Making the sums add up

An experienced businesswoman who identified significant service demand among local women in County Durham and managed to attract some local council and other funding, she nonetheless couldn’t make the sums add up. She found that the social enterprise rhetoric did not mean her, that Big Society Capital was aimed at the big boys and that little other dedicated funding was available or easily accessible either.

Cathy Pharoah of Cass Business School writing for Third Sector about the experiences of Linda Kirk, who set up the Just For Women Centre in County Durham. Few in the social enterprise sector are more critical of over-optimistic social enterprise rhetoric than me but I don’t think it make sense to blame all that gushing and bluster for the difficulties facing individual businesses.

Fortunately, Pharoah goes beyond this predictable cry of anguish to make some important points about the business challenges facing social ventures. She (rightly) rejects the ideas that social enterprise success is primarily driven by the creative, problem-solving genius of entrepreneurial individuals and points out two of the key challenges facing new local social enterprises: “One is poor access to intelligence and analysis of local market opportunities, and how they can best be used to meet need, or to fund ways of meeting it. The other is the ongoing lack of appropriate easy access to small-scale, higher-risk social finance. Small ventures need help to respond quickly and flexibly when a market opening appears.

From a social enterprise perspective, the first point is a polite way of saying ‘is selling product or service (X) really a viable way of funding social outcome (Y)?’. In the case of the Just For Women Centre, based on the information I have available that question becomes ‘is selling recycled rugs, cushions and jewellery really the most viable way to fund a centre providing a range of support for women in the local area?’ I don’t know much about rugs, cushions and jewellery in a general sense – and I know even less about the quality of the products made by this particular business – but it’s not a proposition that immediately inspires confidence.

At least, it doesn’t inspire confidence in the sense of it becoming a sustainable, unsubsidised business. In general, one of the biggest mistakes, made most regularly, in social enterprise is to attempt to carry loss-making social activities on the back of a small business doing something that isn’t directly related to those social activities. A mistake that’s made almost as often is to expect core activities with a clear social purpose – such as bringing some people together to make things – to become a viable business activity that will pay for itself, let alone generate profit to support other work. Of course, neither of these are impossible to achieve but they’re much more difficult than running a successeful small business (which is quite difficult in itself).

I don’t know if either of these models are in place in this case but, despite the local council paying its rent, the Just For Women Centre needs £40,000 to keep going. Linda Kirk believes that misunderstanding of the term ‘social enterprise’ is the key to her financial problems telling The Guardian: “I believe in the big society, but a lot of people think of a social enterprise as a business and think, ‘Why should we fund a business?’ It is a not-for-profit organisation – the difficulty is getting that across to people“.

As so often, it depends a bit on what you mean by social enterprise. I think that rent (which I’m estimating at around £10,000 per year) + £40,000 sounds like a pretty reasonable subsidy for a local organisation that, according to The Guardian story, has helped over 250 people in 15 months (since January 2011). If we round that down to 200 women using the centre in a year, that would be a subsidy of £250 per person per year. It costs the NHS around £60 an hour to provide psychotherapy.

I don’t think it’s useful to debate whether projects like Just For Women Centre – and the tens of thousands of other social ventures who deliver high social impact at a relatively low cost – are social enterprises. The people involved clearly are socially enterprising. What does need more thought is whether these ventures are likely to thrive in the current economic climate, and in the brave new world of social investment.

The social investment model promoted by Big Society Capital is about social enterprises generating a trading profit to pay off loans. That’s not much use to socially enterprising organisations who can’t sell their core social impacts as products but can, across their organisations as a whole, make relatively small amounts of public money pay for far greater positive social change than direct public sector delivery (or delivery by some larger charities).

There is, located somewhere in the future, the bountiful promise of approaches to commissioning that would enable projects like Just For Women Centre to get properly paid by commissioners for helping women rather than making rugs. What’s not currently clear is how (or whether) we’re going to support these kinds of social ventures until the promise comes true, if it ever does.

