At first glance this may appear to be a quote from another needlessly pedantic blogger or academic, questioning the honourable attempts of the government and the social enterprise lobby to spread the good news about the inexorable growth of social enterprise in the UK. At second glance, it is in fact a quote from Lucy Findlay, Managing Director of the Social Enterprise Mark Company.

The estimate that there are 68,000 social enterprises in the UK comes from the Annual Small Business Survey (ASBS), conducted by the Department of Business, Innovation and Skills (BIS).

This is the criteria by which BIS decide whether an organisation is a social enterprise:

• no more than 75% of turnover is generated from grants and donations

• no more than 50% of any surplus is paid to shareholders (or never generate a profit

• the business owner thinks of the business as a social enterprise, and

• the business owner thinks the business is a very good fit to the definition “A business with primarily social/environmental objectives, whose surpluses are principally reinvested for that purpose in the business or community rather than mainly being paid to shareholders and owners”?

A previous ASBS found that there were 62,000 social enterprises in the UK and this figure was used prominently what was then the Social Enterprise Coalition now Social Enterprise UK (SEUK) and the New Labour government for several years.

When Lucy Findlay says that ‘the social enterprise sector’ doesn’t question the accuracy and meaning of this figure she’s either short of information or using a narrow definition of the social enterprise sector that excludes me, some of the UK’s leading social enterprise academics, and leading social enterprise support charity, Unltd.

The problem isn’t with the ASBS – which provides credible statistics based on clearly explained criteria – but with the fact those statistics have been prominently promoted by social enterprise support organisations that define social enterprise by very different criteria.

So, the criteria for Social Enterprise Mark holders are:

A. Have social and/or environmental objectives

B. Be an independent business

C. Earn 50% or more of its income from trading

D. A principle proportion (50%+) of any profit made by the business is dedicated to social/environmental pruposes

E. On dissolution of the business, all residual assets are distributed for social/environmental purposes

F. Can demonstrate that social/environmental objects are being achieved

So far, 462 organisations have been awarded the Social Enterprise Mark.

Regular readers may be aware that I’m not really a big fan of the Mark but despite my own opposition to the venture, I very much admire Lucy Findlay for her dedication and committment to a project that she believes to be socially useful. I also partly sympathise with her predicament on this point.

While Social Enterprise UK’s current team are not responsible – and those who werre responsible were clearly acting with the best of intentions – it is deeply regretable in terms of the credibility of the sector that the organisation that was then the Social Enterprise Coalition, as a co-owner of the Social Enterprise Mark company, found itself in the position of simultaneously promoting two significantly different definitions of social enterprise – one of which was purportedly the method for social enterprises to ‘prove they are genuine against a set of qualification criteria’.

It’s equally regretable for the Social Enterprise Mark Company, who have found themselves theoretically trying to sell their product to a clearly-defined target market of over 60,000 organisations when in reality the vast majority of those potential customers would be turned away if they attempted to buy the product. Of course, the chances of the Mark project receiving £964,000 worth of grant-funding from the combined pockets of Big Lottery and the government may not have been enhanced by a realistic assesment of the scale of social enterprise, as defined by Mark supporters, at that time.

At this point, we can be quite clear that there are at least 462 social enterprises in the UK and that there may be hundreds of thousands more than that, depending on your chosen framework for definition. In the 2009 – 2011 period, I found it difficult to understand how so many otherwise sensible people in the social enterprise lobby could justify the apparent ‘have your cake and it eat it position’ that there was need for significant government spending on supporting social enterprises but less than 462 social enterprises – less than one per parliamentary constituency – worthy of support. Even being charitable, this position apparently involved believing that over 60,000 organisations were waiting to apply for the Social Enterprise Mark and would do so once they got around to it.

No there is no money for social enterprise support – and the current government has no desire to promote ‘the social enterprise’ as a model – so the ASBS figure, though its meaning is entirely unchanged, is now virtually irrelevant. On the plus side, it means that what’s left of the social enterprise lobby is free to get on with promoting the social enterprise as a diverse social movement in all its glorious, hopeful messiness.

So writes journalist Peter Oborne, not in a small circulation left-wing magazine but in a passionate outburst in today’s Daily Telegraph. This is not a sign that Mr Oborne or his newspaper have moved away from their conservative position on the political spectrum support but one of a number examples of the fact that some of those now most worried about the state of our economic system are those who are theoretically its strongest supporters.

Thursday saw Prime Minister, David Cameron, address the issue championing: “a vision of social responsibility, which recognises that people are not just atomised individuals, and that companies have obligations too” before adding: “I believe that out of this current adversity we can build a better economy, one that is truly fair and worthwhile” and claiming that the government would reduce barriers to setting up co-operatives.

