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Designed by designcrew Hastings Tel: 01424 205499 This booklet was initiated by Hastings Trust Community Regeneration Unit and made possible by a Global Grant from East Sussex County Council. Project part-financed by the European Union Every effort has been made to ensure that this material is accurate and up to date. However the guidance and opinions offered here must not be treated as a substitute for appropriate professional advice and should not be used as the sole basis for personal or business decisions. The author cannot be held responsible for any loss or damage, however incurred, as a result of any person acting on the guidance offered. Copyright: Susan Heath at Decoda 2006 Email: enquiries@decoda.org Web: www.decoda.org “Never doubt that a small, group of thoughtful, committed “a what enterprise?” citizens can change the world. Indeed, it is “People rarely the only thing that succeed unless they have fun in ever has” what they are a beginner’s guide to social enterprise Written by Susan Heath doing” Contents Introduction 3 4 What is a social enterprise? How to set up a social enterprise Future Potential of Social Enterprises: Procurement Resources 6 19 21 “Never doubt that a small, group of thoughtful, committed citizens can change the “ To accomplish great world. Indeed, it is the things, we must not only thing that ever only act, but also has” dream; not only plan, but also believe ” “One generation plants the trees; another gets the shade” “The road to success is always under construction” Introduction “Why don’t you become a social firm?” - a simple enough question, asked 3 years ago, during a conversation with the local Community Regeneration Unit about the drawbacks of registering as a charity. At the time we were a small not-for-profit organisation – a non-incorporated association – in other words we had a constitution showing charitable objectives but no formal legal structure. We knew we needed a legal structure and had thought the only option was to become a charity. That remark was like passing through the turnstile into a maze with low but thick hedges. We could soon see where we needed to reach but getting there was tortuous. Over the next year we researched and considered every possible structure until finally settling on a not-for-profit company limited by guarantee. That decision simply meant entry to the second maze, that of writing the Memorandum and Articles. Finally, with some legal help, we were there but we’d reached somewhere that wasn’t on the map. Whenever we replied to the question of were we a charity by saying No, we’re a social enterprise the answer was invariably the same: A what enterprise? Or maybe A social what? Two years on the picture has changed – especially if you work in the sector of not-forprofit or charitable organisations. There is now a wealth of information and initiatives where three years ago there was very little. Suddenly “social enterprise” has become the answer to everything and especially to the question of how to survive in a world of dwindling funding. Outside that world there are still many people who haven’t heard of social enterprise. Where people have heard of it there can be a lot of 3 confusion. For the past year, with the aid of a Global Grant, I’ve been offering mentoring to individuals and organisations in East Sussex interested in following the social enterprise route. From those meetings certain themes emerge: G What is a social enterprise? A business is born when someone sees an opening, a market in which to make money; a charity or voluntary organisation is born from a desire to solve a particular social problem. Put these two together and you have a “social enterprise” – a business-based approach to achieving social and environmental aims. The government’s official definition is this: “A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profits for shareholders and owners.” To call social enterprises “non-profit” is misleading as they aim to sustain their business and make a profit, it’s what they do with these profits that’s different. Social enterprises share certain features: G G G G G Shall we be a charity or a company? What’s the main difference between them? What’s the difference between a CIC and a company limited by guarantee? What other structures are available? How do we get started? Where can we get funding? Hopefully this booklet will help to answer those questions and also provide some local examples to encourage and inspire. “Never work just for money or for power. They won’t save your soul or help you sleep at night” Marian Wright Edelman The trading of goods and services although grants may be used in setting up or to subsidise sales, social enterprises are basically about business approaches to achieving public benefit. G The social or environmental aims are central to what the enterprise does. G The ownership structure – social enterprises can be owned by their users or customers, their employees, the wider community, trustees, public bodies, or a combination of different stakeholder groups. The Small Business Service has shown that there are more than 15,000 businesses trading with a social purpose in the UK. Judged in terms of numbers and employees and contribution to the economy the social enterprise sector is now larger than agriculture. 4 Who might want to set up a social enterprise? G G K An enthusiasm to be an entrepreneur G G G A community wanting to set up its own enterprises. A charity or not-for-profit group who want to generate their own income rather than relying on grants. People with a good business idea who are motivated by more than the desire to make money. People with the same aims and goals who want a business that’s jointly owned and democratically controlled. An individual or group wanting to provide meaningful jobs for people who can’t find work because of e.g. disabilities. You may have doubts because: N You think business and charity shouldn’t mix (although charities are increasingly run in a business-like way). N You don’t want anything to do with business, it’s not something you can think about – artists, musicians, is this you? N You think business methods are mysterious and difficult, especially the financial aspects – does a fog come down when you hear the words “Cash Flow Forecast”? K What do you need? A product or service which someone wants to buy – a social enterprise is aiming to earn at least 50% of its income from sales. A desire to use your organisation to create value