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8 Comments

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8 responses to “Making the sums add up

  1. Sion Whellens

    So by making a little funding go a long way, Social Enterprise approximates ever more closely to charity, although unfettered by charity law?

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    • Beanbags admin

      I think that is a danger (obviously many in the charity world see the opposite as danger) but that’s not necessarily what I’m advocating. I think we need to find commercial models for the social value that organisations create – but that’s not easy to do. How do we create a market in public sector service delivery where smaller, local social enterprises are realistically able to compete?

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  2. David, In her book ‘Social Enterprise Typology’ Kim Alter would categorise this centre as a ‘service subsidization’ approach to social enterprise. It’s the book we used to categorise the various components of a social enterprise strategy paper.

    It’s a little worrying to learn that this endeavour grinds to a halt concluding that access to information and finance are the major obstacles when one considers the following was written 16 years ago about business for social purpose which led to sourcing a microenterprise development project in Russia: .

    “In order for economic development to take place in any given location, the very first thing required, before anything else can possibly happen, is information. This information includes first and foremost where to look for the necessary resources to do anything. If new businesses are needed, knowing they are needed and finding funding for them are two very different things. The first step is to locate possible capital resources in order to move forward, and this step is no more and no less than information. Once resources are located, the next step is what terms and conditions are involved in obtaining those resources — more information. Once this is known, paperwork must be completed, business plans made, market research and due diligence conducted, and all of this compiled and forwarded to the appropriate parties. Again, nothing more than information. In fact, most of the work involved between identifying a need and solving the problem is information acquisition and management: getting and developing information.”

    Clearly , by definition “service subsidization” is not self-sustaining and needs a complementary ‘more than full cost recovery’ enterprise to propel it. This was the point of our mixed component strategy, where broadband technology takes on the role of a ‘profit for purpose’ business which “in terms of social enterprise,can be characterized as “combined: complex model”, combining fundamental models: marketing intermediary, service subsidization, and organizational support.”

    We are the type of social business Big Society Capital would support in theory, but we know it just ain’t gonna happen even 8 years later.

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  3. Excellent blog. We had a very similar conversation about this story at SEUK when it was covered in the Guardian . Stanley, Co Durham is a very deprived area where consumers will buy very low-cost products, including rugs, cushions and jewellery. These products are available in spades on the market on Stanley Front Street and in the local hypermarkets – at prices that could never be matched in a way that would pay rents and running costs for a social venture. But Stanley also has a high rate of citizens who are making exceptionally frequent use of health and social care services and the rates of depression and anxiety are very high. Useful and enterprising social businesses in Stanley could save a huge amount for the taxpayer – not neccessarily for rug and cushion-buyers. This is where the Big Society idea is failing – it hasn’t yet resulted in 3D commissioning. The Social Value Act offers a platform but there is a major battle to be fought.

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    • Celia,
      It’s been a major aspect of our work at P-CED to develop solutions for deprived regions. For example the Russia of the late 1990s in the wake of an economic crisis.

      Social service provision being dependent on state funding required an economic resurrection, to be provided at all.

      For us this wasn’t a matter of creating revenue mechanisms to support the provision of social services. These by and large, didn’t exist. It was a matter of empowering opportunity for those economically disenfranchised. For some reason, it seems this kind of action is something the Guardian is desperate not to hear.

      “The basic ingredients existed that I thought were needed for an economic resurrection. The population of 600 thousand people were generally very well-educated among six universities in the city. Internet was available, but limited to a 1 MB link that was parceled out and distributed among universities, businesses, and citizens. Government was largely reform-oriented towards democracy and market economy. Tomsk was the primary telecommunications node between Moscow and Vladivostok, making it an ideal location for replicating successful project components. Small businesses were beginning to flourish despite severe financial constraints following the financial collapse of August 1998.

      There were also critical food shortages in the region, children living on the streets because they considered orphanages intolerable, women having to resort to prostitution to feed their children, and a near-total lack of new economic opportunities. Economic opportunities for women were routinely negotiated in bed, if at all.