A good time, then, for the social enterprise movement to have its say and Social Enterprise UK (SEUK) chief executive, Peter Holbrook, stepped up to the keyboard with a blog post calling for the government to actively support the development of social enterprises: “We need to shift quickly, through tax breaks and through education and reward new radical forms of fair, responsible and wealth redistributing capitalism, we must re- invigorate  the connection and moral responsibility our business leaders have  and insist on a better understanding of, and commitment to our society“

and concluding with a stark challenge to political leaders: “If the government and opposition are really serious about reforming market based capitalism then tipping the playing field in our collective favour is the only long term solution to our social and economic woes  and offers the only hope to tackling the ever greater divisions and an ever growing gulf and detachment between rich and poor.“

On Guardian Social Enterprise Network, The Social Investment Business‘s Jonathan Jenkins claims: “This is an important moment for social investment. I’m not naïve enough for one minute to believe this is Big Society II: The Coalition Strikes Back, but the very fact that the politicians are vying for profile on this topic means that they know this is becoming of increasing interest and concern to the Great British Public“

before adding: “I have written before in The Guardian that I have a dream that everyone can become a social investor, whether their budget is £5 or a £5m bonus. This dream was anchored in my belief in the efficiency of markets, and the increasing demand from socially driven retail investors, will make it happen. It doesn’t seem such an absurd dream to chase, after all.”

There seems to be little to disagree with in any of these contributions but while Oborne asks pertinent questions about what we want from our economic system, none of the others really provide an answer. I’m a big fan and customer of co-operatives but I reckon it would be stretching it a bit to suggest that our current economic predicament is primarily down to the fact that we didn’t have enough them in the years leading up to 2008.

I entirely support tipping the playing field in favour of social enterprise but if the government formally decreed that 100% of the nation’s economic activity has to take place at Underhill, the sloping home of Barnet FC, it’s still highly unlikely to bring about a situation where social enterprises are the biggest players in the UK economy.

And social investment, so far at least, has primarily been a vehicle for promoting and supporting socially enterprising approaches to public service delivery, as opposed to increasing the size of the social portion of the mainstream economy.

This is not a counsel of despair but a recognition that if we’re going to move towards a more socially responsible economy in the UK then the key players are not social enterprises but the government and mainstream businesses. Ordinary customers, workers and citizens have limited power to influence the behaviour of the larger mainstream businesses – those who have little money and no job have virtually none – but are at the mercy of their actions.

Unfortunately, based on current evidence, it’s difficult to disagree with Peter Oborne’s conclusion:”it is right that men and women who have made a fortune through ingenuity and hard work – such as writer JK Rowling and inventor Sir James Dyson, for example – should be allowed to retain their wealth. The question is how to create a set of rules which achieves that aim while penalising the greedy and rapacious. Neither leader (David Cameron or Ed Miliband) has quite put their finger on the answer.“

A danger for the social enterprise movement in the UK seems to be that we end up with too many social enterprise structures and not enough viable social enterprises. The latest suggestion for a new type of company is outlined on the Social Enterprise website by Luke Fletcher of solicitors Bates,Wells and Braithwaite.

“If we want social enterprise to go mainstream, we need to get the message out that businesses are able to trade for a social purpose – and that an asset lock and express limits on dividends are not absolute requirements. To do this, company law should be developed to create a new legal identity for mainstream businesses which trade for a social purpose.“

There’s lots of possible objections to this view.

One is the position that, for the reasons explained in the article, the asset lock and limits on dividends are a barrier to investment – of both cash and sweat equity – in CIC’s Limited-by-Shares but that, rather than create a new form, it would make more sense to adapt the exist CIC structure. While there’s a clear logic to a lock on physical assets that might be given – or sold at a preferential rate – to a CIC based on the fact that it’s trading in the interests of a community, it’s less logical to prevent entrepreneurs or investors from profiting from the increased value of their shares based on the increased value of the company. It’s actively discriminates against entrepreneurs and early-stage investors.

A second objection, from the other end of the social enterprise spectrum is that we don’t ‘want social enterprise to go mainstream’ unless it’s on our own terms. Companies that exist (at least in part) to make a profit for shareholders are not part of the social enterprise family and don’t need to be encouraged by government or the social enterprise movement. This line of thinking can just about tolerate CIC’s Limited-by-Shares with a strong asset lock in place but regards further ‘concessions’ to the practices of mainstream business as a dilution of the social enterprise brand.

