How to build a social enterprise
Money, money, money… in a social entrepreneur’s world!
Tip number 11 to fellow and aspiring (social) entrepreneurs, from my lived experience.
I often speak and coach social entrepreneurs, young people looking to start a career and those who want to change theirs for a purpose led one.
The most common questions they ask me are:
- What do we need to know to create our own social enterprise?
- How did you do it?
- Where do we start?
This is one in a series of articles where I try to answer those questions and more.
Dear fellow and aspiring social entrepreneurs,
Let’s talk about money in the third sector: about having it and not having it; about having to fundraise for it and about what happens when your fundraising efforts fall short. Let’s talk about where money fits in the third sector world which typically values people and the planet ahead of profit.
Tip number 11. Money, money, money… in a social entrepreneur’s world!
In this article, I explore why I believe third sector organisations should strive to achieve financial resilience. It has occupied several of my founding years at and the Micro Rainbow International Foundation to unpack this topic and I am still unpacking it.
I believe we need to talk more about money and its role in the third sector. There is a lot of stigma around money and within organisations whose primary focus is people and/or the planet and not necessarily to maximise profits.
What I have come to realise is that every organisation needs money to achieve its mission, and we do not need to be ashamed of this commercial reality.
In my next two articles, I consider why purpose businesses do not just need money but why they need it in abundance. I examine the concept of money scripts, and how different money scripts can cause friction or make dreams come true.
Money Is Not a Dirty Word
I have spent my whole career in the third sector, working nationally and internationally. For too many years, I was uncomfortable talking about money with peers and stakeholders.
The culture around me, at least 20 years ago, was predominantly anti-corporate and anti-wealth. It was as if you had to pick sides — for profit or against profit. Volunteering for a cause was considered by many as the way to achieve social change, rather than paying professionals a salary. As a consequence, “money” or “profit” felt like dirty words; the enemy.
For me it is nuanced and there is a balance to strike between being financially vulnerable as an organisation and worshiping money or between being anti-corporate and pink-washing.
For example, I believe that corporates can be allies of human rights organisations and play a role in the fight for LGBTQI equality. However, this does not mean that, in this process we forget our integrity and that we do not stay aligned with our values. I believe that this often-uncomfortable alliances can be powerful.
I have worked for several charities and founded two, as well as establishing a social enterprise. I have experienced personally how uncomfortable it can be to talk about money. Here are some of the obstacles I have faced.
Scarcity vs capitalism
My roles have frequently required me to hold some budget responsibilities. Instinctively, I would argue the need for us to build financial surpluses to enhance our financial resilience. In response, I sometimes faced resistance. I recall being asked “Are we a capitalist organisation?” At the time, that question threw me and made me feel like the enemy within.
Reserves vs financial vulnerability
The resistance referred to above sometimes came from external sources. When speaking to potential funders, we were often asked “If you have some reserves why can’t you use those first?”.
The danger of this approach is that it contributes to fostering a culture of financial vulnerability. I understand that there might be a desire to help those organisations without adequate resources. But where does that leave the rest of us?
I am now more comfortable in challenging these types of questions. Some funders and donors value our prudent approach and wish to work with us. Others do not see us as being a “good fit.”
I am proudly comfortable with both responses as I believe in the power of being with our very own tribe. Thankfully, over the years I have noticed that this approach is changing and potential funders and donors want to partner with organisations such as ours who value long-tern financial resilience.
Sustainability vs solidarity
There is an expectation that all of us in the third sector will come together in solidarity, at any cost, to further the shared cause.
How sustainable is that?
As many people working in the third sector know too well, we are often called upon to collaborate with other organisations, thereby maximising resources and providing as much value to our beneficiaries as possible.
I have lost count of how many times I have been asked “We would love your support but we do not have a budget. Please can you do it for free?” The expectation is that a third sector organisation would say yes in solidarity and without considering the financial hit that such collaboration might imply.
