Like many social entrepreneurs I like a good conference, so it was disappointing not to make it to last week’s Social Enterprise World Forum (SEWF2018) in Edinburgh.
Amongst the passionate discussions partially recorded on Twitter was a debate with the title: ‘The myth of sustainability is damaging the social enterprise sector’ with School for Social Entrepreneurs’ CEO Alistair Wilson amongst those drawing attention to the potential damage.
Whether or not it’s damaging in itself, the sustainability of the debate about social enterprise sustainability is unquestionable. Here I am in 2013 tackling the myth that ‘trading income is more sustainable than grants and donations’ with the aid of some llamas.
I haven’t substantially change my opinion on these issues since 2013 but – based on a model I learnt from some of the world’s most successful private sector businesses – I’ve decided to make one new argument and minor updates to the others and sell it to you again:
Sustainability is the means not the end. All organisations run the inherit risk of conflict between their desire to continue to exist and their desire to achieve an outcome.
For private sector businesses, the theory is easy. Is your restaurant losing money? Change your business model – increase prices, cut wages/staff, use cheaper ingredients, call in Gordon Ramsay to swear at you for a few hours.
After that, if you the combination of you and Gordon haven’t managed to stop your restaurant losing money you should close it. There are plenty of good reasons why many people don’t do that but the theory isn’t complicated.
It is more complicated for social enterprises because they’re (hopefully) organisations that exist to do something other than keep going and make money. There’s two different spectrums:
Going bust – surviving – thriving
No social impact/Negative social impact – some positive social impact – as much social impact as possible
Ideally, we’d all like our social enterprises to be a thriving fully commercial operations achieving as much social impact as possible but, particular for those of us who have started businesses in situations of market failure, that doesn’t happen very often.
As a social entrepreneur you have to understand how your desire for sustainability interacts with your desire for social impact.
If you’re setting up a social enterprise to provide secure long-term housing, your social impact depends on finding a business model that enables you to continue to exist for decades rather than for a couple of really good years.
If you’re setting a social enterprise that raises awareness of problems in the fashion industry through film and drama you might be better off finding a model than enables you to be brilliant for 2 years (taking money from funders and supporters who agree with what you’re saying) rather than shit for 20 years (taking money from anyone who might pay you to make a film or put on a play about fashion).
Advocates of social enterprise (and charity) sustainability understandably make the argument that you can’t do any good if don’t exist but that isn’t – in itself – an argument for your continued existence.
Finding the right business model for your social enterprise is also about finding the right lifespan for it. (As long as you don’t leave big unpaid debts) shutting down after doing lots of good in a relatively short space of time might be less of a failure than keeping going while achieving nothing much.
Sustainability means finding the best way to generate income from the value you create. Tautologies are best preceded with an advance warning but one that is useful but underused is: the most sustainable business model is the one that you’re best able to sustain.
Susan Aktemel, speaking in last week’s SEWF2018 debate, made a good argument against using grant funding as a major part of long-term social enterprise (or charity) business plan.
Much of the UK’s current grant funding sector was shaped at a time when it might have been possible to scale up a social enterprise or charity (to the level of mid-large local organisation) by moving along a grant funding pipeline: Unltd/Award for All > Esmee Fairbairn/Comic Relief > Reaching Communities > Ongoing grant from local council/other local contracts.
I’m not sure how well (if at all) the grant funding world has dealt with the fact that (in most areas) the council’s pot of gold at the end of the rainbow is now just a pot of tears – but Aktemel and others are right to argue that no one starting a new social organisation now (particularly at a local level) can seriously hope to keep it going for 5 years+ (with a turnover of £100,000+) primarily using grant funding.
But, while the social entrepreneurs who warn you against trying to exist on grants alone are correct, this knowledge tells you nothing whatsoever about whether it will be possible to sustain your social enterprise through trading.
The universal principle of social enterprise sustainability (as with any other business) is that you have to create value and get someone to pay you for it – and keep on paying you for it.
The Llama example still works but if you prefer a shorter one – if you run a social enterprise cafe that creates two kinds of value: (a) some tea and cake that people want to buy and (b) training and support to help people get back into the job market: there’s no reason to assume that charging high prices to customers for (a) will be the most sustainable way of covering the cost of (b).
Whether it’s public sector agencies, grant funders or donors (or some combination of all them) if you want to provide (b), the most sustainable model will be a model that involves someone paying you something because you do (b).
The most sustainable proportion of income available from any given source depends mostly on the market you operate in and the gap you’re seeking to fill in that market.
News journalism is an industry where trading income (from print newspaper sales and advertising) is in sharp decline but what is effectively donation income, from membership schemes, is growing rapidly – with The Guardian now boasting over 500,000 paying supporters.
It’s unlikely that many local newspapers will be able generate as much of their income from supporter donations as The Guardian but the success of The Bristol Cable‘s membership model suggests there is a genuine ‘market’ of at least some people who value local news to the extent that they’re prepared to pay for it to exist.
The challenge is to find the mix of advertisers, members, supporters and potentially online subscribers that fits together to make both a commercially viable organisation and (for social entrepreneurs) a socially useful one.
There’s no one, single answer for all local social enterprise newspapers so it’s hardly surprising that, at the level of ‘the social enterprise sector’, none of the abstract answers to the (ongoing, important) questions about sustainability are particularly useful.
You need to work out what you’re trying to do, who might pay you to do it and how you’ll get them to pay you to do it (and keep paying you to do it).
Once you’ve got that sorted, all you have to do is do it.