for your community. K Vision and passion – the urge to tackle a social or economic problem in a new way. K Keep this at the front of your mind as you plough through the legal formalities and the minefield of finance. Why are you doing this? Constantly remind yourself of what difference you want to make – in one year’s time, in five year’s time? If you said No to any of the above then maybe this model isn’t for you. To find out more about social enterprise there are many case studies on the Social Enterprise Coalition website www.socialenterprise.org. There’s also an excellent guide There’s More to Business Than You Think downloadable at http://www.socialenterprise.org.uk/cms/ documents/guide.pdf Martin Luther King had a dream. He didn’t say “I have some key success factors” or “There are some statistical measures of discrimination I’d like to share” From Breakthrough Thinking for Nonprofit Organisations by Bernard Ross and Clare Segal 5 Are there entrepreneurs in your group? Anyone in business will tell you that on the whole people make a successful business. Action research tells us that the key personality traits for setting up and running a social firm are: G How to set up a social enterprise There are two main areas to address: your legal structure and your business plan. The legal structure. This is where the weak-hearted grind to a halt because it looks difficult and/or expensive and because there are so many to choose from – a Community Interest Company; a limited company; a co-operative; a charity; a social firm to name a few. The structure depends on certain basic questions including: How do you see your role in the organisation? Is it your brain-child that you’ve spent time developing? Do you want to be paid to work in the enterprise? Are you happy to hand over the control to others? These are crucial questions: if you go the charity route you have to choose between being an employee and a trustee, you cannot be both. For that reason if you’ve done all the initial work you may prefer the flexibility of a company which allows you to be both an employee and a director. Will the enterprise be self-sustaining from the start or will you need grants for several years? There is no doubt that charities can have an advantage when it comes to fund-raising: Some trusts can only give to registered charities because of their own rules; Charities are closely regulated by the Charities Commission so a trust can feel more confident about giving them money; There are tax incentives for an individual or corporation to make donations to a charity; If you intend to become a company and need grants from trusts you must show the funders that your objectives are charitable and that you are able to manage the money. There are particular sources of funding open to social enterprises but it tends to be in the form of loans rather than grants.   Having guts, determination and focus – being able to overcome barriers and not get side-tracked (for too long) Being able to spot opportunities Having vision Having responsibility and ownership – autonomous management Feeling comfortable with ambiguity/being open to change Managing networks and relationships – creating interdependency and win-win scenarios Being energetic and motivated – a good starter, identifying finishers Taking incremental risk/managing risk Taking initiative and making things happen – being able to make the “phone ring” G G G G G G G G In terms of a very simplistic “entrepreneurial tool” it might be useful for you and colleagues to have a structured discussion around the above bullet points, and consider whether your group has the capacity to develop a business. Section One of the Social Firm DIY Feasibility Toolkit see www.socialfirms.co.uk 6 The Electric Palace Cinema and the Maitreya Buddhist Centre – two different enterprises that illustrate what can be achieved with effort and determination. The Electric Palace is an independent cinema in the Old Town in Hastings and the Maitreya Buddhist Centre is a Bexhill-based charity that provides classes and courses on meditation and Buddhism. Both began simply and then found a way to make their activities more long-lasting through enterprising solutions. The Electric Palace staged a week-long film festival in 2002 and the Centre had been renting venues for classes for the past five years. The solution for the Electric Palace has been to show films that people would otherwise have to travel a long distance to see and to hire out the cinema for private parties. For the MBC the solution has been to rent premises for classes that also include a shop. Neither group had access to finance from banks. The Electric Palace has been given grants for various projects and to buy equipment but never any core funding to run the venue. The start-up of the shop was made possible by fundraising activities and especially by donations of time, money and labour from volunteers. The shop is in its infancy but already the Administrative Director, Andrew Durling, can see the benefits in terms of the group: “Being part of a social enterprise is an exhilarating and intense experience as it brings the Centre’s members much closer together into an effective, harmonious group and gives it a focus for working together creatively in new ways.” After three years the Electric Palace is flying with a membership of 1400 and rising. Besides the rich and varied programme of films, including Saturday morning cinema for children, they invite directors, actors and filmmakers to talk about their work, there’s an education programme making films in the community, professional film equipment available to hire at subsidised prices and networking events for filmmakers to meet and show their work. One of its founders, Rachel Pearson says “the Electric Palace really is a labour of love for us, but we are now totally addicted to it and I can’t quite imagine it not being a part of my life.” The Electric Palace is at 39a High Street, Hastings, TN34 3ER Tel: 01424 720393 website: www.electricpalacecinema.com The Maitreya Buddhist Centre and World Peace Shop is at 13 Sea Road, Bexhill, TN40 1EE Tel: 01424 733761 website: www.maitreya.dsl.pipex.com 7 Who else will be involved: a management committee, members, stakeholders? Fortunately there are some excellent guides available: G  Keeping it Legal by Bates, Wells and Braithwaite, the legal experts in the field of social enterprise. Costs £10 from the Social Enterprise London website, www.sel.org.uk/ publications or can be downloaded as a pdf file at http://www.bateswells.co.uk/ newsletters/Keeping%20it%20Legal %20(final).pdf The module covers developing a mission statement, business planning and finance, legal structures and much more. G This is one of several useful publications available at the social enterprise and training website www.setas.co.uk G The Business Link website www.businesslink.gov.uk outlines all the forms available to social enterprises. Currently most enterprises fall into two groups: companies and industrial provident societies. Community Interest Companies are limited companies subject to general company law, like other companies registered under the Companies Act 1985, but with their own Regulator. Companies 1. A company is a corporate body and a legal person in its own right. This means that like a living individual it can do business, enter into contracts, employ staff and own property. 