Don't start a social enterprise if you just want grants

I’ve been having a little social enterprise wobble recently. I’ve met a lot of people thinking of setting up social enterprises because they wanted to get grants for their work. Then I read a depressing article where a business said they converted to be a social enterprise because: ‘we couldn’t make any money’. Argh, hold head in hands and sob.

I started to think: is this the elephant or sacred cow or third rail (insert suitable metaphor - I like Trojan sea cow) in the social enterprise room. I feared for the future of social enterprise - are we really just a group of pseudo-philanthropic organizations? Can we really change the face, body, heart and soul of commerce?

We like to talk about social enterprises being ‘businesses’. That is, they trade: they sell something to someone. One question I ask all start-up folks I meet is to write down: “I sell x to y” and fill in the blanks. I sometimes feel a flutter of disappointment by the responses. Often there is a dearth of clarity about the market for products and services. I suspect this is probably true for standard businesses starting up too. However, on the positive side, this is always something to work through with social entrepreneurs and, in working it through, you can arrive at some innovative and unusual places.

Then there’s also the old 1% gambit: “the total market for widgets is a gazillion pounds. If I can get 1% of that market it means returns of a, b, c.” Well, if I had 1% of the cash of the one percent gambitters I would probably…not be a rich man. Note that ‘gazillion’ is an indefinite or fictitious number. A suitable term, then, for a fictitious market.

This does get to a gritty issue at the heart of social enterprise - if tackling pressing social and environmental issues was easily tradeable surely someone would have done it by now. That leads you down some tricky paths - making money out of poverty, profiting from others misfortune, etc.

In earlier, rosy-tinted, pre peak of inflated expectation days, people said that social enterprise goes where the private sector doesn’t or that social enterprises operate in areas of ‘market failure’. I always thought, and still think these ideas are red herrings. We shouldn’t be scared to take on the private sector and I’m not even sure what ‘market failure’ is - no one is yet to explain this to me clearly. Answers on an e-card please.

I would advise not to start on the premise that you need a grant to make your business work. Start from a point of knowing there is a clear market for your product or service and that someone in that market will pay for it. Sure grants can be good sources of investment and many standard private sector organizations also get grants - maybe that is another elephant in an albeit more lucrative room - but see them exactly as that: a source of investment; not something to rely on.

Another common difficulty is thinking of an idea and having a vague notion that somehow the state will subsidise or pay for it. In an age of austerity (whatever Philip Hammond might say) that’s a dangerous path for any social entrepreneur.

So don’t start a social enterprise if all you want to do is get a grant. Start a social enterprise because you want to be a business that sells something to achieve a good cause.

New politics, a new hope

Is Brexit the rebellion of the voiceless?

No this is not another Star Wars themed blog!

Yesterday evening I attended the Nexit: What next for Plymouth and the South West event organised by RIO and the RSA at Devonport Guildhall. Around 200 people showed up - a sign of increasing politicization maybe and great to see so many engaged people. The waiting list was nearly as long as the attendance list apparently.

So a big turnout. And big ideas were discussed. There were initial ‘provocations’ from Molly Scott-Cato, Green MEP for the South West; George Cowcher, Director of Devon Chamber of Commerce, John Harris, a Guardian political journalist with a penchant for anything non-Westminster and two young people - Joe and Tom from Our Way Tech.

Molly asked for a second referendum, proportional representation and a need to reclaim our country. Citizen’s juries and a ‘progressive alliance’ of Greens, Lib-Dems and Labour were also mooted.

George gave a precise talk about business issues post Brexit. He said a majority of businesses wanted to remain in the EU and that there was still no real vision for what leaving looked like. In the South West we are particularly vulnerable to potential export problems caused by Brexit as 60% of our exports go to Europe. The main point that resonated with me was his direct question to business: “Exactly what ‘red tape’ do you want to change?” There is a lot of bluster about EU regulation but no-one can seemingly put their finger on what they want to remove.

Joe gave an eloquent and heartfelt speech (written on the back of a napkin in an impressive five minutes) expressing his fears about right-wing populism and invoking the spectre of fascism. Tom produced one of the quotes of the night: “A window has been broken - but that is good for people who fix windows.” I was left a bit bemused.

John Harris then gave an excellent talk on his approach, Brexit and the deep cynicism about politics. He said that a leave vote was just as valid as a remain vote and that we need to understand why Brexit happened. He called the Brexit vote a ‘rebellion of the voiceless’. In a telling moment he asked if anyone in the room had voted leave and only one or two people raised their hands.

We then had discussions in table groups. I was honoured to be asked to lead one of these. Our topics ranged widely over education, housing, environment, representation, inequality, economics and more.