A third objection, which is broadly my own position, is that a new ‘social business’ form is a solution in search of a problem. Luke Fletcher explains that: “A curious quirk in the Companies Act 2006 provides a glimpse of how a Social Business form could be created in law… there is an exception to the general rule that a company exists for the benefit of its members or shareholders where the purposes of a company ‘consist of or include purposes other than the benefit of its members’. In the case of a company which has a social purpose in its Articles, the directors are therefore obliged under the 2006 Act to promote the success of the company by advancing its social purpose.“

He adds that: “Unhelpfully, the 2006 Act does not give any clue about how the social purpose of a company limited by shares is to be reconciled to its ability to return profits to shareholders.“

Fletcher believes that this reconciliation can and should be achieved by the creation of a new legal structure. A more pragmatic option is that shareholders in social businesses can, should and currently do reconcile competing shareholder and commercial interests themselves based on their own judgment. I’m happy to be corrected on this but as far as I know there hasn’t been an instance where the directors of Cafédirect, or a similar ‘for profit’ social businesses have been sued by shareholders for neglecting their interests in favour of pursuing the company’s social purpose.

Fletcher claims: “The new legal status would give mainstream businesses which operate for a social purpose a perfect opportunity to self-identify as a Social Business. It would also enable commissioners, customers and social investors to identify those businesses which are expressly run for social benefit and from which financial and social returns are available.“

I’m slightly baffled as to how this could or should be the function of an organisation’s legal status. A company’s legal status is a good vehicle for setting out what it wants to do but, unless the annual registration fee is going to be very expensive, it’s a very bad vehicle for finding out whether it’s any good at achieving those aims. Companies engaging with (and needed to enthuse and reassure) commissioners need proper kitemarks, awarded by people qualified to judge the impact of their work and/or their competence. Customers and investors need to be convinced of the social value of a business by the people running it – though specific certificiations such as the Fairtrade Mark clearly also have a role in explaining the social impact of products to customers.

There’s lots of evidence that it’s difficult – but certainly not impossible – to generate profit for shareholders while delivering demonstrable social impact. There’s no clear evidence that running businesses for both shareholder profit and demonstrable positive social impact is difficult because we lack the legal structures to do it, or that those who have done it successfully need a new legal form to enable them to communicate what they’ve done and why. If the government is keen – as I am – to see more successful social businesses it should steer clear of new structures (while possibly adapting existing ones) and focus on providing practical support.

Having recently co-authored a report on the government’s big policy idea, I well understand the feeling of working on a project that started as an in investigation into how The Big Society might work, and ended up focusing heavily on why it hasn’t worked – at least so far. The RSA seem to have found themselves in that position with their new year publication of Beyond the Big Society – Psychological Foundations of Active Citizenship, a report that forms part of their Social Brain programme. The basic premise of the report is that the Big Society is currently failing to gain traction because it is widely viewed as set of politicial policies that people either support or don’t support rather than a programme of cultural transformation that will equip citizens to build a society that’s more socially cohesive and sustainable.

For the report’s authors, the big issue for The Big Society is ‘mental complexity’, which is described as ‘our varied capacity to understand competing motivations and values in ourselves and others, to ‘get things in perspective’, and to act appropriately in uncertain or ambiguous situations‘. On this basis, the key question isn’t whether most people are for The Big Society, against it or unable to underatand what it is – it’s whether we are ‘Big Citizens’, psycholigically equipped to deliver it.

This challenge is not primarily related to specific elements of the current government’s Big Society agenda but to the general desire amongst politicians of all parties to get people more involved in delivering public services and promoting positive social change in local communities. This, the report suggests, calls for a major change in thinking: “Many of the existing considerations about participation seek to answer the motivational question: Are we up for it? But thus far, few have asked a related but very different developmental question: Are we up to it? Perhaps if we focus more on the latter question the former will begin to take care of itself.“

For the report’s authors, the process of cultural change needed to bring about The Big Society – described as a ‘curriculum’ – requires the development of three three key ‘competencies’ – definition – needed to build The Big Society are Autonomy, Responsibility and Solidarity.

This is Autonomy: “Autonomy is a much richer concept than merely doing things oneself, but at its heart is the idea of self-direction and freedom from external coercion. The Big Society is premised on the State, both local and national, not getting in the way of people choosing their ends, or the means to achieve those ends. Autonomy has various definitions, but here it is used to reflect the
psychological implications of subsidiarity, in the sense of taking personal initiative without state interference.“

This is Responsibilty: “… the activities and behaviours embedded within the curriculum of the Big Society require a more nuanced account of responsibility, in which ‘people’ take ownership of tasks that they might previously have assumed to be the responsibility of government, and often do so together with strangers…“

And this is Solidarity: “Solidarity is a hugely complex notion, and there is a large literature on the subject, but it is broadly about integration, about the extent to which we feel we are on ‘common ground’ with and have a sense of mutual commitment with the people with whom we share space, time and resources.”