2. A company is owned by its members. These are shareholders if the company is “limited by shares” or guarantors if it’s “limited by guarantee”. What’s limited is the liability of the members – in the second case to the value of the guarantee, usually £1. 3. A company is managed by its directors. The directors are appointed by the members. There’s nothing to stop the members and the directors being the same people provided it’s in the constitution. Directors have a duty to act with care and skill in the best interests of the company. The company secretary is a key officer whose job is to ensure that the company complies with all the requirements of company law e.g. filing annual accounts and returns; informing Companies House of any change in the registered office or directors’ details. 4. The constitution is made up of two documents: the Memorandum of Association, which contains the objects and powers of the company and the Articles of Association, which set out the internal management The guide was written before Community Interest Companies became law but it’s still very useful. G If you want to gain a qualification in the process of setting up then go to the South East Social Enterprise Partnership site at www.sesep.org.uk G Hastings Voluntary Action have an information sheet for a community group considering becoming a company at www.hastingsvoluntaryaction.org/ BriefingNotes/Incorporation G WISE (Working in Social Enterprise) produced by Anglia Ruskin University and downloadable at www.enterprise.apu.ac.uk/wise/ downloads.Par.0002.file.tmp /WISE%20Module.pdf “Bite off more than you can chew, then chew it” Ella Williams 8 procedures and the roles of members and directors. All limited liability companies have an “objects” clause in their constitution that sets out the company’s aims and purposes – for example to operate the business of recycling furniture. All activity must fall within the company’s objects so future opportunities can be covered by catch-all objects besides the specific ones, for instance: G certain requirements.) The starter pack will include copies of all the forms, plus guidelines and explanatory leaflets. To register, send the following documents to Companies House    “to promote other benevolent and philanthropic purposes as the Directors think fit;” G “to carry on business as a not-for-profit company”. Two requirements usually found in the constitution of a social enterprise are: G that profits are not to be paid out to members but must be put towards the company’s social purpose; G that any assets remaining after the company is dissolved have to be applied for similar purposes and not distributed amongst the members. The Memorandum and Articles of a company are in the public domain, that means they’re available for anyone to read, they’re not secret documents. Read several and find a structure that fits your activities and social aims. If you’re unsure then it’s best to get legal advice: Bates, Wells & Braithwaite are the experts. Tel: 020 7551 7777 or go to www.bateswells.co.uk The Solicitors Pro Bono Group (SPBG) is a small, national charity whose aim is to enable and encourage lawyers to provide free legal help to individuals and community groups in need. There is an application process which takes time. Phone 020 7929 5601 or go to www.probonogroup.org.uk/community 5. To form a company ask Companies House for a free Starter Pack. The New Companies section will give free advice on the technical aspects of the registration including advice on the name you’ve chosen. (You can delete the word Limited from the company’s name if you’re a not-for-profit company and meet Memorandum of Association Articles of Association Form 10 (details of the directors of the company)  Form 12 (a declaration that the Companies Act 1985 has been complied with in respect of the company) It costs £20 for incorporation within seven days and £80 for same day incorporation. More details can be found at www.companieshouse.gov.uk Tel: 02920 380801 Community Interest Companies A CIC is a new type of company, designed for social enterprises that want to use their profits and assets for the public good. CICs have all the flexibility and certainty of the company form, but with some special features to ensure they are working for the benefit of the community. They are registered in the same way at Companies House with an additional £15 payment. The two main features are the community interest test and the asset lock. The community interest check is at the heart of the CIC. To become a CIC, an organisation will need to satisfy the regulator that its purposes could be regarded by a reasonable person as being in the community or wider public interest. It will also be asked to confirm that access to the benefits it provides will not be confined to an unduly restricted group e.g. employees or members of the company. All applicants for CIC status must make a Community Interest Statement, signed by all the directors or intended directors, indicating why they believe that they satisfy the test. In addition, the constitution (memorandum and articles of association) of a CIC must comply with the relevant legislation. 