For many years, I put solidarity ahead of sustainability. However, I came to realise this approach is not only unsustainable, but it also makes our movements vulnerable.
It goes without saying that we do place a value on solidarity. So, we ask ourselves and our partners questions like “How can we make this work? What is the minimum we can commit to? What work specifically requires funding? How can we secure it together? Who else can help?”
The naughty corporates
Working with corporates can be seductive. However, I have learned that some organisations are very skilled at asking third sector organisations to work for free, and with no strings attached. So I have started to attach some strings.
I cannot recall how many times a corporate with a multimillion-pound turnover has asked us, “It is pride month, can you come and give a talk to our employees about your work? Unfortunately, we do not have a budget for speaker fees or transport costs”.
In the past I said yes, almost every time. I thought it would bring us in front of new audiences, help us raise awareness and bring other opportunities. I saw it as a marketing investment as well as a responsibility to spread our message as wide as possible. The truth probably lies in the middle.
I no longer agree to these opportunities immediately. I might ask for a contribution towards our time and costs. If corporates cannot immediately contribute, I ask what their plan is for longer term engagement with Micro Rainbow and LGBTQI issues; and I ask directly how else they might help, if not with funding.
It’s taken me several years, but I am now comfortable in asking for money (because I value our time) and in saying “no” to offers when they do not align with our values or when they are a pink-washing exercise.
I am also more open to talk about money with colleagues, funders, partners and corporates. What helps me in this process is knowing that ultimately, we are responsible for the salary of about 25 people. Money feeds families, pays rents and mortgages, it keeps people healthy, it gives dignity and much more. Equally important, money is instrumental for us to support thousands of LGBTQI people fleeing persecution every year. If money contributes to all these things, it cannot be seen as dirty and we must not stigmatise it.
The Quest for Financial Resilience
For me, financial resilience is what helps us, third sector organisations, to withstand unforeseen tough times. We never know what’s around the corner — a sudden increase in the demand for our services due to geopolitical events, or a dramatic change of public opinion linked to politics and/or the media.
Every third sector organisation desperately needs money to achieve its mission. Not talking about money and not thinking about “profit” are some of the reasons, in my opinion, why our movements are often fragile, especially in the VUCA (volatile, uncertain, complex, and ambiguous) world.
The VUCA world is not only impacting businesses and industries but also social and environmental movements. As a result, several of our human rights are vulnerable to being eroded. At these times, the financial resilience of our movements and organisations is critical.
Being financially resilient was a driving force behind the creation of Micro Rainbow. We wanted to create an organisation that changed the LGBTQI lives and that, at the same time, was sustainable, replicable and scalable. Financially resilient.
For example, financial resilience helped Micro Rainbow design a programme to support LGBTQI Ukrainians when Russia invaded their country. It also helped us support those LGBTQI people who were lucky enough to escape the return of the Taliban to Kabul and reach the UK. From another point of view, our financial resilience assisted us to bridge funding gaps when some donors changed their priorities and stopped funding our cause. We did so without interrupting our service provision or having to cut costs like salaries. Financial resilience also allowed Micro Rainbow the capacity to respond to the increased hate towards migrants and LGBTQI people when Suella Braverman and Priti Patel were the Home Secretaries.
When we started Micro Rainbow 12 years ago, our income derived 100% from grants and donations. We were very reliant on the generosity of external donors. Despite our overall income increasing substantially over the years, we are now at a 60/40 split between commercial and grant income. We are much less vulnerable now. Our goal is to become 100% sustainable by 2030.
We are creating an organisation that not only changes people’s lives, but which can also survive during tough times. Money is not only saving people’s lives and compensating those who help them, but also ensuring that we can continue our work until it is not needed anymore, which I am afraid spans well beyond my lifetime.
My hope is that you can find some prompts in this article to feel confident to start conversations about money, surviving in a VUCA world and financial resilience. I believe we need these conversations to happen if we want to respond to some of the increased challenges that we face today.
With my very best wishes for your social entrepreneurship journey
Sebastian
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