To some extent the report offers a theoretical angle on the practical work being carried out as part of the government’s existing Community Organisers programme – in that in focuses on how to enable people to deliver the social change they want to deliver in their local area – but it also extends beyond that to begin to focus on the broader challenges of how societies will work as we move away from universal welfare provision.

Clearly more work is needed on ideas for building ‘mental complexity’ in practice beyond the report’s suggestions: “One implication is that community centres should be turned into transformational learning hubs which run training exercises for community leaders. A tool-box of training exercises designed to build mental complexity should be offered to community centres, particularly those already offering adult learning courses.” and “We should also encourage businesses, community organisations and other bodies to form transformational learning consortiums. For instance, businesses should work with local community groups and voluntary organisations to improve the productivity and overall effectiveness of their workforce.“

Ultimately, though, while the challenge this report addresses may not continue to be known as The Big Society, meeting growing needs with diminished state resources is the toughest and most important task facing the current generation of politicians, social entrepreneurs and citizens in general. The is useful contribution to part of the debate.

According to the article, while lower division clubs, Stenhousemuir and Clyde, are already operating as CICs – Stenhousemuir’s website provides the kind of clear explanation for using the CIC structure than many social enterprises might do well to replicate – Premier League St Mirren are currently looking to become the first full-time professional club in Scotland to go down the CIC route. Unlike Stenhousemuir and Clyde, where the clubs themselves are CICs, in St Mirren’s case supporters have set-up a CIC co-operative with intention of raising money to buy a controlling stake in the club.

In the When Saturday Comes article, journalist Peter Geoghegan explains that: “When it comes to football, one of the most attractive features of a CIC is that it ‘locks-in’ all the club’s assets, ensuring that assets built up over time cannot be squandered for profit by the current generation. Instead assets must be used for the stated community purpose. Even if a CIC is wound up, its assets must be transferred to another, similarly asset-locked body. All this makes it mightily unattractive for any would-be robber baron chairman.“

One reason why this story is worth highlighting is that it’s an example of situation where organisational structure really does matter. Most football clubs in the UK are set up as conventional trading business but both the aims of the business and its major stakeholders are very different to a conventional trading business. Some people do buy football clubs with intention of selling them on for a profit but the aim of a football club – even for most owners – is to win trophies while achieving financial sustainability rather than to make a profit while getting relegated.

In terms of stakeholders, the people who care most about a football club are the club’s supporters but they are, technically at least, in the simple position of paying customers whose rights don’t extent beyond the ability to either turn up to matches or not. Unlike the customers of restaurant or supermarket, however, most football supporters are stuck with their  team for life, and can’t just choose to go and support a different club if whoever happens to be owning the club at the time doesn’t provide the service they want.

The combination of a need for financial sustainability and wider accountability to both supporters and a local geographical community, makes CIC an ideal structure for football clubs. While the top five or six English Premier Clubs – which are major international brands – have the potential to make serious money for owners, beyond that top tier, there is no honourable way to make large amounts of money from owning a football club. While some do try to do so dishonourably, the general set-up in English football is for relatively rich people to lose lots of money owning football clubs in exchange for some combination of pleasure and prestige. This goes wrong when a particular rich person feels they’ve lost as much as they can afford to and tries to cut their losses and sell up but no one wants to take on business that’s laden with debt and has little or no chance of ever making a profit. A CIC wouldn’t be able to put itself in that situation – a rich person could still pour in unstainable levels of cash but they’d have to accept at the start that they wouldn’t get most of it back.

Unfortunately, the key barrier to CIC’s in English football is that, for most clubs, unless all the other clubs also chose to do so, living within their means would mean accepting that they’d be unlikely to ever reach the Premier League or – in the case of the smaller Premier League clubs – to qualify for the Champions League. As a Coventry City supporter, I know that our current ownership by a little-known venture capital firm is a disaster for all parties – they can’t be accused of asset-stripping because previous owners had already sold most of the assets before they took over – but I’m not sure that’s quite enough for me to give up on the dream that the club might one day be bought by a UAE-based billionaire who will chuck his oil wealth into the club enabling us to sign Lionel Messi.

Assuming, though, that clubs are in a position where it’s possible for them to become a CIC in the first place – either because supporters in the community can raise the funds to buy them from their owners or owners are prepared to give them to the supporters – CIC is potentially a structure that could enable football clubs to operate in the real world financially, while being responsive and accountable to their supporters and their wider local community.

