A new way to fund social enterprise

A new way to fund social enterprise
By Robert Ashton, Third Sector, 26 April 2007

A marriage between charity and business could lead to the birth of social enterprises that will free charities from their dependence on statutory funding, says writer, consultant and speaker Robert Ashton.

Too many see establishing a social enterprise as a new opportunity to approach old funders. They simply take a tired charitable service, incorporate it as a Community Interest Company and expect it to thrive. What’s often missing is the entrepreneurial spark.

Evolving a charity activity into a social enterprise should be viewed as an opportunity to do much more than pander to the whims of the grant-making trusts. While I am no right-winger, I have some sympathy with the recent Civitas claim that a charity with more than 70 per cent of its income derived from statutory funding is not a charity.

Of course it would be futile to try to persuade a passionate, lifelong third sector manager to don red braces and a sharp suit and set about cutting deals. But the real opportunity lies in the fact that the hard-nosed businessman, while knowing deep down that he should be sharing his good fortune with those less blessed, often doesn’t understand how do to do. Instead he flings a few coins at those who beg at his door; a process that satisfies neither party.

The answer is marriage. The charity is the bride: caring, soft and pacifying. The groom is a ‘for profit business’. Thrusting, assertive and successful, but aware that shareholders, customers and staff want to do good as well as make a profit. The fruit of their union can be a vibrant, sustainable, focused and innovative social enterprise.

An example of what this can be found in Norwich. Meridian East is a charity that prepares and supports people with mental health problems into work. The people there wanted to create a community café where clients could gain work experience. Although they had access to a capital grant to fund its set up, it was important that the café made a profit. I introduced them to Charlies, a growing chain of juice and smoothie bars based on the South coast. The Directors of Charlies had read one of my books and sought my advice as they wanted to grow their business and be different.

Together, the two organisations set up a CIC and used a capital grant to set up their first outlet, located within a successful youth project. By using Charlies’ entrepreneurial flair and proven business model, Meridian East now has a far more sustainable retail outlet, where their clients can gain both confidence and valuable work skills. Both parties benefit from the marriage, and the Community Interest Company structure, with its asset lock and public interest criteria, forms a very effective pre-nuptial agreement.



Top Ten Tips
Here are the ten steps I recommend you follow if you want to try this new approach to creating a sustainable social enterprise:

1. Make sure first that you know exactly what you want to do and why.

2. List what you are confident you can do and what you are equally confident you can’t.

3. Look for a successful commercial provider who might benefit from what you are planning. For example, a computer retailer might host an IT recycling business.

4. Find out all you can about the firms you’ve identified as prospective partners. What is their turnover and profit? Are they growing? Who are their rivals? Who are their directors and are any of them charity trustees? Look for possible links you can use to open a dialogue.

5. Make your approach. Say you are planning a social enterprise and think they have expertise or experience you could learn from. Ask for nothing more than an hour of their time.

6. Meet them and ask about their plans for the future. What are the opportunities and threats? Describe your proposed social enterprise and ask their advice. Be upfront about what skills and resources you lack.

7. Raise the subject of a possible joint venture. Explore how both parties could benefit. Try to make it an equal partnership. This means you both contribute equal value.

8. Allow time for both parties to reflect, consult stakeholders and advisers.

9. Decide if it’s feasible and agree a timetable for making it happen.

10. Stick with it and deliver what you’ve promised. Don’t keep raising doubts or concerns. Go for it!



Robert Ashton is a business author, speaker and mental health activist. Meridian East is one of his consultancy clients.

See the article on the Third Sector website here