9 A company must continue to satisfy this test as long as it remains a CIC. The asset lock is a general term used to cover all the provisions designed to ensure that the assets of the CIC (including any profits or other surpluses generated by its activities) are, subject to meeting its obligations, either permanently retained within the CIC and used for the community purposes for which it was formed or transferred to another asset locked body such as another CIC or a charity. The annual community interest report is the document a CIC is required to file with its accounts which will be placed on the public record at Companies House and will be copied to the CIC Regulator. The report will need to include details of the remuneration of the directors, the dividends paid on shares and the interest paid on capped loans. It will also need to explain what the CIC has done to benefit the community and how it has involved its shareholders or stakeholders in its activities. For more detailed information on CICs, especially regarding payment of dividends, go to www.cicregulator.gov.uk In future there will be model constitutions and annual reports available on the website. The guidance there includes a detailed list of considerations for any organisation considering becoming a CIC:            What activity do you want to undertake and how will it benefit the community? What community will benefit? If the community is too narrowly defined, the company will not be eligible to be a CIC. Who will be the owners, managers, directors, shareholders or guarantors? How will it be funded? How will any surpluses or profits be used and what do you want to happen to any remaining assets if the CIC is dissolved? Do you understand the permanent effect of the asset lock? In most cases becoming a CIC will have long term consequences. Do you want to pay dividends to investors, and will the ability to pay   dividends have a favourable or adverse effect on your funding or tax status? Do you understand the dividend cap limitations on the payment of dividends? If you do not want to pay dividends would a CIC limited by guarantee be the best option? Do you understand the continuing obligations of CICs such as filing of annual returns and accounts with a CIC annual report and will your organisation have the capacity to perform these? If you are an existing unincorporated organisation are the existing stakeholders, creditors, trustees etc in agreement with the change to a CIC and are you in a position to make any necessary transfer of assets? If you are (or want to be) a charity, remember that the same organisation cannot be both a CIC and a charity. CICs will be more lightly regulated than charities but will not have the benefits of charitable status, even if their objects are entirely charitable in nature. Charities will be able to establish CICs as subsidiaries that can pass assets and profits to the charity owners without asset lock restrictions. Being a CIC will not confer any special tax status as such. You should make sure you understand the tax consequences of your organisation becoming a CIC. This is particularly so for organisations with wholly charitable purposes where the benefits of lighter CIC regulation may be outweighed by the tax benefits of being a charity. Being a CIC will not confer any automatic right to grants or other special funding. Transparency is an important aspect of CICs. Stakeholders should get a clear idea of how a CIC has performed as it will make an annual community interest report detailing what it has done and how this has benefited the community, what directors’ salaries and dividends have been paid and to what extent it has involved its community in its activities. You will need to consider from the outset how you will involve the stakeholders in the project. 10 Social firms A social firm is not a legal structure in itself: it’s a term to describe an organisation in which at least 25% of the workforce have disabilities. There are several examples of social firms within East Sussex: two which have been in operation for over ten years are Chailey Heritage Enterprise Centre near Lewes and the Coterie Tea Rooms in Rye. Both were set up in answer to the need to provide meaningful employment for people with disabilities. In CHEC’s case the founder could see that the students with profound physical disabilities leaving Chailey Heritage school had no route into suitable work. Today the Enterprise Centre’s design and production facility embellishes garments and other products for gift, promotion and corporate identity. Products include embroidery, screen printing, cut vinyl printing, laser printing of clothes as well as other products such as mugs, coasters and umbrellas. At Coterie, the Canterbury Oast Trust bought Mariners, a home in central Rye for adults with learning disabilities and opened the café within the building as a place for residents to work. They differ in their structure – CHEC is a charity and charitable company in its own right while Coterie remains part of the Trust. That doesn’t mean it’s carried in any way and the tea rooms is a self-sustaining business venture with all profits going to the work of the Trust. CHEC meanwhile produces its income from sales, from grants and from social service fees in approximately equal amounts. Both places have had their manager in place for the past ten years which suggests real job-satisfaction. Mike Swain at Rye says “Every day’s different. I get a kick out of providing something for people with learning disabilities. They’re like an extended family to me.” Graham Barber at CHEC enjoys the challenge of seeing his staff achieve more than they thought themselves they could achieve. Graham also places the emphasis on the social aspect of social enterprise. He believes that to put too much emphasis on turnover and self-sustainability is to use the very model that stops people with disabilities getting jobs in the first place. As a society, he suggests, we are too narrow in our definitions and in our view of what “work” looks like. Both Coterie and CHEC challenge our ideas of what people can do and offer a model of a fulfilling work environment. CHEC can be contacted at www.chec.co.uk or 01825 – 724376 The Coterie Tea Rooms (known locally as The Mariners) is at 15 High Street in Rye. More information at www.canterburyoasttrust.org.uk/coterie_tea_room.html 11 At the time of writing CICs have been in place for six months and in that time fifty have been incorporated nationwide, with just one in East Sussex – the South Downs Extended School. One reason for the small number may be that despite the government’s support for social enterprise there are as yet no tax advantages in becoming a CIC. As the “brand” becomes more widely known and recognised it may be that a social enterprise will need to be a CIC to establish its authenticity in order to bid for contracts or to apply for grants. At the moment however for a small, locally based company it may simply mean more paper work and regulations. Industrial and Provident Societies 1. An IPS is also a corporate body and a legal person in its own right. 