June 2011

Social Enterprise Development Guide

SeamlessSupport

Contents

History of Seamless Support........................................................ p3Final year of programme in numbers........................................... p4Social Enterprise Diagnostic Tool................................................. p5Business Plan Outline.................................................................. p10Case Studies................................................................................ p11Social Enterprise Agencies.......................................................... p12

This publication was designed by Reasonably So! - a Norwich based design studio specifially working with charities and social enterprises to create the greatest positive social value. Reasonably So! is a business of Profit Is Good Ltd, a social business consultancy.www.profitisgood.co.uk

Seamless Support Funders

Seamless Support Partners

easonably.so!

This is a legacy publication celebrating the impact of the Seamless Support partnership delivered in Norfolk from 2006 to 2011 by Voluntary Norfolk (VN), The Guild (TG), Norfolk Rural Community Council (NRCC) and West Norfolk Voluntary and Community Action (WNVCA).

The Seamless Support partnership of voluntary sector and business support agencies offered the option for voluntary and community groups to receive support at whatever point they find themselves on the spectrum of progression towards social enterprise and a clear progression route towards their goal. It also offered existing social enterprises specialised business support.

The Cabinet Office summary of the ‘National Evaluation of the OTS Social Enterprise Business Support Improvement Programme Baseline Report’ stated that:

‘Social enterprises’ business support needs are broadly similar to those of mainstream businesses but the nature of the business model means it will always need specialist support component.’

The report showed that, while each region was providing social enterprise support in different ways:

‘Establishing strong relationships between the strategic partners appears to be a key factor in improving the business support environment for social enterprises.’

History of the programme

Business Support

TGNRCC

Development Support

VNWNCVANRCC

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Is your organisation a social enterprise?

The next two sections of this Social Enterprise Development

Guide are over to you! The first is a Social Enterprise

Diagnostic Tool which can be used to determine which social

enterprise model and structure would be most suitable for your

needs. This is followed up by a Business Plan Outline that can be

used to structure your thoughts.

Final year of programme in numbers

The final year of the Seamless Support programme ran from April 2010 through to March 2011. The infographic below sets out the achievements of the partnership.

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Number of people in businesses created

Number of people in businesses assisted to improve performance

122

Number of people receivingOCN accreditedskills development

47

Number of people supportedin pre-prestart up

Number of people supportedwithunaccreditedskills

123

457

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Social aimsDoes your enterprise have clearly-defined social objectives that guide its whole approach to business?

Source of incomeDoes a significant proportion of your income come from selling goods or services?

MembershipDoes your enterprise feature a membership structure open to key stakeholders or the wider community? OR is it controlled by a charity or some other organisation (or organisations) with its roots within thecommunity?

Application of profitsAre all trading profits re-in-vested in the business?

If the answer is “no”:Possibly a private sector business where social aims are subordinate to conventional, commercial objectives.Ask yourself: on what basis do you consider it to be a social enterprise?

If the answer is “no”:If the bulk of the organisation’s income is (and will remain) in the form of grants and donations, ask where the “enterprise” element of the project is. Maybe you should consider yourself a voluntary sector organisation. If the organisation has little or no income, it may be an embryonic social enterprise if you expect to be trading significantly in the future.

If the answer is “no”:Who owns it? If a small number of self-selecting people, this would probably not be recognised as a social enterprise in most quarters. If membership issues are unclear or undecided, go to the ‘status finder’.

If the answer is “no”:Where do the remaining profits go? It is unlikely that you are a social enterprise unless surplus profits are given:(a) To charities or non-profit organisations; or(b) Back to customers as a form of rebateSome return on invested capital is acceptable provided it is capped in some way.

Social Enterprise Diagnostic Tool

Is your organisation a social enterprise?

The term “social enterprise” has no precise legal meaning and can, within limits, mean different things to different people. However, there are some key features one would expect to see in a social enterprise.

Diagnostic testIf the answer to the following four questions is “yes”, you are most probably a social enterprise. If the answer to any of these questions is “no”, please read the accom-panying notes and then reach your own judgement.

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Social Enterprise Diagnostic Tool

Status Finder

A social enterprise may or may not have paid adequate attention to selecting the most appropriate legal structure when it was setting up. Your response to a series of questions should yield one or more forms of legal status that are likely to be appropriate to your organisation. The main options for legal status available to organisations in our sector are:

• UNINCORPORATED ASSOCIATION• TRUST (Unincorporated)• INDUSTRIAL & PROVIDENT SOCIETY (“Society for the benefit of the community”)• INDUSTRIAL & PROVIDENT SOCIETY (“Bona-fide co-operative”)• COMPANY LIMITED BY GUARANTEE• COMPANY LIMITED BY SHARES• LIMITED LIABILITY PARTNERSHIP (“LLP”)• COMMUNITY INTEREST COMPANY (“CIC”)

As you go through the questions, the response will lead to some of these options being deleted. Once complete, if there is only one option left, then that is the legal form that may be most appropriate for your group. If there are two or more options remaining, then your group can probably choose freely between them. If there are no options left then you may not be a social enterprise!