      After returning to the US, I spent most of the August 1999 reviewing notes and writing them up into a proposal with three key ingredients:

      a community development bank to provide financing to would-be entrepreneurs to create their own business, without need for material collateral because almost no one had that collateral aside from mafia, who just took what they wanted;
      emergency food relief
      assistance to children in or out of orphanages. “

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      • Beanbags admin

        Hi Celia,

        I agree there’s definitely a battle to fought. I wonder whether there’s more than we can do from within the world of social enterprise to make things easier for commissioners.

        I suppose the question is ‘saving the taxpayer money that would’ve been spent on health and social care services’ is the outcome we’re offering but what’s the product?

        It can’t just be ‘running a centre that does some stuff that helps people’ because that’s the grant model that government is explicitly moving away from. I’m sure the are some successful models out there but how do we make it easier for new social enterprises, doing the kind of work that Just For Women Centre does, to find one that works for them?

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  4. David, You’ll remember from a few posts back that part of my business proposal for a self-sustaining local hub was to provide employment for those displaced by the closure of a local Remploy factory. The great obstacle has always been visibility and the rather London centric approach to showcasing rather than engagement with all.

    In the support infrastructure we proposed in our 2004 business plan, a participative management interface was suggested to interface at the regional level to share suggestions and ideas. :

    “This interface is in itself a participative management arrangement, creating a nationwide participative management scheme which actively engages and enables communities to improve their localized economic and social conditions.”

    In 2006 joining the SEC I’d attempted to engage others in this way on the web forum. The lack of response led to my creating the Social Enterprise group on Facebook. and other pubic networks.

    Social value can only be judged when those offering services are visible to both commissioners and public and there are clearly vested interests in local government who’d prefer that not to happen.

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  5. Angela Fenwick

    I actually volunteer for the ‘Just for Women Centre’ as mentioned in the article, I have been there since its commencement in 2011, and was actually set up to work with women who have problems in their lives, i.e. health problems, domestic abuse, low self esteem etc, the aim of the centre is to give women the tools to make their life better.

    Through the medium of craft the women are taught new skills, which in turn boosts confidence, enough to try other courses we offer which then in turn gives them knowledge and skills to be able to either get back into work or even turn their lives around to a point that they never imagined they could get to. We do also offer counselling and other therapies where necessary, and offer a safe place for women to come where there is no pressure from outside influences to conform to a set of standards that society puts on them. The key to all of this is that the centre is run by volunteers that have all been in the same or similar positions as the women who attend the centre, which helps enormously in the way the project is delivered. We all just want to help each other,

    The sustainability of the centre comes from the sale of hand made crafts in the Be-Creative shop attached to the centre, made by the women attending the centre from donated materials (not mass produced cheap items you find on the market or on the highstreet) and by holding private workshops for the general public. We are now into our third year and are still going. We may also have to look for bigger premises due to demand.

    It is really hard to get funding for a social enterprise, we have had help from some local government who believe in what we are doing, but just cant seem to get big funders on our side, the fact that we are a ‘not for profit’ enterprise and that we are delivering a service that is needed in our area just doesn’t seem to make a difference.

    The centre has also had beneficial effects on my life too. I am disabled, but have worked all my life, till ten years ago when my life changed after a breakdown, I constantly lived with mood swings and panic attacks for years, and certainly in no position to go back to work. I thought that volunteering would slowly get me back into society, and after volunteering at a local community centre for a few years I happened to come across a course that was taking place at the ‘Just for women centre’, so I thought I would sign up for it. When I got there, Linda Kirk explained to me what her vision was for the Just for women centre, and I immediately offered my services to help women learn to sew, I have been there ever since, and my confidence has soared, I love what I do and now I’m looking into setting my own business up to do craft workshops and sell my own craft in the Be-creative shop. All thanks to the Just for women Centre.

    We are a formidable group of women who just want to make this work.

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