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Social
Enterprise
Trading
for a social purpose
- the term Social Enterprise
or Community Enterprise can describe a type of activity
or
an organisation: |
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A voluntary or community organisation may undertake 'social
enterprise' trading activity as part of its income
generation.
Where a separate trading arm is set up as a viable business,
with mainly social goals in which all the profits are reinvested,
it may be described as a Social Enterprise. |
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| A
Social Enterprise generally seeks to be inclusive and has social
and democratic ownership structures that aim to involve the users,
employees and local community.
In an age of diminishing
grant availability and a changing public sector, Social Enterprises
have an increasingly significant role to play in the communities
they serve. They are a means of delivering goods, services and
opportunities beyond the limits of the state, profit-led business
or pure charity.
In the voluntary and
community sector the initial approach to social enterprise is
likely to be from the perspective of seeking new funding sources.
However, as the voluntary and community sector is already largely
engaged in providing services and opportunities beyond the market's
margin and state's reach, it is beneficial to take a broader consideration
of social aims.
The social element
of the enterprise may be in the Product or service
itself (eg a nursery or food co-op), in the Process
of the business (eg fair trade or training) or in the use of the
Profits (eg charity shop) - or any combination.
The types of community
benefits achieved by Social Enterprises are wide-ranging:
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provide
a means for individuals and communities to improve their
local neighbourhoods |
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develop
the skills and talents of local people |
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bring
excluded groups into the labour market |
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deliver
value-for-money services |
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promote
active citizenship |
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catalyse
innovative solutions to local needs |
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protect
of enhance the environment |
Engaging
in Social Enterprise
Voluntary and community
organisations need not become 'a Social Enterprise' in order to
engage in and exploit the opportunities of social enterprise activity
as part of their income diversification. However, here we will
look at social enterprise from the aspect of starting a new trading
business.
Like any new business,
starting a Social Enterprise involves a great deal of planning.
The socially-directed nature of the business introduces special
considerations for the ethos, structure and management. The main
aspects of the planning process are:
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Business Idea |
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Research |
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Business
Plan |
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Local
Support |
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Finance |
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Risk Management |
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Organisational
Structure |
Business Idea
- the starting point for all good businesses is a good idea. For
a Social Enterprise this should embody an achievable social objective
as well as a commercially viable business.
Be very careful about
selecting what you will do, as the harsh reality is that most new
business ideas fail in implementation. Products or services can
be categorised as based on:
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core
work |
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serving
a new geographic area or customer base
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using
staff skills |
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intellectual property
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property assets |
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unrelated business - most risky, consider
using a partner |
The best ideas are consistent with mission, use existing strengths
and assets, meet a definite customer need, have a competitive advantage,
can be piloted small scale with room to grow, and engender enthusiasm.
Research
- a feasibility study of the business idea will put it in the context
of the market where it will operate:
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current
availability of services and competition |
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size
of the relevant market and opportunities for growth |
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identify
customers and their needs - surveys & focus groups |
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resources
needed - people, skills, premises and equipment |
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money
requirements and sources |
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risk
assessment and limitation |
Regional and local
funding may be available to undertake such studies - SEEM,
DCF.
Consultants
can be found that specialise in social enterprise.
Business Plan
- this will develop from the research and enable you to test the
quality of your idea against the reality of the market identified.
It will outline how the idea will be executed successfully.
Though a good deal
of work is involved in the plan, it is worth it, as the foundation
of the enterprise. Funders will also require a sound professional
business plan. It should be assessed by a range of experts. Also
write a short executive summary of the plan, which is simple and
compelling.
Many good business-plan
templates can be found on the web - additional considerations
for a Social Enterprise are the social objectives and how these
will be achieved, and the democratic structure of the organisation.
Support
- get as much business advice as you can.
A variety of organisations can assist you, many for free:
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Glossopdale
Furniture Project
is a local organisation exemplifying many of the characteristics
of a Social Enterprise.
The social purposes of the project involve collecting discarded
furniture and selling it at prices affordable by people on
low income.
Materials from unusable furniture are reused to make useful
objects, which are sold to generate further income.
Furniture refurbishment and reuse creates employment and training
opportunities, which are directed toward social inclusion.
The aim is to reinvest profits for the purposes of the business
and the community served.
The project is sustainable, socially inclusive and environmental,
with social ownership and community accountability. |
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| The
UK Government definition of a Social Enterprise:
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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 profit for shareholders and owners.
Social
enterprises tackle a wide range of social and environmental
issues and operate in all parts of the economy. By using
business solutions to achieve public good, the Government
believes that social enterprises have a distinct and valuable
role to play in a helping create a strong, sustainable and
socially inclusive economy
Social
enterprises are diverse. They include local community enterprises,
social firms, mutual organizations such as co-operatives
and large scale organizations operating nationally or internationally.
There is no single legal model for social enterprise. They
include companies limited by guarantee, industrial and provident
societies and companies limited by shares; some organisations
are unincorporated and others are registered charities.
('Social Enterprise - a strategy
for success', DTI, 2004) |
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| Social
Enterprise Web Resources: |
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The NFEA
and BVM
also broker free mentoring to start-up businesses. |
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Contact
High Peak CVS for information on ProHelp
advisors - professionals who volunteer free assistance. |
Finance
- there are
a variety of potential sources of grant and loan support - community
finance initiatives; member investment and member loans; local authority
grants; banks - Triodos,
Unity Trust Bank,
Charity Bank;
charitable
trusts; European
funds; Lottery
funds; Government grants; Social
Enterprise East Midlands (SEEM); Industrial
Common Ownership Finance; Local
Investment Fund; CIS Community Grant.
Risk Management - risk may be a necessary part of
any social enterprise, but steps can be taken to reduce and control
it. Identify vulnerabilities and worst-case scenarios. Develop a contingency
plan of how to deal with each possible negative outcome. Have an exit
strategy with evaluation points to trigger closure of the business.
Use clear written contracts, even for internal agreements, and obtain
legal advice where ever appropriate. Whenever possible test your idea
on a small pilot scale and grow it from there.
Organisational Structure
- this could be a co-operative,
a partnership, an employee-owned
business, a social
firm, or be community-based focusing on local markets
or services.
There are three main ways
to set up as a limited company:
1) A company limited by guarantee
is the most common type of set up for organisations intending to trade
in the 'not-for-profit' sector.
2) An industrial or provident society trades for the benefit of the
members and the wider community, by ploughing surplus profits back into
the organisation.
3) A company limited by shares is the most conventional method of setting
up a business and its purpose is to trade and make profit.
A new trading form - the Community Interest Company is due to be introduced
in 2005, this will provide social enterprises with the flexibility of
the company form.
Setting up a
for-profit subsidiary will shield a charity from business risk and achieve
transparency and simplicity. The management can have business-focused
skills, avoiding distraction from management
of the parent organisation and its social aims. A clean break is best,
with each working to its own business plan - the transition process
is best facilitated by an outsider. Continued negotiations between the
two entities should be transparent, fully documented and at arms length.
Any sharing of resources should be formal, with written contracts to
clarify roles, expectations, costs, payment and ownership.
See
also the Sustainable Funding
page for related information.
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