2. Its members also benefit from limited liability. 3. There are two types of IPS – a “bona fide co-operative society” and a “society for the benefit of the community”. A co-operative society is a democratic enterprise which, in general, is based on members having one vote regardless of the number of shares they hold. A society for the benefit of the community must demonstrate that its activities will benefit people other than its own members. It has rules that spell out how surpluses are used and that any assets remaining after dissolution will be applied for similar purposes and not distributed amongst the members. The minimum number of members is 3. The Financial Services Authority is the body that registers and regulates IPS’s. All information about registering, annual accounts and returns etc. is on their website www.fsa.gov.uk/ The cost of registering varies with your constitution: if you adopt the model rules, with no amendments the fee is £40. The more amendments you make the more the fee rises, to £950 for rules with 11 or more amendments. There’s also an annual (“periodic”) fee based on the society’s assets. The minimum for assets below £50K is £60. More information about co-operatives can be found at: www.cooperatives-uk.coop/ www.co-operativeaction.coop/ Other structures 1. Co-operative (choosing to not be an IPS) Co-operatives follow the seven international co-operative principles: i. Voluntary and open membership; ii. Democratic member control; iii. Economic participation by members; iv. Autonomy and independence; v. Education, training and information; vi. Co-operation among co-operatives; vii. Concern for the community. Recently many co-operatives have opted for being companies. It’s also possible to be an unincorporated body acting with co-operative principles. The members, who own and control the co-operative, can be employees (a worker co-op), customers (a consumer co-op), tenants (housing co-op), or a combination of these groups. For an explanation of how to set up a co-operative as a company go to www.coactive.co.uk/documentstore/ Doc81.pdf 2. Charity: this has tax advantages but there are strict rules and regulations about trading so it’s appropriate for some social enterprises but not all. Some points to consider: If a social enterprise is also a charity the object and activities must be exclusively charitable; All profits must be ploughed back to serve the charity’s aims; Charities can set up for-profit trading subsidiaries in which they own all the shares (if it’s a share co.) or in which they’re the guarantor (if it’s a guarantee co.); they can also now set up a CIC. It’s not possible to be a paid employee and a trustee. 12 If you decide you want to become a charity then there are more guides than anyone could ever read in one lifetime available at www.charitycommission.gov.uk including model constitutions. Hastings Voluntary Action are the local experts in this field. An alternative legal form for charities only – the Charitable Incorporated Organisation – will be included in the new Charities Bill. How to choose between a charity and a company: this comes down to personal inclination and to questions of control and financing. After years of pushing social enterprise the Chancellor recently announced the abolition of the nil rate band of corporation tax. Previously companies could make up to £10,000 profit without paying corporation tax. In future all profits will be taxed at 19%. Unless this is changed the irony is that it will make more business sense for some small, local social enterprises to be charities! The feasibility study and the business plan How are they different? A feasibility study is the process of gathering all the information you need to work out whether your business idea is sound. The purpose is to identify the “make or break” issues that mean the difference between a successful business and one that fails. A business plan uses the information gathered during the feasibility study and more, to build a detailed picture of the business and how it will operate. Social Firms UK have designed a toolkit to help social enterprises examine for themselves the feasibility of their business idea and assess whether or not it has the potential to work. Although it was originally designed with social firms in mind, it is an ideal resource for any type of organisation considering the development of a social enterprise. The DIY approach to business feasibility not only saves money on hiring external expertise but also empowers staff in increasing their sense of ownership of the business and trains them in business feasibility. The toolkit costs £90 to non-members of Social Firms UK but is free to members and costs £50 to members of the Social Enterprise Coalition. Social Firms UK are now at the forefront of producing resources for social enterprises: membership at £100 a year can represent a good investment. www.socialfirms.co.uk The business plan With or without the Social Firms toolkit it’s important to consider G G G G G G “To accomplish great things, we must not only act, but also dream; not only plan, but also believe” Anatole France The people who will be involved in the enterprise Your motivation Your organisational capacity The business idea itself and whether it’s needed Market research The break even point 13 Social Enterprises set up by individuals: The Rooms and Paperchase PaperChase provides outsourcing solutions for small to medium size businesses, including charities, in the form of administrative and business support services. It was set up in 2004 as a company limited by guarantee with social aims including creating opportunities to develop: Local capacity building; community empowerment and development; the inclusion of disadvantaged groups to participate in local economic activities. It was set up without any capital input but will in the future be looking at grants to help meet the social aims through specific project funding. The main aim at the present time is to develop and establish the business to provide the services on offer to meet some of the social aims. The best thing about being part of a social enterprise? “it’s the social aims that lead the way to the work you do. It is, however, disappointing to know that these social aims are not valued by Government and social enterprise may as well be a private business with social aims as there’s no tax relief or any other financial benefits to help you meet your