Speech at Somerset VCSE Conference June 2019
This morning I’m going to speak about social enterprise and in particular why I believe this is really vital work. Because I believe that social enterprise has the potential to address the big issues that politics, government and big business are failing to address. And perhaps as important, my view is that social enterprise is key to the success of the voluntary and community sector.
I accidentally got into social enterprise in 1980. I hated meat as a child, in my late teens discovered the impact that meat production had on the environment and when I was 22 years old set up a Bristol-based workers co-operative distributing vegetarian and vegan food across the South-West, Wales and the Midlands. The business grew fast. In less than 3 years. we were riding a wave of vegetarian eating, delivering to over 200 shops, employing 16 staff, driving four large lorries and turning over three million pounds a year
I was fortunate to discover at an early age that it’s possible to be financially successful while doing something that changes the world for the better. We were passionate about the health and environmental benefits of our products (which is now well known). But we also learnt how to grow a successful enterprise.
Essential Trading, as it is now known, is still going strong, but in the mid-1980’s I moved on. I worked for two charities where, among other things, I was responsible for fundraising. It was an interesting challenge as I was used to selling food. For some time, we were successfully winning grant funding but after a while I found that funders wanted to move on. The challenge was to make the services we offered sustainable. Was it possible to think of the charity’s services as things that people would buy?
The first time I tried this was in Scotland. I was part of a team creating a new eco-village in a coastal community and we had plans to create a wind farm to power our homes. This was not a wealthy part of the world but full of people passionate about creating a more sustainable way of life. We negotiated buying a second hand 75kw wind generator and managed to persuade the bank to lend us 50% of the cost, off the back of a compelling business plan.
We then spent months trying to raise the other 50%. We sought grants from foundations, we sought funding from the local enterprise board and tried all sorts of funders. But no success.
Then one evening we had an idea: how about asking all the residents of the community to put in a small amount of money and effectively create a cooperative business, whereby they would receive a discount off their electric bills once the bank loan was paid off. We asked each household to come up with £500.
It worked. We set up the cooperative and within a couple of weeks had the funds to go ahead and buy the wind generator and associated infrastructure. And the best thing was that the whole community took a weekend out to hand dig the one-mile trench to lay the cables to the electrical substation. It was a real community endeavour in every sense.
And for me I started to understand what I now call the social enterprise mindset. It’s a different way of thinking and is core to the culture change that voluntary organisations have to engage in or order to transition from grant funding to social enterprise. What does this involve?
- It means developing a mindset that considers the commercial opportunity of everything that your charity does.
- It means imagining who will buy your services and why they would want to do that.
- It means finding great organisations to partner with that so you can scale up and create greater impact.
- It means making sure that you always make enough profit to put back in to growing your charity and increasing your impact.
- It means changing your mindset from ‘not for profit’ to ‘not for loss’. Too often charities end up subsidising their own services to the benefit of the public sector.
- It means always thinking of new ways to do what you are doing, for example creating a digital service or finding ways to do what you need to do for less cost.
- It means never assuming that you can keep doing the same things.
- It means thinking about your charity like it was your own business.
These days social enterprise is a growing part of the economy. In September last year, a Social Enterprise UK reportshowed there to be over 100,000 social enterprises contributing £60bn to the UK economy and employing two million people, considerably higher than previous estimates.
And increasingly there are plenty of charities that are now engaged in social enterprise and see this as a key part of their sustainability.
So how do you get started. Once you start to adopt the social enterprise mindset its surprising how easy it becomes, as often the opportunities are staring us in the face. So here area a few examples.
Turning programmes into products.
In the late 1990’s I was working in London as the CEO of a charity that had launched a successful counselling service for school teachers. We quickly gained a reputation for being the organisation that best understood the challenges of mental ill health in schools. We were invited by a local authority to set up a wellbeing programme in schools. We gained two years funding from the Council and a local grant making trust, but towards the end of this time it was clear that we would need to find other sources of funding.
News had got around that the work we were doing in this area of country was having great results. We got approached by a number of schools. Some came to visit and see what we were up to. It was time to engage the social enterprise mindset.
We spoke to all the schools who had approached us. What if we developed some tools, gave them some training and then did an annual review of how the school was doing on a wellbeing framework. Almost all of them said yes – and “what will it cost?”
We quickly developed a pricing model, adapted the tools we had created as part of the original programme and in a short period of time we were working with a few hundred schools in about either parts of the UK. It was time to scale up.
