Social Enterprise

Top 7 Things to Consider Before Setting Up a Social Enterprise

What are social enterprises? Are they the answer to success during this economic crisis? These seven top tips will guide you through the social enterprise journey from both an employee and employer’s point of view.

1. What is a social enterprise?
It is a business or service with primarily social objectives whose surpluses are principally reinvested in the community. A social enterprise is owned by its employees, has a clear social purpose and trades goods or services. Greenwich Leisure Limited is a well-known example.

2. Defining the business case
Key to any successful change or new service delivery model is the development of a robust business case. This should include the following: vision, mission, services to be provided, stakeholder engagement, partnership, costs, feasibility study, business operating model, associated risks, governance, timescales and implementation.

3. Accessing resources
It is anticipated that the Big Society Bank will provide some funding for social enterprises from April 2011 and other funding is available from regional and national organizations. Competition is social and fierce entrepreneurs often resort to private loan arrangements which can be high interest and risky.

4. Procurement issues
It is not yet clear what impact Government policy will have on procurement rules as they currently exist and their impact on social enterprises. Social enterprises will have to compete alongside private companies and other organizations for tenders and cannot simply be awarded a contract as was currently the case under the NHS Right to Request scheme. Seeking accurate and current advice on contracting and procurement is therefore essential.

5. Choosing the right business model
There are many different types of models – from Community Interest Companies (CICs) to Companies Limited by Guarantee to Mutual (Industrial and Provident Societies) to Workers co-operatives and Charities to name but a few. All need to be registered with Somerset House for company status and no type of model has all the pros and none of the cons. Again, both employees and employers should seek further advice to protect assets and income.

6. Issues to check
TUPE, pensions, insurance, asset transfers, IT, finance, HR skills and VAT are but a few of the deal breakers which are often either forgotten or badly managed. Employees and employers should consider these carefully as they are crucial to the long-term success of the new venture and should obtain professional advice as there is no ‘one size fits all’ solution.

7. Monitoring
What will success look like for social enterprises? It will involve profit as well as the wider social, economic or environmental impact and it is in this way that social enterprises can be said to have a ‘triple bottom line’ – a term that was coined by John Ellington in 1994.

As you have seen, the transition from public services to social enterprise is not an easy one. Social enterprise funding is not easily accessible and the journey from local government or the public sector to social enterprises, mutual co-operatives and collective ownership models is long.

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