While some charities have been embracing the social enterprise model as part of their work for years, many are not and others are still in the dark about what social enterprise is. Trading to generate income is not for every charity and even though it can make an organisation more sustainable and help it grow, becoming a social enterprise is a gradual process with lots to consider.
Read more in Why Social Enterprise? which aims to help you explore if social enterprise is right for your charity.
THE DIFFERENCE BETWEEN A CHARITY AND A SOCIAL ENTERPRISE
What’s the same?
- Charities and social enterprises both exist to fulfil a social mission.
- Charities and social enterprises both reinvest the majority of their profits (charities often describe these as surpluses) in doing social good.
- Charities traditionally aim to fund their social mission through grants and donations.
- Social enterprises aim to fund their social mission through trading activities - selling products and services to customers.
According to Social Enterprise UK, social enterprises should:
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 interests of the social mission
Be accountable and transparent
More detail about these points can be found in the short paper - What makes a social enterprise a social enterprise?
FROM CHARITY TO SOCIAL ENTERPRISE: LONDON EARLY YEARS FOUNDATION
When June O’Sullivan joined Westminster Children’s Society in 1996, it was a traditional charity running nine small nurseries in the London Borough of Westminster.
Founded in 1903, the charity had a long history of working to give children the best start in life and a staff team committed to the charity’s objectives. As more funding became available under the New Labour government, the organisation was able to access new income streams but it remained dependent on a block grant from the local authority to support its work.
When she became chief executive in 2005, O’Sullivan decided that the charity had to become a social enterprise: “I was determined to move us away from the charitable model. I didn’t want to ruin the ethos and the fantastic history the organisation had but I didn’t feel that if we were to rely on our charitable model we would survive."
The challenge was to turn the organisation from a grant dependent charity into a sustainable business while continuing to provide a service for children and parents who couldn’t afford to pay for it.
Part of the answer was expansion. The charity, renamed London Early Years Foundation (LEYF) in 2009, began to move beyond Westminster and opened nurseries in other London boroughs creating economies of scale: “Our business model is quite simple: increase occupancy; increase revenue; reduce costs. That’s it. It’s what you have to do.”
Initially, many LEYF staff were worried that the changes would mean they could no longer provide a service to the poorest children. It required a shift in culture and thinking to enable staff to understand the new approach and the benefits it would bring:
“What I had to explain to them is that we had to balance the business model so that you had a level of cash cow and a level of mixed-market – which is our majority – and that way we would actually be producing enough profit to give many more children a free offer.”
JOIN SOCIAL ENTERPRISE UK
For a one-off annual membership fee we provide social enterprises and charities with a range of tools including access to training, information and advice, discounted event attendance, PR and comms.