We developed a business plan, identified that we needed to raise £250,000 of investment and although that took some time, we kept growing. Eventually the investment came through and within the next two years we were in over 2,000 schools. And delivering profits back to the charity.
And here is another example with a charity I am a trustee of.
Turning research into a service
The Money and Mental Health Policy Institute was set up three years ago to break the link between financial difficulty and mental health problems. The charity conducts research, develops practical policy solutions and works in partnership with both those providing services and those using them to find what really works.
In just three years, the charity has produced a significant body of research and gained a reputation in the financial services industry. In particular we have developed a set of standards that consumer-facing companies (such as banks, insurance companies and utilities) can use to ensure that they are making the adjustments in their processes to support their customers who have mental health problems or diagnoses.
We are launching a pilot of this next week with a high street financial services company which we believe will have a huge positive impact thousands of people facing mental ill health.
And assuming this is successful (which we are confident of) we will develop this as social enterprise, with a plan to roll this out across this and other industries. Turning research into a product that helps our client group as well as the financial sustainability of the charity.
From regular donations to subscription products
I’m always interested in seeing what charities are up to in the creation of enterprise. So, I was excited to see that last week the charity Water Aid has come up with a creative solution to a fundraising challenge.
The charity set itselfchallenge of developing a sustainable, scalable source of unrestricted funding in response to the fact that it’s increasingly challenging to drive and sustain regular giving, not just for Water Aid but across much of the charity sector.
So, they have launched a product called Fempowered, a service that allows subscribers to choose between a range of organic, sustainably produced period products that are delivered to their doors for £10 a month.
And profits will go to WaterAid’s work in helping women and girls around the world to deal with their periods safely and with dignity.
The charity has clearly stated that this service would behave like a social enterprise, despite being part of the charity.
If large, traditionally donor funded charities are heading down this path, then we are likely to see another growth spurt for social enterprise.
From charity to social enterprise
As I have said earlier, it’s as much a mindset as anything, but here is my list of what has worked for me when taking a charity down the social enterprise route.
1. Can you sell your services?
Firstly, have a good look at the services you provide now and who you provide them to. Are there new markets or customers for what you are doing already? Or are there new services that you can take to your existing customers or donors?
If as a result of this you have identified a product or service you think you may have a market for, test out the value proposition on some if the potential customers that you already know.
2. Value proposition
A value proposition refers to the value a company promises to deliver to customers should they choose to buy their product. It requires understanding what your customer wants, so a form of empathy really where you put yourself in their shoes. What is the problem that they need a solution for? Can your product or service provide that?
In my experience most enterprises start before they are ready! That’s not a bad thing. The first two years of any new business are often about experimentation and its often worth trying out your ideas and see what works and what people will buy, ideally before you need much, if any, investment.
3. Proper pricing
Next up is proper pricing. Most charities know how to do this already for grant applications and tenders. Social enterprise pricing is really no different. What are your direct costs of delivering your service? What overheads do you need to ensure a quality and sustainable service? What profit do you need to make to ensure you can grow the enterprise and gift back to your charity? And can you do all this at a price that your potential customers will pay?
4. Adopting a sales mindset
One of the challenges charities can face is moving from a fundraising mindset to a sales mindset. Actually, I don’t think it’s that different, but I am forever meeting people (including fundraisers) who say that they ‘don’t like to do sales work’ or feel intimidated by it.
But selling products and services is very much like fundraising. It’s about building great relationships with people. The part of my job I most enjoy is meeting customers and potential customers, finding out about them, their customers or service users and their organisations. I spent the last 12 years of my life ‘selling’ to charities and I loved it. I got to visit between three to five charities a week. I got to understand what their challenges were, I got to understand about their service users and in many cases the people I met there have become good colleagues and friends, regardless of whether they purchased from me or not.
So, if you believe in what you have to offer, like meeting people, are interested in learning about other people and organisations and can articulate your value proposition, you’ll be great at sales!
5. Financial forecasting
Finally, you need to get good at monthly financial forecasting. This is a skill similar to, but different from, budgeting. It requires flexibility, and ability to shift gear quickly. Many years ago, when I was raising investment for a social enterprise, a wise financial adviser told me to work out how much investment I thought we needed, and then figure out how to create the enterprise on half that sum. It worked. I raised half the sum and we successfully grew the business.
I have been doing the financial forecasting for every enterprise I have run since I was 24 years old. These days I have it down to a fine art – it takes about half a day a month and all the enterprises have gone well and are still going strong.
Thanks very much for listening and have a great day