Third Sector Economic Projects: A Charitable Business
This is a second case study illustrating how third sector organisations function in the local economy. I’ve based these case studies on real projects and as far as I know all of them still exist and have moved on since I knew them. Any case study is necessarily a snapshot in time. So, if anyone thinks they can identify the projects please remember first, my intention is to describe the issues and not to criticise the project. Second, these issues do not necessarily apply to this organisations today; they probably struggle with entirely different issues!
Social Enterprise or Charitable Business?
I believe the business I’m going to write about today is doing well. My concerns about it relate to an early stage in its development and its genesis raises some important questions.
It started as an attractive idea using the teaching of particular skills to support a group of disadvantaged people. Their business plan for a social enterprise won awards and some grants and loans to get started.
Whilst funding bodies recognised them as a social enterprise, they looked like a small business. They were in effect one person investing a lot of money in a risky enterprise. Whilst their values were positive, they lacked business acumen and their success depended upon the support of statutory sector funding bodies.
They were successful because they marketed themselves as a social enterprise. Whether or not you are a social enterprise should not depend solely on your beneficiaries. The beneficiaries for this project had particular disadvantages and so that made the offer perhaps charitable. It did not make it a social enterprise. It is a social enterprise where a group of beneficiaries form the business or maybe a neighbourhood organisation identifies this group of beneficiaries.
A Business Without a Market
What we have here is a sole trader business whose market notionally includes its beneficiaries. In terms of where its funding comes from, its market was its funding bodies.
This business had no market. Whether the market was their beneficiaries or others who might purchase services from the enterprise, they simply did not have a list of contacts. They had run no trials to prove they had a market and had not a shred of evidence that it existed. They were in effect dependent upon grants and loans. It was touch and go, but they did eventually land a large grant and so may be able to establish their business.
This story raises a number of issues:
- Why did none of the supporting funding bodies spot the lack of a market?
- Why did something that was clearly a private enterprise receive awards as if they were a social enterprise? The project had no membership or local community.
- Why should someone with the same idea conceived as a private enterprise not receive the same support?
- If this developed as a private enterprise, in what sense would it be inferior to a social enterprise? Staff still have to be paid, including the entrepreneur.