As the When Saturday Comes articles notes: “Retiring football chairmen are wont to declare their desire to safeguard the long-term future of the club – Wigan’s Dave Whelan springs to mind. A CIC is not foolproof – a board could still overextend and get into serious debt – but it does introduce safeguards to protect the club for those who value it most.“

*This article is not available online. It appears on page 11 of the February 2012 issue of When Saturday Comes.

The first contribution (at least the first one I’ve read) on the matter this year comes on the Guardian Social Enterprise site where Declan Jones contributes a piece on ‘The Trouble With Not Defining Social Enterprise’.

Jones definitely succeeds in succinctly explaining a widely perceived problem: “Avoiding definition has also allowed social enterprise to be co-opted by others. We now witness public sector municipalists and private sector opportunists masquerading as social entrepreneurs. The former are zealous mini-state status quo defenders. The latter want to make money on their investments. Neither group are social entrepreneurs but both are nifty and inventive when it comes to using charitable, trust and social enterprise business structures and models when it suits them.“

I share Jones’s view that if a council hives off its leisure services into a not-for-profit company and fills the board of that company with either local councillors or council employees, the entity that’s been created is not what I’d consider to be a social enterprise – for me, it’s a vehicle for wielding power without taking democratic responsibility.

I don’t share Jones’s view that the involvement of people who want to make money from their investments, in itself, prevents companies from being social enterprises but I would agree that it’s not helpful if the term social enterprise is used to refer to conventional private companies operating in a social sector, such as A4E.

What Jones doesn’t manage to do in his article, at least in a way that I can make out, is explain how these problems would be solved by a new definition of social enterprise.

The Social Enterprise Mark, an attempt to create an opt-in definition of ‘a social enterprise’ permitting a wide range of organisational structures, has not been successful. After two years of trading, the company is still some way from signing up 1% of organisations who self-define as social enterprises.

If a once and for all definition was worthwhile, one way would be to create a company structure – or series of structures – unambiguously called ‘social enterprise’. The then new Labour government could’ve done that when it launched Community Interest Companies but chose not to.

Another similar but slightly different option would be to create a form of registration along the lines of registered charity – registered social enterprise – whereby organisations could be registered as social enterprises on the basis of fulfilling particular structural and reporting criteria, and be regulated by a ‘social enterprise commission’, the equivalent of the Charity Commission.

Neither of these options is likely to be pursued in the near future but even if they were – and therefore all organisations were definitely either ‘a social enterprise’ or something else –  this wouldn’t stop council’s managing services through ‘not-for-profit companies’ rather than ‘social enterprises’. And while The Guardian and politicians have called A4E a social enterprise, it describes itself as ‘a social purpose company’ –  a definition of ‘a social enterprise’ wouldn’t prevent that (even if it were desirable to do so).

Aside from perceived badness that clear definition wouldn’t stop, I’m not clear on the benefits it would bring about. At the beginning of his article, before arguing for definition of social enterprise, Jones claims that: “Some social entrepreneurs eschew defining social enterprise because it is too awkward and troublesome. They prefer ambiguity and complexity because inclusion is seen as more important than differentiation.“

That may be true for some people but it’s not my position. I don’t have a problem with definition that’s awkward and troublesome if it’s useful. It’s extremely important, for example, that running a hospital is clearly defined and regulated activity.

In terms of ambiguity and complexity in the social enterprise movement, I neither support nor oppose it but I recognise it as an inescapable reality. The previous government actively chose to chuck together loads of different businesslike approaches to social change under the banner of social enterprise. That may or may not have been a good idea but the result is that there is a wide spectrum of people in the UK who regard themselves as running, working for or buying stuff from social enterprises.

The definition debate will run and run. In my view, charters, kitemarks and accreditation can and should have a role in the social enterprise movement and individual social enterprises promoting themselves and their goods and services to customers, but a once and for all definition of ‘a social enterprise’ shouldn’t and probably won’t.

Some in the movement wish that we could stop talking about this issue. That won’t happen and I think it’s useful to have ongoing debate about what we’re doing and why. What we do need to do is ditch the believe that there’s some form of definition out there that would – in itself – transform our abilities to promote better ways of doing business.

One way or another, New Labour put a reasonable chunk of money into supporting and promoting social enterprise. That money may not always have been spent on the most useful things but there’s no doubt that it played a big role in building the profile of the sector over the last ten years. Now most of that money’s gone and what’s left will soon be gone too.

The effects of the wind-up of Regional Development Agencies began to become clear in the South West, where Rise became the first regional social enterprise support agency to take the decision to close.

