As charities adapt to the tough funding environment, a new free guide is launched today in response to a rise in demand for information and advice about how they can become a social enterprise
As charities adapt to the tough funding environment, a new free guide is launched today in response to a rise in demand for information and advice about how they can become a social enterprise.
The guide, Why Social Enterprise?, has been produced by Social Enterprise UK (SEUK) and Pilotlight, a charity that brokers free business coaching to small charities and social enterprises to help them grow and become more sustainable. It also includes expert legal advice from charity specialist solicitors, Bates Wells & Braithwaite.
A social enterprise is an organisation that trades for social purpose and they can range from large national businesses to small, community-based enterprises. There are more than 68,000 social enterprises in the UK and both SEUK and Pilotlight say they expect to see this number increase as social investment takes off and the Public Services (Social Value) Act comes into force in January 2013. It’s hoped the Act will create more trading opportunities for charities and social enterprises providing public services.
Gillian Murray, Deputy Chief Executive, Pilotlight, says:
“In the past twelve months we have seen a significant increase in interest from our partner charities about becoming a social enterprise. With the cuts in local authority funding and changes in the way charities’ services are being commissioned it’s no surprise that charities are exploring the opportunities social enterprise can offer. We hope this free, practical guide will provide them with clear information so that they can make an informed decision.”
The guide examines various issues that charities should consider if they are thinking about becoming a social enterprise, ranging from cultural changes to legal structures. It highlights that charities don’t always need to change their legal structure and emphasises that many social enterprises remain as registered charities. For some charities a social enterprise will be just one part of their activities that will enable them to make a surplus so that they can grow and invest.
The guide explains where charities can trade without structural change and where they will need to set up trading companies. It acknowledges that some charities may find it hard to make the change from grant funding to running a business, selling services or products at a profit and advises them to have a robust business plan in place.
Peter Holbrook, CEO of Social Enterprise UK, says:
“We are delighted to be collaborating with Pilotlight on this topic- it’s vital that we secure the future sustainability and social impact of our charities. Lots of information and know-how needs to be changing hands across the social economy as we deal with the economic and environmental changes we face. Many charities can have a greater social impact if they trade and reinvest their profits. Some of the most successful social enterprises in the UK today started life as small charities.”
The guide is aimed at charity leaders, senior managers and trustees to help them understand what the transition to social enterprise might mean for them. It emphasises that the mission and the ethos of charities do not have to change just because they become social enterprises.
June O’Sullivan, CEO of London Early Years Foundation, says:
“We started as a traditional charity, relying heavily on grant funding from the Government. I knew this wasn’t a sustainable way to run our nursery, and with rafts of research showing the benefits of good quality nursery education, I felt it was our duty to support even more children and families across London. It was vital we diversified our income streams to help us survive and grow. The social enterprise model was the obvious transition, preserving our mission and ethos, but helping us adopt a more sustainable, business-like approach. The shift was met with some unease from staff, who believed it would affect the way we supported the nursery’s most vulnerable children, but in fact it allowed us to considerably expand our services and develop a model that increased our reach and revenue, while reducing our costs.”
London Early Years Foundation
London Early Years Foundation (LEYF), founded in 1903, was established as a charity and had a long history of working to give children in the City of Westminster the best start in life. Although more funding became available under the New Labour government in the 1990s, leading to new income streams, the charity remained dependent on a block grant from the local authority to support its work.
In 2005, when June O’Sullivan was appointed CEO, she decided that LEYF needed to become a social enterprise. Initially, many LEYF staff were worried that the changes would mean they could no longer provide a service to the poorest children. It required a shift in culture and thinking to enable staff to understand the new approach and the benefits it would bring.
The challenge was to turn the organisation from a grant-dependent charity into a sustainable business while continuing to provide a service for children and parents who couldn’t afford to pay for it.
The answer was expansion. LEYF began to move beyond Westminster and opened nurseries in other London boroughs creating economies of scale – in doing so, they increased occupancy and revenue, while reducing costs. Becoming a social enterprise has helped them produce enough profit to give many more children a free offer than they could previously. London Early Years Foundation now provides one third of children across five London boroughs with some level of (financial) support.
Worth Unlimited is a charity that works with young people across the UK who are suffering from the effects of poverty and deprivation. Two years ago it recognised a real need to help young people who had dropped out of school to develop the skills they needed to get a job or go on to college.
They had already had an idea to open a bike repair business and a bakery and realised that this would work well as a social enterprise, giving young people both work experience and transferable skills. As a result, Worth Enterprises was set up as a social enterprise arm of the charity. However, fairly quickly, CEO Tim Evans realised they needed help with the vision for the new enterprise and how to plan for its future.
In September 2011, Worth Unlimited began working with Pilotlight which brought together a team of senior business people to coach them through the process of becoming more sustainable and efficient. The Pilotlight team helped Worth Unlimited think through its social enterprise activity and acted as an expert critical friend. Tim says part of the challenge was getting staff to buy into the new venture and think in a totally different way.
‘We needed our youth workers to switch their mindset to running a business which was a big change for them. Pilotlight was able to help us with this and got us all thinking more as a business, which enabled us to put the structures and processes in place to be successful locally.’
The results have been impressive and the charity is now being supported by O2 to open a new bike shop, again run by young people as a social enterprise, as part of its Gear Up programme in Birmingham.
Tim says that having the opportunity to really think through how the new social enterprise was going to work made all the difference.
‘We now have two fledgling enterprises which are growing and which we are using as the flagships for the rest of the organisation. We’ve learnt important lessons and our goal now is for every one of our local branches across the UK to have a social enterprise element as part of what they do.’
Pilotlight is a unique, capacity building charity offering free, tailored strategic planning support to charities and social enterprises that are tackling disadvantage in the UK. We match directors from charities and social enterprises with teams of senior business people who coach them through the process of planning for sustainability, development and growth. Each charity and social enterprise also has a dedicated Pilotlight project manager who coordinates and facilitates the process.
We are currently working with over 70 charities and social enterprises across the UK. Within two years of working with Pilotlight our partner organisations increase their income, on average, by 50 per cent and are able to double the number of people they reach.
Social Enterprise UK
is the national body for social enterprise. Social enterprises are businesses that are changing the world. When they profit, society profits. Together with our members we are the voice for social enterprise in the UK. We do research, provide information and tools, share knowledge, build networks, raise awareness and campaign to create a business environment where social enterprises thrive. Our members are local grass-roots organisations and multimillion pound businesses that operate internationally. What unites them is their commitment to changing the world through business. Visit
For more information please visit our website, www.socialenterprise.org.uk
Content from our partners
Don’t miss out on the best of Spear’s articles – sign up to the Spear’s weekly newsletter