Seb Elsworth: Trading is the route to growth for charities

Earned income is increasingly important, and social investment might be able to help, says the chief executive of Access

Seb Elsworth (Photograph: Claudia Leisinger)
Seb Elsworth (Photograph: Claudia Leisinger)

About three years ago I was presenting at an event in Winchester about social investment. Having heard many times the advice on public speaking that one should "tell them what you’re going to tell them, tell them it, and then tell them what you’ve told them", I must have said "social investment is not a replacement for lost grant income" at least a dozen times.

Over lunch I met a lady who ran a local charity. She told me she was in the middle of negotiations with the local authority about her grant. She was hopeful but not optimistic that it would be continued. But she gladly told me that if the worst happened and she lost that grant then she would come knocking on my door.

Message not received.

But it wasn’t her fault. My 15-minute talk was unlikely to undo the five years of hype that had pervaded the sector about how social investment was going to save the day and help the sector transform itself away from grant dependency.

Now clearly I wouldn’t be doing the job I do if I didn’t believe that social investment can be a hugely useful tool, but all that hype missed out the key point. It’s not the social investment that is transformational, but the development of trading income or the better utilisation of charity assets to complement voluntary income. Social investment does not replace your lost grant income, but earned income might, and social investment might be a tool to help you get there. Therefore you should not start by thinking about the investment, but by figuring out a model for earned income or using your assets differently. Once you have that, raising investment is the easy part.

The UK Civil Society Almanac for 2017, from the National Council for Voluntary Organisations, shows that earned income rose by £700m in 2014/15 compared with the previous year. In his summary, Sir Stuart Etherington concludes that earned income is the only way the sector will grow over the coming years.

Championing trading models can easily sound like every charity should suddenly become a social enterprise and earn all of its income for evermore. This is not how it works, of course, and fails to reflect the critical role that grants play. Some vital activities cannot be delivered through a trading model, and only well-proven interventions are likely to be viable trading propositions. A better understanding of the nature of what earning income means and how it is really being used might be the best way to provide clarity. And the almanac itself is a great place to start.

Earned income can be derived from providing goods and services that are integral to the missions of charities, as well as a means to generate profit. These can include trading with the public – for example, charging fees for services – as well as trading with government, other charities and the private sector.

Earned income covers a wide range of activities, and many charities will have been carrying out these activities for decades. From our work with charities and social enterprises over the past few years, two stand out as particularly good examples of how trading fits in with a broader income mix.

One, in Kent, supports children with disabilities including through providing respite care. They have contracts with the local authority, fees from some service users and a significant fundraising operation. They have also developed a new source of trading income by selling excess bed capacity in the respite centre to other local authorities on a spot-purchase basis.

Another in Oldham provides training to front-line workers in the public sector on using therapeutic techniques in working with troubled client groups. This activity earns them a surplus that they can then reinvest in providing accessible and affordable therapy to children, young people and adults in the community.

So, when looking for growth, do not start with social investment – think first about earning your income. And do not think that means everything you do has to change. Enterprise can be part of a web of sources of income. Once that picture is clear, there could be a conversation about whether social investment is the catalyst.

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

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