The difficulties for social enterprise in the new public sector marketplace were shown in Surrey, where NHS commissioners dished out a £500 million contract to a private provider backed by Virgin rather than Big Society award-winning social enterprise, Central Surrey Health.

A possible glimmer of hope was the slow procession through parliament of Chris White MP’s Public Services (Social Value) Bill - backed by the government once the words ‘Social Enterprise’ had been taken out of the title. When it becomes law, the Act will encourage commissioners to consider wider social value in the decision-making.

The government’s failure to back social enterprise as an organisational structure in law was an added frustration at the end of a difficult second year in the life of the Social Enterprise Mark – which faced challenges from academia, the co-operative movement and social businesspeople, while ending its relationship with Social Enterprise UK, the umbrella organisation that had started the year as the Social Enterprise Coalition.

In a good year for social enterprise research, Social Enterprise UK’s 2011 State of Social Enterprise Survey, Fightback Britain, uncovered a social enterprise sector more likely to be based in deprived areas than conventional small businesses, and more likely to be start-ups. That’s a combination of characteristics that will increase the pressure for social enterprises in 2012 as the full effects of public spending cuts hit home in areas where residents are heavily dependent on the state.

Many in the sector, including me, have spent substantial parts of the last year chanting the mantra ‘challenges and opportunities’. That is the thread running through Better Mental Health in a Bigger Society?, the thinkpiece that my social enterprise, Social Spider CIC, produced in 2011 and which was published by Mental Health Providers Forum in December.

The problem is that, for many social enterprises, the challenge of having no money risks seriously inhibiting our ability to take the opportunity to fill some of the gaps in social provision left by the retreating public sector which will not be filled by the private sector.

So 2012 is a year of possibilities but one we enter with a slightly uncomfortable mix of excitement and trepidation. The big step the government did take during 2011 was the setting up of the organisation now known as Big Society Capital. 2012 will see the wholesale finance institution begin the process of injected £600million into the social finance sector. Given the social finance sector’s persistent difficulties in living up to its own relentless hype, it’s likely to make a significant impact.

Big Society Capital – working through new and existing investment organisations – will be provided investment that will enable social enterprises to get started and (primarily) to scale up and grow. That investment is welcome but it’s not going to solve the biggest problem faced by many social enterprises this year – getting enough people to buy the things we’re selling and/or coming up with different things to sell. It’s not going to be easy. Good luck!

The least painful stage for ‘build it and they will come’ to fail at is stage 1. While it seems frustrating, those web-based social entrepreneurs who generally lost least money (theirs or other people’s) in the early years of this century were the ones who didn’t actually manage to find the elusive techie who could complete the website to their detailed specifications based on their tiny budget. Slightly more cash was frittered away by those who managed to build something but quickly gave up on the tedious slog of trying to get people to come to it. The real nightmare, though, awaited those who built a website, successfully got some people to turn up and then kept spending for several years at the invisible third stage ‘and then it will be easy to develop some revenue streams.

While ‘build it and they will come’ may be most clearly identifiable in the case of online businesses, it’s clearly not a solely web-based phenomenon.  Online, ‘build it’ is latest incarnation of the eternal problem that a need that exists in the abstract – ‘lots of people like ethical products, wouldn’t it be great to have a portal where people could buy all the ethical products they want to buy in one place’ – doesn’t actually exist in the world of the customer – ‘I want to buy ethical stuff, cheaply and quickly at a supermarket or from a website where I can also buy other things that I want’.

Beyond online services ‘Build it’ is a strategy that’s particularly prevelant in the infrastructure world. Social enterprise certification product, The Social Enterprise Mark, for example, was primarily set-up to tackle the abstract problem that the UK had 64,000 organisations calling themselves social enterprises but no clearly agreed definition of what a social enterprise was. So the ‘build it’ was a definition of social enterprise (controversial or otherwise).

Other difficultes aside, the Mark has faced the challenge that solving the abstract problem it was set up to solve – while arguably useful to society as a whole – has no clear commercial value to anyone. The semi-detached commercial question that Mark answers is ‘does demonstrably conforming to this definition of social enterprise give my organisation sufficient commercial adavantage to justify paying this annual fee?’ is a ‘yes/no’ question that needs either robust evidence and/or a very low fee to provoke a ‘yes’ answer.

As watching Dragons’ Den often show us, solving problems that paying customers don’t want solving for cash is not a problem restricted to social enterprise. Where social enterprise often leads the way is in terms of the disconnect between a genuine abstract need and a commercially viable response. Enter, the Social Stock Exchange.

