SeamlessSupport Social Enterprise Development Guide June 2011
Contents History of Seamless Support........................................................ p3 Final year of programme in numbers........................................... p4 Social Enterprise Diagnostic Tool................................................. p5 Business Plan Outline.................................................................. p10 Case Studies................................................................................ p11 Social Enterprise Agencies.......................................................... p12
Seamless Support Partners
Seamless Support Funders
easonably.so!
This publication was designed by Reasonably So! a Norwich based design studio specifially working with charities and social enterprises to create the greatest positive social value. Reasonably So! is a business of Profit Is Good Ltd, a social business consultancy. www.profitisgood.co.uk
History of the programme This is a legacy publication celebrating the impact of the Seamless Support partnership delivered in Norfolk from 2006 to 2011 by Voluntary Norfolk (VN), The Guild (TG), Norfolk Rural Community Council (NRCC) and West Norfolk Voluntary and Community Action (WNVCA). The Seamless Support partnership of voluntary sector and business support agencies offered the option for voluntary and community groups to receive support at whatever point they find themselves on the spectrum of progression towards social enterprise and a clear progression route towards their goal. It also offered existing social enterprises specialised business support. The Cabinet Office summary of the ‘National Evaluation of the OTS Social Enterprise Business Support Improvement Programme Baseline Report’ stated that:
‘Social enterprises’ business support needs are broadly similar to those of mainstream businesses but the nature of the business model means it will always need specialist support component.’
The report showed that, while each region was providing social enterprise support in different ways:
‘Establishing strong relationships between the strategic partners appears to be a key factor in improving the business support environment for social enterprises.’
Development Support
Business Support
VN WNCVA NRCC
TG NRCC
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Final year of programme in numbers The final year of the Seamless Support programme ran from April 2010 through to March 2011. The infographic below sets out the achievements of the partnership.
457
122
123
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Number of people in businesses created
Number of people receiving OCN accredited skills development
Number of people in businesses assisted to improve performance
Number of people supported with unaccredited skills
Number of people supported in pre-pre start up
l Enterprise Development cia So s thi of ns ctio se two xt ne e Th a Social Enterprise Guide are over to you! The first is to determine which social Diagnostic Tool which can be used uld be most suitable for your enterprise model and structure wo siness Plan Outline that can be needs. This is followed up by a Bu used to structure your thoughts.
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Social Enterprise Diagnostic Tool Is your organisation a social enterprise? The term “social enterprise” has no precise legal meaning and can, within limits, mean different things to different people. However, there are some key features one would expect to see in a social enterprise. Diagnostic test If the answer to the following four questions is “yes”, you are most probably a social enterprise. If the answer to any of these questions is “no”, please read the accompanying notes and then reach your own judgement. Social aims Does your enterprise have clearly-defined social objectives that guide its whole approach to business?
If the answer is “no”: Possibly a private sector business where social aims are subordinate to conventional, commercial objectives. Ask yourself: on what basis do you consider it to be a social enterprise?
Source of income Does a significant proportion of your income come from selling goods or services?
If the answer is “no”: If the bulk of the organisation’s income is (and will remain) in the form of grants and donations, ask where the “enterprise” element of the project is. Maybe you should consider yourself a voluntary sector organisation. If the organisation has little or no income, it may be an embryonic social enterprise if you expect to be trading significantly in the future.
Membership Does your enterprise feature a membership structure open to key stakeholders or the wider community? OR is it controlled by a charity or some other organisation (or organisations) with its roots within the community?
If the answer is “no”: Who owns it? If a small number of self-selecting people, this would probably not be recognised as a social enterprise in most quarters. If membership issues are unclear or undecided, go to the ‘status finder’.
Application of profits Are all trading profits re-invested in the business?
If the answer is “no”: Where do the remaining profits go? It is unlikely that you are a social enterprise unless surplus profits are given: (a) To charities or non-profit organisations; or (b) Back to customers as a form of rebate Some return on invested capital is acceptable provided it is capped in some way.
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Social Enterprise Diagnostic Tool Is this the most suitable legal structure? A social enterprise may or may not have paid adequate attention to selecting the most appropriate legal structure when it was setting up. Your response to a series of questions should yield one or more forms of legal status that are likely to be appropriate to your organisation. The main options for legal status available to organisations in our sector are: • UNINCORPORATED ASSOCIATION • TRUST (Unincorporated) • INDUSTRIAL & PROVIDENT SOCIETY (“Society for the benefit of the community”) • INDUSTRIAL & PROVIDENT SOCIETY (“Bona-fide co-operative”) • COMPANY LIMITED BY GUARANTEE • COMPANY LIMITED BY SHARES • LIMITED LIABILITY PARTNERSHIP (“LLP”) • COMMUNITY INTEREST COMPANY (“CIC”) As you go through the questions, the response will lead to some of these options being deleted. Once complete, if there is only one option left, then that is the legal form that may be most appropriate for your group. If there are two or more options remaining, then your group can probably choose freely between them. If there are no options left then you may not be a social enterprise!
