We all know that starting an enterprise can be difficult, but that’s part of the challenge. I’d just been made redundant [having decided not to apply for a lower graded job] and had two options:
- try to find employment and continue ‘working for the man’ or
- do what I help others do in my working life, start-up and enterprise and make my own destiny.
First steps- understand your market
Identifying what I aimed to do was quite simple, I’d set up an enterprise that supported others to do the same, after all that’s what I know and I’m pretty good at it too. I needed however to consider my USP [Unique Selling Point], in other words what sets my enterprise above the rest? Why would a customer come to me rather than someone else? This is something we all need to do to have a successful business, we need to understand our market.
The market I’m in has changed significantly over the last year or so. It’s moved from one which has government and local authority funding which is given to some organisations to provide essentially free start-up and business advice services to others, to one which needs to market itself to individuals and organisations who will pay directly for services.
The customers have changed then from essentially ‘service users’ to customers who will want a greater value and more tailored support. This is where I see my USP. [I'm moving away from saying my business now, as you'll see later whilst I started it off it's a social enterprise so I have to surrender a certain amount of control].
The model of business that Development in Social Enterprise offers is highly competitive. It works with experienced and qualified advisers, but doesn’t have the overheads many of its competitors have. It is therefore greater value for money and has the potential for greater impact. In my humble opinion this is what the market needs: high value, quality developmental support that works with organisations and individuals to transform and develop services and products on the organisation’s terms, not some target driven funded support that sometimes provides what people want, but quite often doesn’t.
So point one if you’re thinking of setting up a business, whether it be a social enterprise, you as a sole trader or you aim to make significant profits for personal wealth, understand your market, including your competitors which we’ll talk about in more detail later in this diary series.
Structure follows strategy
Right then we know what the strategy is, but what about the structure? Having worked in a charity for over 15 years and then within a social enterprise I wanted to ensure that the organisation was not for personal profit i.e. a social enterprise’. I also needed something quick and effective which could be funded by my small amount of redundancy pay.
The Community Interest Company [CIC] structure seemed perfect and is very simple to set up, but locks in assets. The CIC is a limited company [either by shares or guarantee, I chose guarantee], but has the added restrictions of being ‘asset locked’, that is any assets it eventually owns will be locked into the social purpose of the organisation, this helps when you are setting up a social enterprise, but is not always essential, because being a social enterprise is more about how you do business and what you do with your profits than what structure you adopt.
There are a few other things that the CIC structure will add for example, you need to pass a ‘community benefit test’ and report your performance against your social aims which is reported to the CIC regulator each year. Whilst this is required the report is not as onerous as a charity needs to provide to the Charity Commission, but of course you won’t be a charity, we’ll look at dual structures sometime later I’m sure!
Point two then is consider how you intend to do business and chose the most appropriate legal structure for it, but note if it’s a CIC you’ll need at least one other director. If you’re setting up a charity you’ll need trustees who must be volunteers.
That’s it for this diary entry, there’s some very interesting stuff to come!