Everything you need to know about social enterprises

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​Our #SocEntSummer campaign has been highlighting the diverse range of social enterprises already thriving in Scotland. This week, we're aiming to help those considering starting their own by answering five of the most commonly asked questions we’ve had.

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26th August 2016 by Paul Cardwell 0 Comments

What is a social enterprise?

There isn’t actually a legal definition of what a social enterprise is, but Social Enterprise UK, the UK body for social enterprise, defines them as being organisations that trade to tackle social problems and improve communities, people’s life chances, or the environment. They make their money from selling goods and services in the open market, but they reinvest their profits back into the business or the local community.

Social Enterprise Scotland (SES), which is the independent membership-led organisation created to help and promote social enterprises in Scotland, describes them as being “dynamic, ethical and more sustainable ways of doing business”. It explains they aim to make a profit just like any private sector business, however, 100% of their profits or surpluses are always reinvested back into their social and/or environmental purpose.

A full criteria of what makes a social enterprise is available in The Voluntary Code of Practice for Social Enterprise in Scotland.

Can you give me an example of a social enterprise?

Yes! There are literally thousands in Scotland. With no legal definition of what one is it’s almost impossible to say exactly how many there are but in 2014 the Big Lottery Fund in Scotland commissioned a survey into which estimated there were around 3,500 north of the border. Latest estimates suggest that there is now over 5,000. Over the past few months as part of TFN’s #SocEntSummer campaign we have highlighted a variety of social enterprise ventures from cafes and pubs to outdoor activity centres and even housing associations and security firms. Social enterprises come in all different sizes from small community halls to nationwide sandwich shop chains such as Social Bite. Social Enterprise Scotland has created a very handy directory of social enterprises where you can search for social enterprises based on location or theme. 

How do I start a social enterprise?

It’s surprisingly easy. Anyone can do it regardless of experience or financial background.

All you need is an idea and the willing to put in the hard yards all the while sticking to the principal of reinvesting your profits to meet a social purpose.

Coming up with the initial idea – just like for corporate businesses – is the hardest part. The best ideas are the ones that solve a genuine problem – there is no point in creating something to combat an issue that doesn’t really exist. Your idea could be a completely new product or service or it could be a social enterprise version of an existing service – you don’t have to reinvent the wheel.

Once you have an idea, spend some time researching the competition. Don’t worry if there are businesses already out there doing something similar but do find a way that makes what you are offering better and more unique.

Of crucial importance if you want to make a success of your new venture is to create a business plan. Include in it an explanation of what your product or service is, what its market is and how you will make money from it, how you will finance it from the start, and include your assessment of the competition. Having a killer business plan is particularly useful when searching for start-up funding.

Creating a business plan can be daunting so it’s recommended you get some help. Just Enterprise is a comprehensive programme designed to help social enterprises and budding social entrepreneurs achieve their trading ambitions.

Do I need to be rich to start a social enterprise?

No! Like most businesses, social enterprises normally need some start up cash to survive and thrive whether it be to hire premises, buy materials or just to pay the founder some sort of a wage. Some social entrepreneurs use their own savings or get a traditional loan but there are also a number of funds available.

The Social Entrepreneurs Fund (SEF) was launched by the Scottish Government in 2008. It is aimed at individuals who want to set up and run a business with a social or environmental purpose and provides financial and business support to help get new enterprises off the ground.

Social enterprise agency Firstport administers the SEF on the government’s behalf and also offers two different levels of funding through an awards programme. The Start It Awards is for individuals with an innovative business idea which addresses a social, environmental and/or community issue. You can apply for up to £5,000 start-up costs to pilot your idea. The Build It Awards is the next level of funding is for individuals who have already piloted their social enterprise idea (either with or without support from the Start It programme) and have proven that the concept works. Funding of up to £20,000 is available to cover an individual’s salary/living costs for one year, so that they can begin running the business full time. An additional £5,000 discretionary funding is available on top of this for other costs in certain cases.

Social Investment Scotland also offers affordable loans to social entrepreneurs. It itself is a social enterprise and it provides funding by borrowing from a variety of sources and lending it out at affordable interest rates. It has an excellent plain English help guide on its website and explains how it offers a variety of types of loans including bridging, property and all-purpose.

Also check out the Big Lottery Fund for grants and Community Shares Scotland which helps community ventures raise capital though investment.

For banking services have a look at social enterprise specialist banks such as Unity Trust and the Charities Aid Foundation (CAF) Bank which offer expert advice and favourable rates.

Where can I get some help and advice?

Many of the organisations we have already mentioned such as Social Enterprise Scotland, Just Enterprise, Firstport and Social Investment Scotland all have excellent websites (the links are all below) and can help you on your journey whatever stage you are at with advice, tips and training.

Senscot is another organisation that is worth exploring. It runs local social enterprise networks (SENs) helping social enterprises to network, trade with each other, learn and grow, with national intratrading opportunities. SENs are themed around community food, culture, employability, health, and sport.

For training in leadership, enterprise, and personal development, the Social Enterprise Academy has over 10 years of experience of helping budding social entrepreneurs to build sustainable enterprises and achieve greater social impact through its learning programmes delivered in communities across Scotland. Similarly the School for Social Entrepreneurs run practical learning programmes and courses to support people from all backgrounds to realise their potential and bring about lasting social and environmental change.

You should also search online for your local Business Gateway and Third Sector Interface.

Social enterprises come in all shapes and sizes

Everything you need to know about social enterprises

Just like people, social enterprises come in many different guises so you need to choose a business structure for your social enterprise.

Co-operatives and Mutuals…

are democratically-owned businesses which give employees, customers or members a direct stake in the business.

Community Interest Companies (CICs)…

are limited companies created for the use of people who want to conduct a business or other activity for community benefit. They are required to report on activity to the UK CIC Regulator.

Social Firms…

are commercial businesses that provide real, integrated employment for people with disabilities or other disadvantages in the work place. They may be registered charities, a CIC or other model

Development Trusts…

are community run organisations that are concerned with the economic, social, environmental and cultural needs of their community. They are owned and managed by the local community and aim to generate income through trading activity that enables them to deliver services.

Credit Unions…

are a type of co-operative that provide financial services to members. Many operate in areas of social and financial exclusion, though more employers are now offering credit union membership and they're being accessed by ethical consumers. The largest offer a competitive range of mainstream financial products.

Housing Associations…

also known as Registered Social Landlords or RSLs, these provide affordable housing for both rent and sale. They give priority to those in greatest need and reinvest any surplus income in maintaining or adding to their housing stock.

All info courtesy of socialenterprisescotland.org.uk