As a business in itself, the Social Stock Exchange, which has received an £850,000 investment from the Big Society Investment Fund, faces some of the same difficulties as the Social Enterprise Mark, albeit from a slightly different angle. The government clearly believes that the idea has social value in terms of promoting a sustainably business-like vision of social enterprise but, paradoxically, that doesn’t mean there’s a clear business case for the Social Stock Exchange itself.

Lots of leading figures in social enterprise, including Social Enterprise UK Chief Exec. Peter Holbrook, have shown enthusiam for the idea. Talking in May 2011 about the possible launch of the exchange, Holbrook told this blog that:  “I think it’s fundamental in connecting individuals with a true social purpose. I’ve got my pension in an ethical fund which is environmentally light green if it’s green at all – it’s probably turquoise. I would love to be able to say to my pension fund administrator: ‘Actually, I don’t want your turquoise or your light green fund – which just pulls out the very, very worst offending companies: tobacco, arms and similar activities. Actually, I want to invest in companies that are genuinely socially beneficial and therefore I want you to invest my pension in the Social Stock Exchange.’”

If Holbrook is right, that’s a potential solution to half the challenge faced by the Social Stock Exchange – find some people to invest in the stock. More problematic, based on the UK social enterprise as it is now, will be finding some stock for those investors to invest in. Equity investment in social enterprise – as pioneered in the UK by Merism Capital – is something that I’m very enthusiastic about but there aren’t yet very many social enterprises in the position to take equity investment at the level that Merism is offering it, let alone hold an Initial Public Offering (IPO).

According to SEUK’s 2011 State of Social Enterprise Survey, only 12% of current UK social enterprises are companies limited by shares, and therefore able to take equity investment in the event that they want it and investors want to provide it. The Social Stock Exchange is clearly not being launched on the basis of large numbers of current social enterprises seeking to hold IPOs and being prevented from doing so because the infrastructure is not in place. But if the companies selling their stock on the Social Stock Exchange aren’t going to be existing social enterprises in their present form then the obvious question is who are they going to be?

Is the expectation that existing social enterprises will alter their structures (and possibly their whole approach to business) to float on the Social Stock Exchange? Will new social enterprises spring up to fill the gap? Will existing business not currently defining themselves as social enterprises attempt to assume the social mantle? The aim seems to to be to set up the infrastructure and then work with new and existing social enterprises to make use of it. It’s not necessarily a bad idea but, based on the starting point, if it’s successful it’s difficult to predict what that success might look like.

Please email your answers to the email address here. The first correct entry drawn out of my winter hat (or the entry with the most correct answers, or the person who enters) will win an annual subscription to Social Spider‘s popular mental health magazine, One in Four. Closing date: December 31st 2011.

Questions:

1. Assura Healthcare, the private healthcare provider that beat social enterprise, Central Surrey Health, to a £500million contract to provide NHS community services in south west and north west Surrey this year is owned by which conglomerate?

2. Which proponent of the Big Society quit his role this year because he couldn’t afford to volunteer full time?

3. Which leading figure in social enterprise support was described at this year’s Guardian Social Enterprise conference as having gone ‘from enfant terrible to éminence grise’ during 2011?

4. Which organisation was not described as a social enterprise on The Guardian website during 2011?: (a) A4E (b) Nestle (c) BAE Systems (d) Circle Healthcare

5. Toby Young, son of School for Social Entrepreneurs founder Lord Michael Young, launched his own organisation this year was it?: (a) a counselling service (b) a free school (c) a website promoting volunteering  (d) a political party

6. The pop-up social enterprise thinktank, Popse, popped up in May 2011 in a shop vacated by which popular sandwich company?

7. The year in quotes – Who said this?:

(a) “There is a social entrepreneur cult of the new, the metropolitan, the digital, the middle class, the white.“

(b) “Dai Powell(of HCT)’s buses go past my house every 15 minutes – day in, day out – in Wanstead. So I do kind of feel I live the dream.” 

