Seb Elsworth: The arguments for enterprise haven’t fundamentally changed

The most resilient enterprising organisations are able to take advantage of new opportunities, even during a time of crisis

Seb Elsworth
Seb Elsworth

The coronavirus crisis is affecting different charities and social enterprises in different ways. We know from the organisations that have been supported across our programmes that those reliant on footfall and income through events and venue hire have clearly been very significantly affected. On the other hand, those that receive most of their income from grant-makers or from existing contracts with government have tended not to see significant falls in their income.

For those of us who have been making the case for enterprise as a route to resilience this is clearly a challenging picture. But before anyone concludes that developing earned income through trading is harmful to resilience, it is important to step back and look at a broader picture.

First, the logic behind developing enterprise models as a route to supporting resilience is fundamentally about not having all your eggs in one basket. Being too reliant on a small number of income streams can leave organisations vulnerable. The most significant example of this from the sector’s recent history is about 10 years old. During the first decade of the century many charities grew their public sector income by competing for public service contracts. When austerity started to bite they were left with big holes in their income and the sector saw some high-profile casualties.

Similarly, although those mainly funded by foundations have had an easier time of it over the past two months, many charities have struggled over the years with foundations that have prioritised innovation over funding tried-and-tested interventions and have lost income streams as a result.

Of course, enterprise models themselves have different degrees of resilience depending on the range of customers you have and the ways in which you reach them. A number of social enterprises have grown significantly over the past few years by selling services to schools, and some of the most successful might sell to dozens.

On the face of it this can seem like a diverse customer base, but in most cases the services being provided by the social enterprise are funded through pupil premium cash, so this income has been very vulnerable to policy change by government, even before schools had to close in March.

Other trading charities or social enterprises that sell services to a combination of different types of organisation and individuals, both physically and remotely, should be better suited to adapting.

Overall, this argument has always been that the more diverse your income streams the more resilient an organisation is in the face of change.

Another argument for promoting enterprise in the sector has been to recognise that the scale of work to which our sector aspires far outstrips the grant available to fund it. Some of that work lends itself to a trading model – for example, where people far from the labour market can be helped back into work and sell a service (coffee) or product (upcycled furniture) at the same time.

Other areas of work do not easily lend themselves to trading models – for example, providing immigration-related legal advice to refugees. The precious grant in our sector should be applied to the areas where income cannot be earned in any other way. And the same logic applies to the response to the crisis. Where previously successful trading models are on hold but vulnerable people need to continue to be supported, social enterprises should be able to benefit from grants for a temporary period.

The final argument is about the benefits of an enterprising mindset and what that means for an organisation’s adaptability. The most resilient enterprising organisations are able to identify and take advantage of new opportunities where they present themselves, and we can see this happening as social enterprises effectively respond to the crisis. For example, a community bakery that has had to close its shop but has taken the opportunity to transition its model to focus on catering and delivery, or a mental health charity that supports people with long-term conditions into employment moving its model online. This is also true of those organisations that support the front line, such as the innovation in Crowdfunder’s Pay It Forward initiative.

For all these reasons the sector should continue to embrace enterprise as part of our funding mix. We should also consider the broader impact that trading charities and social enterprises can have in the places where they work. They help to create economic activity where government investment doesn’t flow and big businesses don’t employ people. Social enterprises are disproportionately concentrated in more deprived communities and trade more successfully there. They create good jobs for local people and bring buildings and key services back to life.

When we get to the other side of this crisis and begin the long road to recovery, trading charities and social enterprises must be at the heart of that recovery, not only so we can get back to the way things were, but also so we can build back stronger and more fairly across the whole country.

Seb Elsworth is chief executive of Access, a foundation that helps to widen access to social investment for charities and social enterprises

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