Developing new enterprise opportunities gives an organisation the opportunity to create trading opportunities which moves it away from grant dependency and adds to its sustainability.
There are numerous reasons to consider developing new enterprise opportunities:
- Moving away from grant dependency
- Creating longer term income streams (like rents)
- Diversifying the service offer (not having all your eggs in one basket)
- Extending a successful pilot project
- Responding to an external offer from a third party
- Need to create a reserve fund (or to balance the books)
- New expertise within the organisation wanting to use their skills
- Setting local, regional or national impact by demonstrating good practice (a better way of delivering local services for example)
Social enterprises, community businesses and development trusts have to make a profit (or a surplus) to survive and grow. Charities are now encouraged to be more entrepreneurial and to generate surplus income to offset loss of income. There is considerable support in professional advice and sometimes in funding to assist organisations to explore enterprise opportunities and to be more entrepreneurial.
There are many enterprise options to consider:
Commissions
The most common option is to deliver commissioned services for a public body such as a local authority or primary care trust. This may supercede a grant arrangement, and more clearly indicate the services the organisation is required to provide in return for a commission which pays for both the service and which contributes to management and overhead costs.
Contracts
Organisations can respond to tender adverts to provide goods and services to public bodies and compete with private and third sector organisations. Typical contracts include advice and debt services, employment or business support, environmental wardens, care of the elderly or childcare services. Contracts can give service costs, management and overhead costs, and a level of profit.
Providing goods and services
Organisations can provide goods or services. The most common is to hire out rooms or equipment which can provide a good local service and cover both the cost of providing the service and a level of profit. Other examples include long term rented office space, offering reception services to other organisations sharing a building or complex, or providing rented space to a public service such as Children’s Centre, a day centre for the elderly or a library.
Catering
Food and catering are further examples of provision of goods and services, and can range from a community café offering drinks and light snacks to high class restaurant offers and/or outside catering for meetings, parties, conferences and so on. The level of provision will depend on the facilities available for food preparation, and the restrictions of food and hygiene legal requirements. Catering can also provide training opportunities, especially for residents with special needs.
Community transport
Community transport options range from hiring out a minibus to operating a fleet of minibuses or providing light haulage or courier services. Most organisations go for new vehicles and then struggle as they age and cost more to upkeep. Rental options can give provide new vehicles each year and keep costs more constant by reducing maintenance.
Consultancy
Staff of organisations can offer consultancy support to other organisations, based on their own experience and learning. An easy option is to offer opportunities for others to visit something that really works or which demonstrates good practice, and to charge a delegate rate to cover costs and make a small profit. Another option is to provide training by qualified staff to other organisations and to charge for it – how to set up a community café or run an advice centre for example.
Manufacture of goods
Manufacture of goods is less popular, but can be linked to a training and employment scheme for example. Furniture manufacture or recycling of second hand furniture is the most popular option. A variation is to franchise a product, ice cream or food hampers for example, or to sell goods on commission for a commercial or charitable operator. Sale of goods needs a customer base beyond an organisations normal catchment, if profitable returns are to be achieved.
Green businesses
Green businesses are a growing opportunity for new enterprises, and range from recycling or kerb side collection services to advice, training or consultancy on waste, energy or climate change. Funds are often available to develop green enterprise options, and local authorities can be persuaded to work with organisations if they can assist in achieving their waste and recycling targets.
Greening the organisation
Deciding to green an existing asset through grants or loans can reduce running costs and generate interest in other organisations wanting to be involved in a green organisation. This might encourage them to rent space from you, or purchase your goods and services, or if they are a funder or procurer, to work with you on commissions and service provision.
E – business
The internet is providing opportunities for new enterprises. IT support or web design are possible. Running an e-business is also possible, providing the organisation has the skills and the ability to maintain web connections. E-bay trading is an emerging option, and there are various fund raising kits operated trough the internet now. This is likely to be a growth area for the third sector.
Full cost recovery
In delivering contracts and commissions you need to be clear about recovering the real cost of your provision. This obviously includes the delivery staff and resources, but also management, admin, financial support, human resources, utility costs, rent of space and so on. Public bodies are signed up to full cost recovery, but not all procurers either understand this or want to pay for it. Don’t be tempted to provide a subsidised service unless your business plan is set up to do this with other funding you already have or have guaranteed access to.
Contract requirements
Think carefully about what delivering a contract or commission means. Frequently they will want you to move into other areas you don’t traditionally cover. Have you the capacity to expand? Will it bring you into conflict with other organisations? Will it actually offer anything to your home patch? If it doesn’t feel right don’t take it just to get the money.
Food and catering
Provision of food related options need to comply with food and hygiene regulations, and your kitchen/food preparation facilities will need to be inspected and authorized. This may require some investment in your facilities. Staff involved in the project will need to gain a Food and Hygiene Certificate, even if they are volunteers. Leaders will need a first aid qualification and health and safety training.
Community cafes often don’t make a profit due to their pricing policy or target marketing. Take advice on the commercial aspects of a community cafe, and consider a wider customer base. Location will be a key consideration.
Community transport
Community transport options often struggle to break even. A minibus purchased primarily to support a local community for free is not going to make a profit, but could have a small income target through limited commercial lettings to contribute to overall running costs. New legislation makes community transport even more difficult to sustain, and even commercial operations find favored community routes unviable.
Make sure anyone driving for you is legally allowed to do so, and can produce an original driving license and insurance document which you can copy. Don’t take their word that they have these, no matter how well you think you know them.
Environment
Green options on buildings can be very expensive. Make sure your preferred option is suitable for your building by taking professional advice. Be clear that your investment will generate a return, unless your business plan provides for a subsidy and that is identified.
E business
Internet based services or businesses need to have the correct licenses. Take professional advice before starting out. Ensure you have backups for internet collapse, for the service going off line, for power cuts, and for virus infection.
Loans
Loans are a good way to generate income for enterprising options, but loans have to be serviced. Don’t over estimate your ability to repay a loan. Shop around. If you get into difficulty talk to your loan provider at the earliest opportunity and reprofile your payment plan.
Advice
Always take advice but be very clear in your brief to advisors as to what you want and what you don’t want from them. Look for people who have real experience. Take references and look at their track record. Don’t try and guess or muddle through. Someone else has already dealt with and solved your problem somewhere else. Where professional help is the right option get the resources to pay for it.
Learn as you go along and become the expert of the future!
Future Builders
Charity Bank
Development Trust Association