Status Finder
From the original produced by Charlie Cattell
1. Does your organisation have a membership (with the right to vote) in addition to those individuals who are members of the governing body? Yes Delete TRUST (unincorporated) and LLP No
Delete UNINCORPORATED ASSOCIATION
If the response to question 1 was “no”, ignore question 2 and move straight to question 3. 2. Are a majority of your members of the governing body elected by and from the membership on a one member, one vote basis? Yes No
Do nothing
Delete both INDUSTRIAL & PROVIDENT SOCIETY options
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3. Who is entitled to become a member of your organisation? Anyone who applies; no criteria Delete TRUST (unincorporated) and IPS (co-operative) and LLP Anyone who meets specified criteria (e.g. using the services provided; employees; living in the area of benefit)
Delete TRUST (unincorporated)
Individuals by invitation only
Delete UNINCORPORATED ASSOCIATION and IPS (co-operative)
4. To whom are the services/facilities of your organisation available? Members only People or organisations who are not member
Delete TRUST (unincorporated) and IPS (society for the benefit of the community) and LLP Do nothing
5. Does your organisation now (or in the near future) employ staff on permanent contracts? Yes No
Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION Do nothing yet
6. Is your organisation now (or does it anticipate) trading regularly where risk is involved; borrowing money to any degree; or entering into long term contracts such as leases? Yes No
Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION Do nothing yet
If the response was “no” to both questions 5 and 6, delete both COMPANY, both INDUSTRIAL & PROVIDENT SOCIETY options and Community Interest Company. 7. Will your organisation seek to raise capital from members or others through the sale of shares? Yes, from members only Yes, from non-members (maybe as well as members) No
Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION and COMPANY LIMITED BY GUARANTEE and LLP Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION and COMPANY LIMITED BY GUARANTEE and LLP and both IPS options Delete COMPANY LIMITED BY SHARES
8. If your organisation generates a financial surplus, will it be able to distribute any of this amongst your members – either while running or on winding up? Yes No
Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION and IPS (society for the benefit of the community) Delete LLP
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Social Enterprise Diagnostic Tool Social Enterprise Matrix On the next page are options for social enterprise types – ways of operating within the legal framework of your organisation’s governing document. The types listed do not provide definitive answers as to how your group should establish or develop its work – this will depend on many other criteria that you, or your business adviser, will need to take into consideration. Remember of course that while some legal structures are incompatible with others, many operating models can incorporate one, two or more defining features – it is possible to be a Development Trust, a Community Interest Company and a Community Co-operative – all registered as a company limited by guarantee. The following are suggested by the primary focus of the activities that your social enterprise wishes to undertake. The answers are not definitive but should provide enough information for your Social Enterprise Business Adviser to refer you to the appropriate specialist agency. If the primary focus of your social enterprise is to create jobs for people who might not get a job in the mainstream labour market, then it could be a Social Firm or a Co-operative. If the primary focus of your social enterprise is to own assets, such as land or buildings on behalf of a community of place or interest, then it could be a Development Trust. If the primary focus of your social enterprise is to own an asset that was previously owned by a public authority and where the community ownership needs to be protected in perpetuity, then it could be a Community Interest Company. If the primary focus of your social enterprise is to create a democratically run organisation that is accountable to its members – its employees, its customers or the community, then it could be a Co-operative. If the primary focus of your social enterprise is to hold financial assets that it will lend to individuals who share a common bond, then it is likely to be a Credit Union. If the primary focus of your social enterprise is to enable an existing voluntary organisation with charitable status to trade, then as long as it is trading within its primary objects it can carry on as a charity. However, if it wants to trade in other activities, it can set up a trading arm using a number of different structures. How to use the MATRIX Status Finder will have provided you with a legal structure that may suit the needs of your group. By referring to this structure on the left hand side of the MATRIX you will find all the relevant ‘type’ of social enterprise indicated by stars. By referring to the ‘defining questions’ under the relevant ‘type’ you should locate at least one type of social enterprise that would suit the needs, management style and requirements of your group. Please note that if more than one type is indicated it will be necessary to seek help in choosing according to the trading you wish to undertake and/or the robustness of your income generating potential. The ‘descriptors’ on the right hand side of the MATRIX are a way of checking the results of the Status Finder.
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Social Enterprise Diagnostic Tool
Development Trust Does the structure conform to the DTA requirements?
