A revolution has taken place in UK voluntary sector income: Half is now earned, at £21.4bn. Peter Holbrook of SEUK says that there hasn't been a corresponding shift in how the voluntary sector describes itself, but embracing social enterprise is vital if charities are to continue to weather the storm.
Peter Holbrook
The fact that more than half of the voluntary sector’s income is now earned through trading (selling goods and services and delivering public contracts), rather than giving through donations, legacies and grants, may come as a surprise to many. But the latest figures from The National Council for Voluntary Organisations' (NCVO) Almanac show that in 2010/11 earned income accounted for £21.4bn, while voluntary income - that given freely - accounted for £14.7 bn.
I can’t help but think this throws into question whether the voluntary sector should describe itself very differently, in a way that actually reflects its changing makeup and the fact that so many charities and other voluntary sector organisations are viable businesses, and contributing greatly to jobs and economic growth. In fact it’s been a few years since trading took over giving as the main source of income for what is still too-often regarded as a sector run on good will and giving.
The results of a survey we’ve published this week tell us that charities are positive and interested in trading and in the social enterprise approach. When asked how they feel when they hear about social enterprise, 52% say ‘excited’ and 29% say ‘interested and want to know more’. Only 7% say ‘nervous’. While the majority (92%) say they would like to increase their income from trading and government contracts in the next three years, three quarters (74%) of respondents say there is not enough support available to help charities make the transition from voluntary to trading income. Two-thirds (63%) say more government support is needed.
Some charities have already made the move, like the London Early Years Foundation, recognised at the National Business Awards late last year for turning a vulnerable, grant-dependent charity into a sustainable business. In 2005, the new in post CEO, June O’Sullivan, decided that the charity (which began in 1903) had to become a social enterprise to survive, but wanted to keep the organisation’s ethos firmly intact. The long process involved the management team and every member of staff, who together created a new structure and culture. Already running nine nurseries in the London Borough of Westminster, in 2009 they began to expand their operations, opening branches in other boroughs in the capital.
Larger charities have established trading arms, the profits of which are reinvested back into an organisation’s central pot. While Age UK’s trading arm has been going for some time (in 2011 Age Concern Enterprises returned more than £21m) other well-known charities are at the beginning of their journey. Auto 22 is a social enterprise; a car servicing and repair business, part of the national charity Catch22, which provides servicing and repairs to the public while offering young people the chance to gain real-work experience in a professional working environment. These are inspiring examples, but the reality of getting a social enterprise off the ground can be a daunting task, and it’s by no means a quick fix. Becoming a social enterprise is a strategic decision, and it’s not for every charity.
Our survey reveals that the two main barriers stopping charities from becoming more socially enterprising are a lack of appropriate business skills or experience among a workforce (49%), and a lack of access to investments/loans (45%). Perhaps not surprisingly, a fifth of those polled say scepticism from trustees (18%). Charity trustees have a legal obligation to minimise risk to the organisation, but if charities want to move to an enterprising approach, they have to be able to take financial risks. Transitioning to social enterprise also means adopting an entrepreneurial culture and mindset throughout the organisation. It can empower a staff team and enable employees to put their business ideas and skills to good use (or mean bringing in new people and skills). But it can give an organisation the freedom to be much more innovative in service-design and delivery.
Hearing that the move to social enterprise is no quick fix might not be what charities want to hear in the face of cuts, donor giving on the wane and traditional funding streams drying up. But it’s encouraging that the research points to a positive attitude, and it’s the job of organisations like Social Enterprise UK and NCVO to provide support and help charities navigate what at first may seem like a long and winding road. If organisations choose to adapt and be more entrepreneurial to weather this funding storm, they might just come out the other side stronger.
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