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How to set up a social enterprise

Christine Ottery

28th January, 2010

Are you an ethically minded entrepreneur motivated by a strong social mission? Starting a social enterprise gives you a more flexibility than a charity, but the reassurance that your values come first...

The heart of what makes a social enterprise is 'businesses driven by social or environmental purposes,' according to the Social Enterprise Coalition.

The three main characteristics most social enterprises have in common are: a viable business that trades services or products, social aims, and social ownership.

Importantly, community ownership and investment means that some or all of the profits of the business go towards its social, or environmental, mission. Most social enterprises do not have shareholders so their social aims are not at risk of being superceded by commercial greed.

However, the actual definition of social enterprise is ‘hotly debated', says Dan Lehner, Head of Business Development at UnLtdWorld, a social network for linking social entrepreneurs and investors.

A broad church

Social enterprises can take on many different guises, from one-person enterprises to charities with innovative trading models or even mainstream businesses that give a portion of their profits to worthy causes. They can encompass a wide range of sectors including healthcare, food, travel, education, transport, and the environment.

The benefits of starting a social enterprise are: ‘autonomy, meaning, purpose,' says Nick Temple, the Policy and Communications Director of School for Social Entrepreneurs. He says that people tend to be motivated by a strong social mission or objective.

There are 62,000 social enterprises in the UK, from those run by a handful of enterprising individuals, such as Mow and Grow and Worn Again, to large and famous ones such as the Big Issue and The Eden Project. Social enterprise creates around 800,000 jobs in the UK, contributing £24 billion to the economy.

‘The biggest growth trend we've seen is for the environment; a direct response to the feeling that a grassroots solution is needed,' says Lehner.

Getting the right people

Once you have a clear idea about what your social enterprise will be, it is time to get practical.

‘Prove you can do it by doing it rather than by talking about it - you've got to get your hands dirty,' says Lord Andrew Mawson, a social entrepreneur and author of The Social Entrepreneur: Making Communities Work.

The other golden tip is to surround yourself with the right people. Lord Mawson recommends building a small team of people with a variety of skills to bring to the table. He says: ‘On that team you need a mixture of people who have real practical skills, serious entrepreneurial and business skills, so that as you develop your business plan you have people asking those critical questions about how you can turn aspirations into practical realities, and how you grow it step by step, piece by piece.

‘It is about looking people in the eye and thinking, "can this person add value in practical ways to what I want to do?"'

There are local and regional social enterprise networks you can join, such as the Social Enterprise Network London. A finder tool on the Social Enterprise Coalition site can help you find a network near you.

Events can also be a good way to meet people, and the coalition organises a yearly conference called Voice, held this year in Cardiff on 1-2 February.

Online social networks, such as UnLtdWorld, which Lehner likens to Facebook for social entrepreneurs, also have a part to play in making connections. In fact, UnLtdWorld can link up people interested in the same field through a news feed that filters profiles and tags.

Project Dirt is another social network, specifically for people wanting to get stuck into environmental projects, including social enterprises. They are currently growing the remit of the site from South London to nationwide.

Get training

Courses are also a good way to hook up with other ethically minded entrepreneurs. Temple says: 'Some of the entrepreneurs are mavericks in their community, they can feel isolated, so the school is an opportunity for networking.'

The School for Social Entrepreneurs recruits 200 people each year to their ten centres across England, so this is good way to meet like-minded people from diverse backgrounds. The year-long course also offers skills and mentoring, for free. Since 1998, 85 per cent of students that have taken part continue to be engaged in social enterprise.

There are also degree courses: for example the University of East London offers a BA in Social Enterprise - the first of its kind - whilst Liverpool John Moores University runs a BA in Social Enterprise Management.

Alternatively, get some experience on the job. Enternships is an online portal for people seeking entrepreneurial internships

Down to business

Apart from connections, the biggest thing people are looking for on UnLtdWorld is financial support. To this end, they encourage social investors and specialist banks to join the site to find enterprises they want to invest in.

But social entrepreneurs can also find funding directly through the UnLtd Foundation's Millennium Commission endowment - a pot of £100 million. If you qualify as start-up social enterprise you could be on the receiving end of £5,000. More established projects can be awarded £15,000 and consultancy support, while a few enterprises can get £250,000 towards their development.

Other sources of funding are outlined on the Government's website for the third sector.

The legal stuff

A social enterprise can be registered as one of three main types of business: a company limited by guarantee, a company with shareholders, or a Community Interest Company (CIC).

CICs offer advantages over just registering as a limited company as they are specially tailored to social enterprises - they have an 'asset lock', protecting the assets for the community, and can give capped dividends to encourage investment. To find out more about CICs, see www.cicregulator.gov.uk or check out Business Link for more information on all legal options.

Support a social enterprise

If you are not a budding social entrepreneur, you can still support social enterprises by giving either your time by volunteering, or spending your money ethically.

The challenge of identifying which products and services are ethically traded by social enterprises will be resolved in February, when a UK-wide mark will be launched at Voice 10, The Social Enterprise Coalition's annual conference in Wales. It will help consumers pick goods that give back to their community or environment. Find out more about the mark, which is based on a trial scheme in the South-East of England, here.

If you want to volunteer for work with a social enterprise the best way is to join UnLtdWorld and befriend and write to some people who have similar interests. Or you could get in touch with the Community Service Volunteers, who can help you find positions within social enterprises.

CASE STUDY

Bikeworks

Awarded ‘Best New Social Enterprise' in the Social Enterprise Awards 2009, Bikeworks' co-director, Dave Miller says: ‘Cycling was a good selection for a social enterprise: there are environment, health, and employment opportunities - we work with homeless people - and sustainable cities, sustainable transport.'

Then

Bikeworks started three years ago when Dave and his business partner Jim Blackthorne joined forces. They registered as company limited by guarantee and a CIC (Community Interest Company.)  Now, Bikeworks employs 10 people full-time, 30 freelancers such as cycling instuctors, and a handful of volunteers. They invest their full profits to community projects.

Future

A new branch of Bikeworks is planned for West London with a view to expanding to a social franchise. Also, a social impact assessment this year to determine wider impact on the community and over time.

For more on Bikeworks, read the full Ecologist case study here.

Christine Ottery is a freelance journalist

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