Legal Structure Options
Unincorporated association Company limited by guarantee Company limited by shares Trust Charity Industrial and Provident Society Limited Liability Partnership Public limited company Defining questions
Co-operative Do the participants wish to act collectively
Is there an intention to employ the beneficiares (at least 50% of the workforce?)
Social Firm Does the structure conform to the Credit Union requirements?
Credit Union
Is there a social as well as a profit objective?
Trading with social benefit Does the charity intend to trade outside its primary objective?
Charity subsidiary
Is there an intention to employ the beneficiaries, prior to employment in the general labour market?
Intermediate Labour Market
Is trading the main objective?
Community Interest Company
Descriptors
Unlimited liability, inadequate for trading purposes
Unpaid Directors, members guarantee shares
Directors and share dividends can be paid Asset holding and/or grant making Service delivery and/or grant making Regulated to ensure security of operation and to protect members’ interests Requires the Partnership agreement to specify the social objective Quoted on the Stock Exchange
NOTE: Although there may be more than one legal structure option for any given social enterprise it will be necessary to choose the most appropriate for the type of trading and for the income generating potential
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Business Plan Outline Summary • •
The existing organisation (products / services, major user groups, size ,resources, staff) Proposed changes to organisation (products / services, user groups, staffing and other organisational changes)
The Organisation • • •
Brief history, (when started, key points in development, growth in level of service and employment) Existing products, services and style of operation (hours of opening, etc) Changes proposed with brief justification
The People and Organisation • Existing: people (numbers, skills and past experience), organisation (hours, shifts, division of responsibilities, training, levels of support) • Proposed : changes to the above and justification
The Market • Background: size of market, trends, etc • Users: target groups, numbers in each group, proportion, characteristics (needs) • Complementary services: who they are , where located, what they offer • Proposed changes: product mix (services), major user groups focussed upon, reasons • Marketing strategy: pricing, promotion, (where, when, how often, cost), image (what it is, how it will be projected)
Premises • Existing: brief description, routine maintenance required • Future: change or adaptation, cost, timescale, justification
Equipment • Summary of existing equipment • Equipment required and costs and justification • Suppliers (terms, reasons for choice)
Financial Projections • Cash flow • Income and expenditure statement • Balance sheets
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Case Studies Graphic Design and Print CIC Graphic Design and Print Community Interest Company (GDPCIC) was set up to provide real-world training and employment opportunities to people who are disadvantaged or socially excluded. Founders Stephen and Lillian Mollison have diverse work careers, Stephen as a graphic designer and Lillian as a registered social worker, but both shared a commitment to social inclusion and equality of opportunity to empower people to reach their full potential. GDPCIC recieved support from The Guild at the pre-pre start-up stage, where a range of different legal structures were discussed, through to incorporation as a CIC and ongoing business support.
Stalham Farmers Market At the beginning of October 2009 Stalham Farmers Market contacted Norfolk Rural Community Council for guidance, as they had heard of the Seamless Support scheme and had been advised to contact by their local area partnership. The main objectives of the project were to establish a retail outlet that provides an opportunity for local producers and crafts /artisans to sell their products at an economic rate to both themselves and consumers. As a part of the Seamless Support project NRCC spent some time discussing the project and it was clear that there was a real need for some research to be conducted in the community and amongst market customers, to establish if there was a real market opportunity, rather than a ‘hunch’ that a demand existed. To pay for the research The Farmers Market was awarded a Seamless Support bursary in order to establish whether there was a viable market. The response to the questionnaire was extremely positive and as a result NRCC spent more time working with the founding partners to identify the most suitable company structure, a sustainable business plan and funding. Truly Local opened its doors on the 26th March 2011 and is a Community Interest Company with all profits invested back into the company and to the benefit of local producers and consumers. Trade has been very positive, although there is a need to establish the concept of ‘local’ – hence no bananas or Cromer pineapples! Truly has already received a number of accolades including winning the Business and Economy category of the East Action for Market Towns Awards.
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Social Enterprise Agencies The Seamless Support partners recommend the following agenices for further support. Social Enterprise Type
Social Enterprise Support Agency
Co-operative
Co-operatives UK www.uk.coop 0161 246 2900 Development Trusts Association www.dta.org.uk 0845 458 8336 Social Firms UK www.socialfirms.co.uk 01737 231 360 Association of British Credit Unions www.abcul.org 0161 8323694 Social Enterprise East of England www.seee.co.uk 0845 606 6296 Charity Commission www.charity-commission.gov.uk 0834 3000218 The CIC Regulator www.cicregulator.gov.uk 029 20346228
Development Trust Social Firm Credit Union Trading with social benefit Charity subsidiary Community Interest Company
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