social aims - poor call on those in power!” (Chrys Brookes, Managing Director of Paperchase Services) The Rooms Studios and Café Bar Rob and Carol Sands registered their not-for-profit co. ltd. by guarantee in 2003. They began with a New Entrepreneur Scholarship grant and a town centre management grant (both through 1066 Enterprise), plus borrowing and investment from friends and family. Their choice to be a not-for-profit company stemmed from their commitment to improving the local community. They were drawn to the ethos of social enterprise as they felt it allowed them to be more autonomous with regard to their prices and services. It also links them to some of the exciting changes coming to the local community and helps them to connect with other socially enterprising activities. For instance – they will soon be working with the Centre of Creativity to show films for kids on Saturday mornings. The Rooms: 33-35 Western Road, St. Leonards on Sea; Tel: 01424 713555; email: info@the rooms.org.uk website: www.therooms.org.uk 14 Once you understand your own organisation, the product or service you are providing, your customers and competitors, and the financial requirements of both starting up and longer-term you can write the business plan. As always, think first “What is this for?” In the beginning the plan will be for yourselves. It will put down what you learned from the feasibility study in terms of G clarifying and defining your organisation G checking that there is a need for you G setting your goals G calculating the cost of launching the operation and seeing if there’s a realistic possibility of making the enterprise sustainable. You will need a business plan if you are applying for funding. It’s essential for loans and some grant funders ask to see one if you don’t yet have one year’s audited accounts. What a business plan covers A good plan needs to be  simple: easy to understand and to act on  specific: with measurable and concrete objectives, specific actions and activities  realistic: especially sales goals, expense budgets and milestone dates  complete. To be complete it will cover the following topics: G executive summary: a page or so of highlights G enterprise description: establishment, history, start-up plans G product or service: what you’re offering with the focus on customer benefits G market analysis: know your market, customer needs, where they are, how to reach them G strategy and implementation: management responsibilities with dates and budget G management team: backgrounds of key members of the team, personnel strategy and details G financial plan: including profit and loss, cash flow, balance sheet, break-even analysis etc. If this sounds daunting the good news is that there is so much help available. Locally: 1066 Enterprise at Summerfields, Hastings produce a skeleton business plan, with notes, and are in the process of producing one specifically for social enterprises. On the net: The Manchester Progressive Enterprise Network at www.mpen.org.uk have excellent briefing papers on all community enterprise business plans; Business Link: www.businesslink.gov.uk again has a thorough guide to writing a business plan; Sample plans are available at www.bplans.org.uk Templates are available at the Microsoft Office Library www.office.microsoft.com There’s a guide to writing a business plan for a social firm at http://resources.socialfirms.co.uk/docs/ business_plan_guide_with_attachments. pdf Books: Creating Business Plans for Dummies – Paul Tiffany & Steven Peterson; Business Plans for Start Ups – Roger C. Rule. Also see the business section of the local library. The “double” or “triple bottom line” This is a phrase often used in connection with social enterprise to describe the dual or sometimes triple aims of the enterprise to meet its financial, social and environmental goals. In the same way that the accounts are audited at the end of the financial year many enterprises also audit their performance from a social perspective. In this case the traditional business plan is not enough: “Social enterprises do not need business plans, they need social enterprise plans which 15 Rural enterprises Social enterprises have existed in rural areas for many years without being known as that. Most village halls, for instance, earn their income from letting fees and playgroups charge both the government and parents for their services. Now, however, there are some very obvious rural social enterprises in the form of village shops owned and run by the local community. The traditional village shop of forty or even twenty years ago can no longer survive in today’s rural economic climate. Several villages in East Sussex however have found a solution – buy and run the shop themselves. One of the first was in Laughton: when the shop there closed in the early 90’s the residents formed the Laughton Village Shop Association and 50% of the amount needed to buy the shop was raised by selling shares to local people. Loans are repaid by the rent from the shopkeeper. Ten years on a room behind the shop has been converted to a community space so that villagers can now access the internet there, use other community equipment and meet for a coffee and to read the papers. The flourishing shop therefore remains at the heart of the village. Others have followed suit including Winchelsea, Iden and Etchingham. The Etchingham Community Stores, opened in 2003, is owned by the shareholders of the Etchingham Community Shop Association Ltd. As in Laughton the association is an Industrial and Provident Society (IPS) – a “not for profit” body, owned and managed by the members of the Society. Any profits made will be used for the benefit of village projects and organisations. The shop relies heavily on unpaid volunteers to assist the paid manager and his assistant. To succeed the shops are creative – some provide ICT facilities, others offer a dry cleaning or prescription service. All find that one of the benefits of a small shop is the ability to source local products from producers too small to be able to supply the quantities required by larger retailers and supermarkets. So, Tesco’s loss is the village shop’s gain - anyone who has sampled the ice cream in the Winchelsea Little Shop knows that’s true. If you want to know more about setting up a village shop there are several agencies that can help you. Virsa (the Village Retail Services Association) is an activity of the Plunkett Foundation, a charity which aims to improve rural livelihoods through cooperation and social