Report

Social Enterprise - A way forward for business and the community

Introduction

The UK is home to 68,000 social enterprises. They generate the majority of their income through their own trading activities and then reinvest more than 50% of their profits to further its social mission. Its social mission also owns and controls the enterprise in its own interest. 1 in 7 are a start-up, which is more than 3x the proportion of start-ups in the mainstream social media enterprise. Social Enterprises have a bank that will lend them money; this is The Government-Backed bank, which has an initial £600million. Some organisations may choose a legal form that is regulated, such as the community interest company for instance.


Social Enterprises are organisations that are using the power of business to bring about social and environmental change without a single term to unite them. Since the mid 1990s the term has been used widely which has created confusion. There are a few characteristics of a social enterprise, which can help clarify whether the organisation is actually a social enterprise. These characteristics are:

•   have a clear social and/or environmental mission set out in their governing documents

•   Generate the majority of their income through trade

•   Reinvest the majority of their profits

•   Be autonomous of state

•   Be majority controlled in the interest of the social mission

•   Be accountable and transparent

Case Study 1

PM Training is a social enterprise, which helps with youth unemployment. It does this by providing work opportunities to 16-18 year-olds located in Staffordshire through apprenticeships, study programmes, vocational training and industry work experience. The organisations focus remains on giving young people an opportunity in those local communities where it is needed most. In 2012, 1,175 people from Stoke On Trent, Stafford, Leek and Newcastle joined one of their programmes, with 262 real apprenticeships being created with a range of local partners and businesses.


As part of the Aspire Group, PM Training also helps improve homes, neighbourhoods and estates through its Homeworks services. Homeworks maintains 1000 gardens, paints and decorates 300 properties, and makers 500 environmental improvements; all done annually. This gives a positive effect on the lives of more than 5000 locals each year, whilst creating jobs and training opportunities at the same time. Although the problem of youth unemployment still remains, PM Training's approach is one that is increasingly recognised by local businesses, authorities, and central government as one that works. This organisation gives the youth an aim and demonstrates as well as re-assures them that they can have an enterprising future no matter where they're from.

Case Study 2
Two former colleagues, Emma Stewart and Karen Mattison, both found themselves in the same position in 2004. With both of them being mums to young families, they wanted to balance work with family. However, it was a struggle to find any part time work at their level of skill and experience.

In 2005, they launched Women Like Us. This is a recruitment firm specialising in part time work, structures around the social aim to help other women to find jobs they can fit with family. Women Like Us provide the women with advice and support, and recruiting staff from amongst them for employers who need talented candidates with experience. They offer its candidates workshops on tackling CVs, interviews and career direction. 

Women Like Us has developed well as it's now a multi award winning social enterprise with 30,600 women on its books. It finds staff for small businesses all the way through to employers such as Santander, Ofcom and Tesco, With the success of Women Like Us, Karen and Emma were made MBEs in 2010.






Finding investment and funding

the economic climate is getting tougher, this means securing early funding or investment for your venture will be one of the biggest challenges. Networking is a key skill in raising funds and networkers can be generous to others as they hope others might be to them. Another advantage of networking is that it's a great source of up-to-date information, for instance, you can use social networking to find out about events, trade shows and meetings to build your network. Being known and understood is key to raising money. Having a profile helps funders to feel more confident about you and share their needs.


'Be liked - People buy from people they like, not those they don't

Qualify - Ensure you're talking to the right person - always talk to the decision maker

Close - Make the ask. We often avoid cutting to the chase, especially if money is involved. But the cliche is true - if you don't ask, you don't get'


Finance

There are many types of finance that you could have for you organisation. The main types are:

•   Grants - They don't need to be repaid and can really help in the early stages. Aside from these advantages, there are drawbacks... They can be inflexible and often used only for very specific purposes. This can limit an organisations ability to raise finance through other mans. They don't often allow any surplus.

•   Venture philanthropy - this grant aims to apply the hands-on management techniques. Grants are given in a form resembling investment. The venture philanthropist will most likely be 'hands on' in the organisation.

•   Dept finance

•   Equity finance - involves the exchange of finance or capital for part-ownership of the business.

•   Quasi-equity - a form of debt that has traits of equity, such as having flexible or performance-related repayment options.

Community Interest Companies (CIC)
A CIC is a limited company. It is created for the use of people who want to manner a business or other activity for community benefit and not for private advantage. 

They can be limited by shares, or by guarantee, and have a statutory asset lock to prevent the assets and profits being distributed (unless permitted by legislation). By doing this, it ensures the assets and profits are contained within the CIC for community purposes only, or transferred to another asset-locked organisation (e.g. another CIC or charity).

A company that is a charity cannot be a CIC unless it gives up its charitable status. However, they may apply to register a CIC as a subsidiary company.

Legal Structure

To begin with, you must decide whether you are an incorporated or unincorporated association. Incorporated is 'the act of putting your new venture into a company - puts legal water between you and your venture'. This allows you to enter contracts or agreements with others as a legal entity separate from you. The business can (in its own right):
Sue or be sued

•   Employ people or make them redundant
•   Accumulate surpluses or make losses

On the other hand, if you start off as an unincorporated association, you will be carrying all the responsibilities of the organisation personally. Here are some examples of disadvantages to being unincorporated:

•   If income is tiny - your turnover may be so low (particularly early on) that you are not putting your personal finances on the line

•   Tax advantages - as an unincorporated sole trader you can pay tax in arrears

•   Low regulations - as an unincorporated business, you are not obliged to file annual returns

The Company Limited by Guarantee (CLG)

Companies limited by guarantee do not have shareholders; instead they have members who are the company's guarantors. As the members do not own shares in the company, they cannot personally profit from any increased value in the company. This is a very common legal structure for many social enterprises.

Choosing the right legal model for you depends on a number of combined factors:

•   The balance of your mission between social and commercial goals

•   Your own need for control over strategy and decision making

•   The extent to which you care about owning a share in the venture

•   Your need for equity investment

•   Your new for grants and donations

•   The ethos and values of your new venture in terms of participation