Q&A: exploring enterprise advice and support series

Jess Farr was Sustainable Funding Officer at NCVO. She left in September 2012, but we have retained her blog posts for reference.

Following an excellent workshop debate titled “All charities should become social enterprises. Discuss” at NCVO’s Annual Conference 2011, we’re launching a series of online Q&As and blog posts on the topic of social enterprise this summer.

This series will give you the opportunity to put your questions to top experts in the field, and learn more about the legal, cultural and financial practicalities of exploring the enterprise option.

The Enterprise Perspective – jump to Q&As

Are you wondering whether using an enterprise model is the right idea for your organisation? Or are you looking at what a charity can do that a social enterprise can’t? Perhaps you are reviewing which legal form you can best use, or looking at alternative business models? Now is your chance to get support on your enterprise questions from our experts.

Julie HarrisKicking off the series is Julie Harris, CEO of the leading social enterprise COSMIC, an organisation that offers a range of ICT services, and delivers social outcomes through digital inclusion.

Julie has a key role in leading the strategic planning of COSMIC’s future, with a keen interest in seeing the company grow and develop. She is also CEO of RISE – provider of support, services and voice for social enterprises in the south west. And she is a board member of the Social Enterprise Mark Company which delivers certification and marketing for social enterprises nationally and internationally.

Question for Julie are now closed, if you have further questions, please check out our advice pages, or consider asking our next expert Paul Farmer, CEO of mental helath charity Mind

Questions submitted published below, plus Julie’s answers

Question 1

We are wanting to set up a Community Car Club in our area. The aim of the Car Club is to reduce car ownership and therefore car use, through offering a ‘pay as you drive’ solution.

We wish to secure investment from individuals and businesses through a share issue to set up the enterprise, aiming to give an return on investment to shareholders. We are happy for shareholders to have one vote per person, and become part of the directorship etc of the group. Profits made will be ploughed back into expanding the number of cars in the area; and longer term potentially into other environmentally sustainable infrastructure solutions.

We are undecided between setting up as a CIC with share option; or an IPS. What is the difference and what impact might it make further down the line.

Julie’s answer

I often recommend people to find a business they really admire in the same field and then do some research – pick up the phone, go visit to find out more about how they’ve built their success and what they did right and wrong along the way. There are many Car Club around the country (and further afield) which have very successfully got the model off the ground and are doing a great job. I’m sure you already know a few but just in case try these –

As for the right legal model to chose, (and bearing in mind I am not qualified to give you legal advice!), I remind people to get the business plan you need to make a success right first, then to get someone with the qualified legal eyes to go over the plan and advise the model which fits. Function before Form.

For example, a major main point in considering the CIC option as opposed to IPS, is the asset-lock, and so if you are keen to make sure the assets (presumably cars) are legally locked in for community benefit then this could be something which your business plan identifies as a priority. Again, I am not a legal expert and I’m sure there are many more aspects to consider, such as the need for a community interest test and annual reporting which will encourage engagement and accountability in your organisation. In some quarters I know that the IPS model is viewed as outdated and problematic and so you would be well advised to seek further advice on comparisons between the two options.

Question 2

We are a very small 4 person social care council team aiming to set up a not for profit limited company by guarantee social enterprise and bid for the council contract.  I understand we can use model articles for a limited company by guarantee but they need to be amended for not for profit?  My friend set up a venture whereby they also had to change the articles to say something along the lines of ‘the directors can be paid to do the work, if they are the most suitable people to do the work’?  We would all be directors.

I wondered if you knew anything about what we need to do, or whether you could point me in the right direction for advice on this?

Julie’s answer

The question you are posing is about legal advice necessary before setting up the business – and you would be very well advised to seek specific legal advice once you have the business plan agreed (see previous question and answer). Please remember that the important thing is to have the correct plan in place and then work out the best legal model to develop which will secure the long-term strategy for the new business.

There are lots of very well experienced and legally qualified people who can assist in this respect, and signposts will be available from your local or regional bodies seeking to support social enterprise e.g. If you are in the South West then Rise provides signposting to local expertise and sources of support www.rise-sw.co.uk In all the other regions there is a similar body.

National organisations also keep registers of useful links for the benefit of their members, for instance, NCVO has its own list here.

Question 3

I am just setting up a company that offers training, consultancy and support around all aspect of communication for people with communication difficulties. We hope to be recruiting and training people with learning difficulties to co-facilitate along side us eventually.  I would like to get information about whether this would be suitable to be a social enterprise, a co-operative and Community Initiative Company (my partners in this are parents of children with learning disabilities like myself).

Is there grants or any funding out there to support us to get established as at the moment trying to set up the company and deliver enough training to keep our head above water is difficult.

Julie’s answer

Social enterprises which primarily aim to provide employment and training to people with specific employment disadvantage are known as Social Firms, and the national organisation which provides support for the development of this business model is Social Firms UK www.socialfirms.co.uk 

Being a social firm does not dictate the legal business model which you chose (and so you could be one of a number of different company forms) but the Social Firm model is based on employability for those people who experience disadvantage in the labour market as a key social objective. Social Firms UK will be able to provide you with plenty of information and support, plus links to other similar organisations which you can use to research and find out best practice. They are a great national organisation and have supported the development of some excellent social enterprises over the years, and will also be able to provide information about the sources of grants and funding, plus the availability of contracts specifically aimed at employability objectives.

Question 4

I have been nurturing my idea for a business that has many community benefits and fits quite clearly into the social enterprise agenda. My question is what examples are out there of organisations that have multiple revenue streams, some which maybe for profit and others that are clearly not for profit. Also what legal entities are these organisations.

Julie’s answer

The social enterprise which I have been most involved in over the past 15 years is Cosmic – www.cosmic.org.uk and we have benefited from securing a wide range of contracts, projects and commercial services, and developing multiple income streams within our business. In fact I would say that the inclusion of multiple income streams and diversification of the business into new products and services over the years has been key to our success. Many strong and truly sustainable social enterprises will have used this approach.

I can recommend that you have a look through the directory of social enterprises which hold the Social Enterprise Mark as these will in many cases will have developed a range of income streams. www.socialenterprisemark.org.uk  You can use the directory to search for social enterprises holding the mark in your area (use the google map) or in a particular service sector (use the tag cloud).

Question 5

We are a group of people in the process of setting up a youth club. We are interested in setting up a company that could attract investment through community shares – do you know what the right model might be for this, and whether there are any advantages in doing this over, say, setting up as a cooperative or just applying for grant funding to get us going? We would like to buy a building to run our organisation in. Should this affect our decision?

Julie’s answer

Your question is primarily about chosing the right legal model for your new venture, and (as in previous answers) I’m not qualified to provide this sort of advice, so I strongly recommend that you seek out someone who is qualified and experienced in this area. But you should also have a good look over your business plan and make sure you fully understand the right long-term strategy to achieve the success and social impact you are seeking – then invite someone to make a recommendation on the legal model which will effectively support that plan.

So in answer to the second point in your question for example, you are considering owning your own building as part of the plan and therefore the asset-lock provided by the CIC (Community Interest Company) legal model might be a good choice, particularly if you are keen to ensure that the asset (building) is secured for the longer term use and ownership in the community it serves.

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