enterprise. They offer free advice and support. Telephone: 01993 814377 website: www.virsa.org AiRS (Action in Rural Sussex) offer a range of advisory services including a Village Shops Co-ordinator. Tel: 01273 473422 website: www.ruralsussex.org.uk Rother District Council Regeneration Division. Where a village shop is under threat of closure, the Council will help the local community to acquire it themselves and run it as a community shop, by making available loan finance and providing advice and expertise. The Regeneration Division is based at 3 offices across the district, in Bexhill, Battle and Rye. More details available at www.rother.gov.uk DEFRA (Department for the Environment, Food and Rural Affairs) Tel: 08459 335577 website: www.defra.gov.uk 16 demonstrate how their social purposes will be achieved, how they will be environmentally responsible and how they will achieve financial sustainability. The business plan as traditionally understood addresses only a small portion of the needs of a social enterprise.” From J. Pearce: Social Enterprise in Anytown; Calouste Gulbenkian Foundation, 2003 This means that you need to consider how you will do social and/or environmental “book-keeping”. In other words what records you will keep in order to show how your activities match your social aims. This isn’t new to any organisation that has received project funding – there it’s called monitoring and evaluation. It’s essential for the annual community interest report that a CIC has to make and will be increasingly important for all social enterprises as they are called upon to assess their impact. Social audit for community enterprises is explained on the Manchester Progressive Enterprise Network site in two briefing papers: http://www.mpen.org.uk/briefing/ briefing8a.html and http://www.mpen.org.uk/briefing/ briefing8b.html Technically “social audit” refers to a process similar to the financial audit. It’s carried out by independent auditors who examine a number of key areas relating to the social aims and mission of the social enterprise, through dialogue with the relevant stakeholder groups, in order to G look at what the social enterprise is doing G compare actual performance to the organisation’s goals G determine where improvements need to be made, and what those improvements should be. A full explanation can be found in the WISE module www.enterprise.apu.ac.uk/wise/ downloads.Par.0002.file.tmp/ WISE%20Module.pdf Locally, Harley Reed Consultants are experienced in carrying out social audits. Contact them at 51 Havelock Road, Hastings, TN34 2BE Tel: 01424 438072 www.harleyreed.com Again, Social Firms UK are developing the Performance Dashboard, a CD Rom to enable Social Firms (or other types of social enterprise) to monitor their progress against objectives and report where appropriate to other parties internally and externally on their actual performance. Finally, if you’d like to learn a lot more about social audit and sustainable development look at these sites: Forum For the Future www.forumforthefuture.org.uk Institute of Social and Ethical Accountability www.accountability.org.uk New Economics Foundation www.neweconomics.org Finance This is a complete topic in itself and indeed there is a whole book dedicated to it – Unlocking the Potential: a guide to finance for social enterprises available from the Social Enterprise Coalition, cost £10 “Apathy can be overcome by enthusiasm, and enthusiasm can only be aroused by two things: first, an ideal, which takes the imagination by storm, and second, a definite intelligible plan for carrying that ideal into practice” Arnold Toynbee 17 Community Enterprises: ORVSO and HFS The Ore Valley Residents Service Organisation is a flagship social enterprise that delivers environmental services for 1066 Housing Association, and some private home owners. The RSO concept is based on the French model of Regies de Quartiers. There are over 80 of these organisations in social housing neighbourhoods in France, providing services to some 300,000 households. They generate 82% of their income from fees, and employ mostly marginalised residents on a short term basis to deliver neighbourhood services. The Ore Valley RSO was the first of its kind in Britain and began as a pilot project, funded by the Joseph Rowntree Foundation from 1998-2001. It received SRB funding in 2001 and started trading in 2002. It’s now part of 1066 Housing Association, a registered Charity and an Industrial and Provident Society. This is a real success story for Hastings due to the vision of people within 1066 Housing Association especially the Neighbourhood Director, Robin Deane, and the Chief Executive, Adrienne Read. The RSO currently delivers painting and decorating, environmental services including hard landscaping, soft landscaping, playground inspection and repair. It also provides job training for long term unemployed local people, and 16 permanent employment posts. Its turnover for the first half of the current year exceeded £200,000. Hastings Furniture Service HFS was originally started by a group of volunteers working with Hastings Voluntary Action who realised that local families with low incomes needed affordable furniture and linked this with the amount of perfectly usable furniture that others threw away. The demand for the service was too great for volunteers to cope with and in 1988 HFS became a separate organisation with paid co-ordinating staff thanks to a grant from Opportunities for Volunteers. HFS is now both a company limited by guarantee and a registered charity with a voluntary Management Committee which oversees the running of the organisation. They raise about 65% of their running costs from sales and fees for removals and house clearances, with the remaining 35% coming from grants and donations. The premises in Dorset Place that are currently being re-built were bought 7 years ago using loans from Charity Bank, ICOF and HBC. HFS has maintained a huge volunteering input and the staff team supports around 10 volunteers and work experience placements every day. Between 40 and 50 people volunteer with them each year. Manager Naomi Ridley explains the attraction: “Most are long-term unemployed and really enjoy getting out and about and feeling part of the team. There’s a great atmosphere because they choose to be here and enjoy the work. We have recently started training to become NVQ Assessors so that people who give their time to help can gain an NVQ in Warehousing & Distribution, a national qualification that may help them