1. Does your organisation have a membership (with the right to vote) in addition to those individuals who are members of the governing body? Yes Delete TRUST (unincorporated) and LLPNo Delete UNINCORPORATED ASSOCIATION

If the response to question 1 was “no”, ignore question 2 and move straight to question 3.

2. Are a majority of your members of the governing body elected by and from the membership on a one member, one vote basis?

Yes Do nothingNo Delete both INDUSTRIAL & PROVIDENT SOCIETY options

From the original produced by Charlie Cattell

Is this the most suitable legal structure?

3. Who is entitled to become a member of your organisation? Anyone who applies; no criteria Delete TRUST (unincorporated) and IPS

(co-operative) and LLP

Anyone who meets specified criteria (e.g. using the services provided; employees; living in the area of benefit)

Delete TRUST (unincorporated)

Individuals by invitation only Delete UNINCORPORATED ASSOCIATION and IPS (co-operative)

4. To whom are the services/facilities of your organisation available?

Members only Delete TRUST (unincorporated) and IPS (society for the benefit of the community) and LLP

People or organisations who are not member

Do nothing

5. Does your organisation now (or in the near future) employ staff on permanent contracts?

Yes Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATIONNo Do nothing yet

6. Is your organisation now (or does it anticipate) trading regularly where risk is involved; borrowing money to any degree; or entering into long term contracts such as leases?

Yes Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATIONNo Do nothing yet

If the response was “no” to both questions 5 and 6, delete both COMPANY, both INDUSTRIAL & PROVIDENT SOCIETY options and Community Interest Company.

7. Will your organisation seek to raise capital from members or others through the sale of shares?

Yes, from members only Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION and COMPANY LIMITED BY GUARANTEE and LLP

Yes, from non-members (maybe as well as members)

Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION and COMPANY LIMITED BY GUARANTEE and LLP and both IPS options

No Delete COMPANY LIMITED BY SHARES

8. If your organisation generates a financial surplus, will it be able to distribute any of this amongst your members – either while running or on winding up?

Yes Delete TRUST (unincorporated) and UNINCORPORATED ASSOCIATION and IPS (society for the benefit of the community)

No Delete LLP

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Social Enterprise Matrix

How to use the MATRIX

Status Finder will have provided you with a legal structure that may suit the needs of your group. By referring to this structure on the left hand side of the MATRIX you will find all the relevant ‘type’ of social enterprise indicated by stars. By referring to the ‘defining questions’ under the relevant ‘type’ you should locate at least one type of social enterprise that would suit the needs, management style and requirements of your group.

Please note that if more than one type is indicated it will be necessary to seek help in choosing according to the trading you wish to undertake and/or the robustness of your income generating potential. The ‘descriptors’ on the right hand side of the MATRIX are a way of checking the results of the Status Finder.

On the next page are options for social enterprise types – ways of operating within the legal framework of your organisation’s governing document. The types listed do not provide definitive answers as to how your group should establish or develop its work – this will depend on many other criteria that you, or your business adviser, will need to take into consideration. Remember of course that while some legal structures are incompatible with others, many operating models can incorporate one, two or more defining features – it is possible to be a Development Trust, a Community Interest Company and a Community Co-operative – all registered as a company limited by guarantee.

The following are suggested by the primary focus of the activities that your social enterprise wish-es to undertake. The answers are not definitive but should provide enough information for your Social Enterprise Business Adviser to refer you to the appropriate specialist agency.

If the primary focus of your social enterprise is to create jobs for people who might not get a job in the mainstream labour market, then it could be a Social Firm or a Co-operative.

If the primary focus of your social enterprise is to own assets, such as land or buildings on behalf of a community of place or interest, then it could be a Development Trust.

If the primary focus of your social enterprise is to own an asset that was previously owned by a public authority and where the community ownership needs to be protected in perpetuity, then it could be a Community Interest Company.

If the primary focus of your social enterprise is to create a democratically run organisation that is accountable to its members – its employees, its customers or the community, then it could be a Co-operative.

If the primary focus of your social enterprise is to hold financial assets that it will lend to individuals who share a common bond, then it is likely to be a Credit Union.

If the primary focus of your social enterprise is to enable an existing voluntary organisation with charitable status to trade, then as long as it is trading within its primary objects it can carry on as a charity. However, if it wants to trade in other activities, it can set up a trading arm using a number of different structures.

