoming irrelevant?” – this will be the question posed at the Large Charities Conference taking place in September, hosted by the Charity Finance Group.

Charity CEOs are looking for new ways to generate income to diversify their funding and reduce their reliance on donations, grants or contracts. Increasingly charities are morphing into social enterprises, increasing their trading activity by selling products and services to generate income. They are becoming more like businesses in their own right, but with a mission to make a social impact.

For some trustees and donors this doesn’t sit right, and can be a controversial move! But do charities have a choice in today’s marketplace? Is the charity model still fit for this more ‘business-like’ future? These are the questions for debate …

Surely finding ways to sustain the future of the organisation should be of optimum importance to a charity? Converting from a charity to a social enterprise should be considered as an option. So what steps should a CEO take to explore it further?

Why social enterprise?

Social enterprises are growing both in terms of numbers and scale. Social Enterprise UK’s State of Social Enterprise Report 2015 highlighted that there are 70,000 social enterprises in the UK, contributing £24bn to the economy and employing nearly a million people.

At a time when charities face increased demand with funding sources not growing at a similar pace, social enterprises are successful. 50% of social enterprises reported a profit, 26% have broke even.

Social enterprises allow charities to join the commercial marketplace of selling to businesses or consumers and generate a sustainable income – competing with mainstream businesses but using their profits for charitable purposes.

How do you explore social enterprise as an option for your charity?

You need to have sufficient data and evidence to ensure that your business model has legs and this may not be the case for every charity. I’d recommend completing a feasibility study is the first suggestion – exploring all the data that you have and interrogating the evidence available.

I’d also recommend visiting other charities that have established social enterprises and learning from their experience. It isn’t a silver lining or easy option – it needs time and resources to get it right!

Finally prepare a business case with evidence of robust test trading to show that there is traction and a clear potential to grow the market further.

Don’t be afraid to hire experts to help you research and set up the social enterprise to be commercially successful – you may not have all the skills you need in house.

Is there financial and business support available?

There are a number of programmes that you can look to in order to support this transition. One of them is Big Potential – a grant scheme which helps organisations undertake feasibility studies and explore whether social investment or a social enterprise is right for them. Economic Change, is working part of this project and you can contact us (heather@economicchange.co.uk) for more information.

What’s the future for charity?

I believe that charities need to become more entrepreneurial and adapt to a changing financial climate. Social enterprises give organisations more freedom to generate revenue whilst keeping them focused on a social mission. In this volatile and changing world, maybe it is time to move to this model and leave charity as a relic of a bygone age?


 

Heather-Portrait-Colour-Cropped-BW-239x300 Heather Black is the Managing Director at Economic Change at will be speaking at CFG’s Large Charity Conference on the 30th September.