(c) “Others will go a bit deeper, and participate because they realise it is in their self-interest to be a bit healthier, learn new skills, meet new people, get to know neighbours’ names, benefiting thereby alongside wider community action from reduced crime, a better quality of life, whether nudged by peers or a third party organisation, or because they are in a reciprocal arrangement such as time banking or a cooperative, or simply by having been trained in active citizenship online and offline.“

(d)  ”The prize is to make an effective connection between mainstream capital and the social sector which does not exist today. We are under no illusions about the scale of the challenge or the length of time it will take.“

(e) “I believe that the English Govt. is very relaxed about SE becoming a generic term – for organisations with a vaguely social purpose – including the soft end of private enterprise.  A mish mash of authentic SEs – bogus SEs – and straight commerce.“

8. The year in numbers – Match the figures to the explanations: eg. (i) = (c)

(i) Members of the CIC Association

(ii) Total equity finance provided provide by social investment sector in £millions

(iii) % of UK social enterprises holding the Social Enterprise Mark, based on current best available figures

(iv) Funds available to new social investment wholesaler, Big Society Capital, in £millions

(v) % of social enterprises that are start-ups, according to Social Enterprise UK’s Fightback Britain research

(a) 0.7%

(b) 14%

(c) 8.25

(d) 1650

(e) 600

As the National Council for Voluntary Organisations (NCVO) Sustainable Funding Project explains: “Increasingly charities are being told to move away from grant dependency, become more business like, earn income, develop an asset base and consider loan finance. And opportunities for delivering public services are increasing. Enabling organisations to see the bigger picture and develop the skills and resources to take control of their future is critical.“

One problem this creates, as already discussed, is that organisations attempt to diversify their income by carrying out activities that they don’t know how to carry out and which end up losing money rather than generating a surplus.

Another problem is that the emphasis on new income streams doesn’t encourage organisations to look at the other side of their balance sheet. If you can get funding for doing new stuff that aims to increase sustainability, you’re less likely to focus on not doing old stuff that decreases sustainability.

At a very basic level, it’s often possible to make small but meaningful cuts in your costs without making any significant changes to what you do. The vast majority of social sector organisations that produce printed materials spend far too much on printing and, if they contract it out, on graphic design. These industries are viciously competitive and, in the case of printing, half an hour’s work on the internet will enable you to find out whether you’re currently getting a good deal.

Obviously, the value of doing this depends on the situation. If you’re printing a few hundred business cards, it’s completely justifiable to pay over the odds (£50 rather than £30) to support a local printing business. If you’re printing thousands copies of a magazine (£5000 rather than £3000), it probably isn’t.

Beyond just not paying too much for stuff, it’s also worth looking at spending on things that are useful but not absolutely essential. For example, does everyone in your organisation need to have their own phone line? If you’re the Samaritans – or any service that people need to be able to contact in an emergency – the answer is probably ‘yes’. If you’re an organisation doesn’t specifically deliver services via the phone, it’s probably “no”.

The specific examples will be different but it is possible to save enough to pay a part-time salary by doing the equivalent of cutting your print bill and having fewer phone lines. I know because my organisation has done it this year.

Unfortunately, though, for most of us the biggest costs aren’t either direct costs (what businesses call cost of sales) or overheads. Our biggest costs are salaries and – while finding ways to spend less money on printing can be good fun (if you don’t work for the printing company that’s losing the business) – making people redundant is usually a horrible experience for everyone involved.

The combination of the horror of redundancy and the entirely commendable desire to continue to provide work for valued colleagues does not always produce good decisions. While there are sensible things than can be done – reduced hours etc. – to keep a staff team together over short period of time, it’s vitally important that this doesn’t slip maintaining roles than aren’t being paid for by either grants or trading income on the basis that ‘something will turn up eventually’.

As someone running a charity or social enterprise, your job is to deliver positive social change for the people who depend on your activities, goods and services – not to find ways to keep people in work. And even if the specific aim of your organisation is to create jobs, that doesn’t include jobs that nobody is paying for. Failing to understand that might be comforting in the short term but it just makes things worse in the long term.

Assuming you’ve been employing sensible, hard-working people, it’s not going to be possible to make people redundant without reducing the ability of your organisation to carry out tasks but – faced with limited resources – it’s important to choose which tasks you continue to carry out based on the extent to which they’re actually useful.

For example, one consequence of New Labour’s capacity-building binge era was that many relatively small organisations have been encouraged to develop a wide range of complex systems to produce detailed financial information to enable them to compete for public sector tenders. In many cases, even if these organisations succeed in winning small tenders, the surpluses generated from doing so will be less than the cost in person time of generating the information.

It’s important that organisations do fulfil legal requirements and have a good understanding of their financial position but beyond that you running the risk of spending £10,000 worth of person time discovering the details of your £10,000 budget deficit. If the public sector is not giving you money to waste money doing this, it’s probably a good time to stop doing it.

Once again, specific examples will vary but most organisations will have some tasks that they’ve been carrying out – initially for good reasons – that, in a situation where there’s less person time available over all could just not be carried out.

None of these points are arguments against diversifying income but, getting people to give you more money to do stuff if not easy and is a process that is only partially controlled by you. Relatively speaking, spending less money is quite easy.