Social Enterprise Diagnostic Tool

Social Enterprise Diagnostic ToolLegal Structure O

ptions

Co-operative

Development Trust

Social Firm

Credit Union

Trading with social benefit

Charity subsidiary

Intermediate Labour MarketCommunity Interest Company

Descriptors

Unincorporated

associationU

nlimited liability, inadequate for

trading purposesCom

pany limited

by guaranteeU

npaid Directors, m

embers

guarantee sharesCom

pany limited

by sharesD

irectors and share dividends can be paid

TrustAsset holding and/or grant m

akingCharity

Service delivery and/or grant m

akingIndustrial and Provident Society

Regulated to ensure security of

operation and to protect m

embers’ interests

Limited Liability

PartnershipR

equires the Partnership agreem

ent to specify the social objective

Public limited

company

Quoted on the Stock Exchange

Defining

questions

Do the participants wish to act collectively

Does the structure conform to the DTA requirements?

Is there an intention to employ the beneficiares (at least 50% of the workforce?)

Does the structure conform to the Credit Union require-ments?

Is there a social as well as a profit objective?

Does the charity intend to trade outside its primary objective?

Is there an intention to employ the beneficiaries, prior to employment in the general labour market?

Is trading the main objective?

NO

TE: Although there m

ay be m

ore than one legal structure option for any given social enterprise it w

ill be necessary to choose the m

ost appropriate for the type of trading and for the incom

e generating potential

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Stalham Farmers Market

Business Plan OutlineSummary• The existing organisation (products / services, major user groups, size ,resources, staff)• Proposed changes to organisation (products / services, user groups, staffing and other organisational changes)

The Organisation• Brief history, (when started, key points in development, growth in level of service and employment)• Existing products, services and style of operation (hours of opening, etc)• Changes proposed with brief justification

The People and Organisation• Existing: people (numbers, skills and past experience), organisation (hours, shifts, division of responsibilities, training, levels of support)• Proposed : changes to the above and justification

The Market• Background: size of market, trends, etc• Users: target groups, numbers in each group, proportion, characteristics (needs)• Complementary services: who they are , where located, what they offer• Proposed changes: product mix (services), major user groups focussed upon, reasons• Marketing strategy: pricing, promotion, (where, when, how often, cost), image (what it is, how it will be projected)

Premises• Existing: brief description, routine maintenance required• Future: change or adaptation, cost, timescale, justification

Equipment• Summary of existing equipment• Equipment required and costs and justification• Suppliers (terms, reasons for choice)

Financial Projections• Cash flow• Income and expenditure statement• Balance sheets

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Case Studies

At the beginning of October 2009 Stalham Farmers Market contacted Norfolk Rural Community Council for guidance, as they had heard of the Seamless Support scheme and had been advised to contact by their local area partnership. The main objectives of the project were to establish a retail outlet that provides an opportunity for local producers and crafts /artisans to sell their products at an economic rate to both themselves and consumers. As a part of the Seamless Support project NRCC spent some time discussing the project and it was clear that there was a real need for some research to be con-ducted in the community and amongst market customers, to establish if there was a real market opportunity, rather than a ‘hunch’ that a demand existed. To pay for the research The Farmers Market was awarded a Seamless Support bursary in order to establish whether there was a viable market. The response to the questionnaire was extremely positive and as a result NRCC spent more time working with the founding partners to identify the most suitable company structure, a sustainable business plan and funding. Truly Local opened its doors on the 26th March 2011 and is a Community Interest Company with all profits invested back into the company and to the benefit of local producers and consumers. Trade has been very positive, although there is a need to establish the concept of ‘local’ – hence no bananas or Cromer pineapples! Truly has already received a number of accolades including winning the Business and Economy category of the East Action for Market Towns Awards.

Stalham Farmers Market

Graphic Design and Print CIC

Graphic Design and Print Community Interest Company (GDPCIC) was set up to provide real-world training and employment opportunities to people who are disadvantaged or socially excluded.

Founders Stephen and Lillian Mollison have diverse work careers, Stephen as a graphic designer and Lillian as a registered social worker, but both shared a commitment to social inclusion and equality of opportunity to empower people to reach their full potential.

GDPCIC recieved support from The Guild at the pre-pre start-up stage, where a range of different legal structures were discussed, through to incorporation as a CIC and ongoing business support.

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Social Enterprise Agencies

The Seamless Support partners recommend the following agenices for further support.

Social Enterprise Type Social Enterprise Support Agency

Co-operative Co-operatives UKwww.uk.coop

0161 246 2900Development Trust Development Trusts Association

www.dta.org.uk0845 458 8336

Social Firm Social Firms UKwww.socialfirms.co.uk

01737 231 360Credit Union Association of British Credit Unions

www.abcul.org0161 8323694

Trading with social benefit Social Enterprise East of England www.seee.co.uk 0845 606 6296

Charity subsidiary Charity Commissionwww.charity-commission.gov.uk

0834 3000218Community Interest Company The CIC Regulator

www.cicregulator.gov.uk029 20346228

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