We decided to develop our own new political party - the ‘Greater Britain Party’ - taking back the language of ‘great’ and ‘Britain’ from the far right with a new progressive manifesto:

1. Talk about politics in schools and everywhere

2. Proportional representation

3. Lower the voting age to 16

4. Sort housing and jobs

5. Improve environmental protection.

Ok, so some work needed on the detail but it was fun, lively, inclusive, honest and had real conviction.

What I found particularly refreshing was the ability to talk about politics in a community, non-party political setting. It felt natural and engaging. Yes, most people were in broad agreement but judging from responses there was a mix of Greens, Lib-Dems and Labour (new and old) and possibly some Conservatives too.

I think the event could have been improved with a ‘Leave’ key-note speaker and maybe we needed more dissent in the room around the opportunities presented by Brexit. A criticism could be that it was a large number of ‘Remainers’ talking to themselves.

John Harris wrapped things up with a call to arms - to find innovative solutions - one being found in Plymouth’s burgeoning social enterprise movement. His most powerful argument was his last. He said: “Dark forces are at work in the country - any attempt to overturn the referendum result through legal or other means could further disenfranchise the ‘voiceless’ turning them to more extreme politics.”

We must not let that happen.

Marginal gains in governance

Here at Iridescent towers - currently disappearing into the Plymouth mist and storm Imogen - we’ve been delivering the Pop Ideas funding and business planning advice scheme on behalf of Plymouth City Council, in partnership with Zebra Collective, for well over a year now.
 
This successful project has now seen over £1.5 million brought in to 69 community groups across the city. This represents a return on the City Council’s investment so far of 25 to 1!
 
In our last blog on Pop Ideas we talked about the reasons for organizations not getting funding. Another point that is becoming apparent is that well governed groups are more likely to succeed.
 
That’s obvious right? Well yes, but it seems to us that getting governance right can be a challenge. In the light of the Kids Company fiasco and the accompanying government report, governance is high on the agenda. That report focusses on when governance goes wrong. And we only really hear about governance when it goes wrong because that’s the sensation that makes the news.
 
However, we think that good governance shouldn’t be difficult or scary or dry. It is about common sense, judgement and proportionality. It should be the bedrock that enables your business to thrive.
 
What is governance?
 
I like this definition from Good Governance in Australia: “Good governance is about the processes for making and implementing decisions. It’s not about making ‘correct’ decisions, but about the best possible process for making those decisions.”
 
This older definition from Chris Cornforth, still stands the test of time: “[Governance] is the systems and processes concerned with ensuring the overall direction, effectiveness, supervision and accountability of an organization.”
 
What happens when governance goes right?
 
Why bother with governance? It’s all policy, red tape and dull isn’t it? Well there appears to be evidence that getting it right can help. There is some research about the link between good governance and growth of organizations. These studies tend to look at private sector businesses rather than those in the social economy (there’s a gap in the market there) but the concept is similar.
 
In 2014 a report in the august publication ‘Principles of Contemporary Corporate Governance’ (Cambridge University Press) stated that: “There now exists ‘empirical proof’…that good corporate governance is important to companies and does add value and make a difference”.
 
An Association of British Insurers report in August 2013 found that good corporate governance adds value: “Good corporate governance enhances…a company’s long-term sustainable performance: it is critical to…economic growth.”
 
Others are a little more sceptical: The ‘Business Case for Corporate Governance’ (again Cambridge University Press) states that it is “Inconclusive that there is a direct link,” however; it points out that, at the very least: “Sensible corporate governance activities may prevent the destruction of value.”  We would sagely argue that it’s important to stop the ‘destruction of value’! Even the government report into Kids Company says that it did good stuff. Sadly that value appears to have been 'destroyed' by poor governance.
 
So what have we seen in Plymouth?
 
Our experience is that groups with good basic foundations in place; those with policies and procedures appropriate to their work, size and complexity can prosper. These organizations win more tenders, gain more grants and gather more supporters. However, a caveat, the reverse may also be true: again look at Kids Company; on the face of it they were phenomenally successful at fund-raising.
 
We have all seen examples where governance may not be outright terrible but it can be flaky. Of course the problem is that governance is not sexy. But the academic evidence and our own experience seems to suggest that good governance can help you. In times of austerity, cuts and competition for funding any edge you can find will help.
 
It’s like David Brailsford’s theory of marginal gains in cycling that led to oodles of gold medals. Increase one, two, three percent in each area and it all adds up to significant improvement. This takes leadership, vision, drive and time. But broken down into manageable chunks it is achievable.
 
We’ll leave you with a question: What can you do each week to marginally improve your governance?