Seb Elsworth: Why enterprise can serve the charity sector

Supporting the ongoing resilience of charities and sector organisations is vital

A couple of months ago I wrote a piece about the paradox of using grants to help reduce the dependency of the sector on grants.

It provoked a strong response on Twitter from David Floyd, an astute commentator of the social investment market over the past decade or so.

David’s critique is, in essence, that this is a confused and confusing goal which falls between two different objectives.

First, he says, if your goal is to develop commercially viable models for delivering social impact, then restricting yourself to working with only existing charities – which, by their nature, are less likely to have the foundations to build those commercially viable models, or leaders with the necessary entrepreneurial skills – is an unnecessarily challenging way of going about it.

He argues it would be better to allocate the funding to organisations whose starting point is the enterprising idea to tackle a social problem and who have the right team in place to make it happen, regardless of whether they are an existing organisation.

Second, if your goal is to diversify the income base for a charity, then why only focus on enterprise, and not look more broadly at improving fundraising practice and other sources of income, or consider whether you need to shrink as an organisation to the point where you have sustainable income.

David is right to highlight these arguments.

I also recognise the unhelpfulness for the sector of a narrative which can be simplified to grants = bad, enterprise = good; especially after the year we’ve had.

So it’s worth explaining that my argument for the role of enterprise in the sector is in pursuit of a goal different to those David assumes: that of supporting the resilience of existing charities and social enterprises.

Why do I think this is an important objective, and why does enterprise help to achieve it?

I have written before about the unique role that charities and social enterprises play in our impact economy.

Our history, proximity to the communities we serve, our track record and evidence base mean that the existing sector is always in pole position to understand solutions and deliver impact to those who need it most (even if sometimes our evidence of impact is still a work in progress).

If you accept that, then the question becomes: ‘How do we best resource the sector?’

Part of that resourcing mix can be enterprise income, and it’s an area that has significant potential for growth.

However, using enterprise as a tool to serve the sector is not necessarily the same as developing commercially viable models for delivering social impact.

Rather, it means you are seeking to maximise the opportunities for earned income to be part of the mix in a varied business model.

Take the classic example of a community café that employs formerly homeless people to help them enter the job market.

The impact model is clear, and selling coffee and pastries will generate some trading income, but it is unlikely that the café will be profitable on its own terms.

It might, however, generate 70 per cent of the costs of employing and training the staff, leaving only 30 per cent to be found from elsewhere – perhaps a grant.

You could view the café as a commercial failure, or as a way of bringing a variety of available resources to the table to support an organisation’s work.

If you start to support groups of charities and social enterprises to develop enterprising activity in a similar way, you can start to develop opportunities for better sharing of knowledge about the role enterprise income can play in different business models.

Our work in specific sectors through the Enterprise Development Programme allows for that exchange of ideas (for example: “How did you get your community café to cover 80 per cent of its costs?”).

As the knowledge base grows over time, so can the resilience of whole parts of the sector, not just individual organisations; and sector leaders can become as comfortable with talking about enterprise models as we have with talking about fundraising or tendering for public service contracts.

With the range of tools, like incentivised grants, to support enterprise activity in the sector, I hope this is an area that will attract more attention – especially as the recovery takes hold.

Supporting the development of enterprise in established organisations has not had as much focus over the past few years as supporting start-up social entrepreneurs.

However, resources exist.

Many foundations provide capacity-building support to their grantees and there is a big opportunity for enterprise activity to form a key plank of that support – along with other areas of income generation, such as public fundraising – and build the resilience we all seek in our sector.

Resilience has become a buzzword, and is in danger of meaning all things to all people.

Access has been reflecting on the key lessons from our first five years, including what resilience means to us and how we hope the funding and support ecosystem can evolve to put resilience for the sector at its heart.

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

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