move on into further training or paid work.” Naomi believes that the value of being a social enterprise for HFS is that they can deliver such a practical, needed service and yet maintain some independence from the agendas and priorities of grant-giving agencies. HFS is currently at 38-40 Earl Street, Hastings, and hope to return to Dorset Place in summer 2006. Tel: 01424 441112 website: www.hfs.org.uk 18 If you are seeking grants there are several fee-paying sites which provide information: www.fundinginformation.org www.access-funds.co.uk www.j4b.co.uk East Sussex County Council produce an excellent monthly Bidding Bulletin on their website at www.eastsussex.gov.uk/community/ funding There’s a comprehensive guide to funding for businesses at www.businesslink.org Both 1066 Enterprise and Hastings Trust Community Regeneration Unit administer loans that are suitable for social enterprises unable to access finance from banks. Future Potential of Social Enterprises: Procurement Procurement in this context means winning contracts to deliver public services. The government recognises the value of social enterprises in this delivery: G “If you really want something in this life you have to work for it. Now, quiet they’re about to announce the lottery numbers” Homer Simpson they are close to customers and not concentrated on maximising profits for external shareholders G they are well placed to be able to deliver good quality, cost-effective services G they can demonstrate the worth of innovative new practices to increase the participation of staff and user. To implement their commitment to bringing more social enterprises into this arena there’s a realisation that this requires input on both sides: promoting greater understanding of social enterprises among public sector procurers, plus those who audit and inspect their work G increasing expertise on procurement within social enterprise – to recognise the opportunities that exist, to have better access to information about these opportunities and to develop their capacity to bid for, and win, contracts. There are two important publications, produced by the DTI in conjunction with the Social Enterprise Coalition. Public Procurement: A Toolkit for Social Enterprises. Available as a pdf file at http://www.sbs.gov.uk/SBS_Gov_files/ socialenterprise/procure_text.pdf G 19 Procurement: the Social Enterprise Solution Available as a pdf file at http://www.sbs.gov.uk/SBS_Gov_files/ socialenterprise/procurement_suppl.pdf As with the other topics there are excellent resources and case studies at the Social Enterprise Coalition website www.socialenterprise.org.uk It’s worth bearing in mind that to truly succeed an organisation needs to be driven by its vision rather than by a funding opportunity. Procurement is not something to be entered into lightly but it is a route for enterprises to consider. “I owe my success to having listened respectfully to the very best advice, and then going away and doing the exact opposite” GK Chesterton 20 Resources The good news is that all the information you could ever need on social enterprises is out there somewhere. The bad news is that you could spend so long reading it you never actually get round to launching your venture. This is a personal list – the places where Decoda found help and inspiration. Local The Community Regeneration Unit Hastings Trust, Robertson Street, Hastings. Tel: 01424 446373 Website: www.hastingstrust.co.uk G G G G G G G G advice on constitution, accounting, funding etc directory of Local Voluntary & Community Sector Resources monthly newsletter with info. about funding and resources courses for committee members – the Committee Conundrum flourishing Health and Social Care Forum volunteering. Bexhill Community Partnership 10 Buckhurst Road, Bexhill on Sea. Tel: 01424 217259 Website: www.bexhillcp.fsnet.co.uk Rother Community Links Red Barn Mews, High Street, Battle Tel: 01424 777163 Sussex Enterprise Tel: 01444-259259 Website: www.sussexenterprise.co.uk Provider of Business Link services. National Social Enterprise Coalition Website: www.socialenterprise.org.uk G G current information on social enterprise administers Community Chest (can give start-up costs to local social enterprises) G administers Community Learning Chest G administers Global Grant (again including start-up costs for social enterprise) G small loan service. 1066 Enterprise Summerfields, Bohemia Road, Hastings Tel: 01424 781860 Website: www.sussexenterprise.co.uk G G G G G runs comprehensive 3-day Business Start-Up course runs variety of other half-day and full-day courses information about grants and loans for local businesses business advice and ongoing mentoring business broker – tel.01424-781870/ email: Jonathan.Dolding@sussexenterprise. co.uk Excellent resource library Publish “There’s More to Business than You Think” G Social Enterprise magazine Social Enterprise and Training Website: www.setas.co.uk G Directories of training, business support, publications, funding and consultants. Social Enterprise London Website: www.sel.org.uk G Hastings Voluntary Action 31A Priory Street, Hastings Tel: 01424 444010 Website: www.hastingsvoluntaryaction.org Supply Keeping it Legal, by Bates Wells & Braithwaite G Resources and training. 21 CAN Website: www.can-online.org.uk Training and inspiration Bates Wells & Braithwaite Website: www.bateswells.co.uk G G Top legal advice The Directory of Social Change Website: www.dsc.org.uk Set up to help charities and community groups; helpful for those who require funding: G “One act of beneficence, one act of real usefulness, is worth all the abstract sentiment in the world” Ann Radcliffe Wide range of books and CDs on fundraising, management etc. G Training courses G Annual Charities Fair. Books Keeping it Legal by Bates Wells & Braithwaite. Available from Social Enterprise London. From the Social Enterprise Coalition, available through their website: There’s More to Business than You Think. Unlocking the Potential: a guide to finance for Social Enterprise. More For Your Money: a guide to procuring from social enterprises. Public Procurement: A Toolkit for Social Enterprises from the DTI Breakthrough Thinking for NonProfit Organisations by Bernard Ross and Claire Segal. Available through any book shop. Community Development Finance: the essential guide - a directory of members – Community Development Finance Institutions are dedicated to creating wealth and opportunity among groups and individuals marginalized form the financial mainstream. www.cdfa.org.uk/ 22