social delta

Consulting and support for social enterprise in Canada

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When is a medical innovation a social enterprise?

  • An effective device to decrease hearing loss in musicians or audiences.
  • A low-cost prosthetic limb to make mobility possible for millions unable to afford traditional technology.
  • A medical equipment business that makes it affordable to get a used wheelchair, bathroom lift or other medical aid.

These are all innovations that have led to improved health, especially for individuals in our community or around the world with a low income. But which among them is a social enterprise?

  • They all generate revenue through the sale of a product or service. As such, they are enterprises.
  • They all seek to improve health of individuals in our community. As such, they have a social mission.
  • They all require investment of time, resources and assets in order to bring their social benefit to market. As such, they have had to get grants, donations, loans or other forms of start-up capital.

If they walk like a duck, and sound like a duck, then surely they are a duck?

The first case is that of Ear Peace, a company that produces various simple earplugs that reduce decibel levels. It is a product that looks like a thousand others in the marketplace, but its salesman tells me that this private company exists to ensure that people’s hearing is protected. Their slogan sounds altruistic: “Hear Today. Hear Tomorrow.” They are available for about $12-20 a set online. Their website features logos of a variety of non-profit hearing loss agencies and associations. (inferring-but not expressly stating-some form of endorsement)

The second case is Legworks, a Toronto based company that calls itself a for-profit social enterprise. They have developed a low cost prosthetic limb to “help people walk again.” Mobility, they highlight, empowers amputees to more fully participate in society, work, and family life. They offer this technology to those in need “regardless of where they live or their ability to pay.” This social mission is to be achieved by creating a margin on sales in more wealthy markets in order to cover losses in other markets. They note that some 85-95% of the 10 million amputees worldwide do not have access to an affordable prosthetic device, and they recently won the Para PanAm accessibility tech pitch award.

The last case is now a historical case.  STRIDE was a medical aid facility operating in Ottawa, but it closed down because the free rent they enjoyed was lost, and in spite of the value they brought to their customers who paid on a “pay what you can” model, they were not able to generate sufficient revenue to pay for the rent increase. The inventory of medical aids were distributed to agencies across the city upon their closure. The business ran on largely volunteer labour, and dozens of agencies would refer clients to STRIDE to access medical aids needed after suffering an injury or contracting an illness.

All of these businesses could be considered a social enterprise based upon their stated mission. But are they social enterprises? One way to determine whether these are businesses with “a primary goal of achieving a social mission”  is to question where the money goes. Ear Peace appears to create profits for its owners.  Legworks might be profitable, it might not—only time will tell—but it has received financial support from publicly funded bodies and it is unclear where any future profits might go. STRIDE was certainly in the business of social benefit, but it was unable to remain in business without jeopardizing its social mission; this tragedy was precipitated because of a lack of a profit motive.

These businesses are but a few in a large array of those marketing medical improvements, breakthroughs and innovations.  As consumers and social enterprise supporters, we are challenged to determine which of those businesses are motivated by social mission and which simply create better health outcomes for a profit. This is the challenge of trying to define social enterprise. 

What we do know is that if each of these companies were to flourish and grow, then we would have a healthier society, and that is a good outcome regardless of the labels we might apply.

Summary: Canadian Conference on Social Enterprise

Did you miss attending the Canadian Conference on Social Enterprise in London Ontario in April?

Jonathan Wade of Social Delta offered a short presentation to members of the Ottawa Social Enterprise Meetup Group and has made this short presentation available as a free download.

Be sure to keep an eye on www.secouncil.ca for announcements about the next Canadian Conference,  scheduled for the Spring of 2017 in Winnipeg.

In the meantime, if you are a social enterprise, or a supporter of social enterprise, consider becoming a member of the Social Enterprise Council of Canada, so that you can add your voice to the movement to create a positive legal, social, and financial environment for social enterprises in Canada.

If you are a social enterprise or if you purchase products or services from social enterprises, consider becoming BUY SOCIAL certified. Visit www.buysocialcanada.ca or contact Social Delta for more information.

Join the Social Enterprise Council of Canada

As of April 2015, the Social Enterprise Council of Canada (SECC) has opened up its membership to social enterprises and any and all who support social enterprise across the country.  By working together, we all have a greater voice to promote change. Become a member now and raise your voice to support the sector.

The SECC is the only national organization that works to promote social enterprise policy and best practice. Based upon the following six pillars required to support the sector, the SECC has for almost a decade worked with governments, social enterprise supports, community partners, funders and financiers to help build a positive environment for social enterprise to start and flourish in Canada.  These pillars have been used by public policy makers in BC, Nova Scotia,  Ontario,  Manitoba and in federal government departments.

The Six Pillars:

  1. Enhance Business Skills
  2. Ensure Access To Capital
  3. Create Market Opportunities
  4. Recognize Impact
  5. Provide Supportive Legislation And Regulations
  6. Connect practitioners in a strong national network

Annual memberships are inexpensive, and with greater membership, the Council has greater voice in representing those who are using business tools and earned income to create  more just, sustainable, resilient and robust communities across the country.

Join today at www.secouncil.ca.  Become part of the conversation that will chart the future of social enterprise in Canada.

Members are eligible to stand for and vote for SECC Directors–who are unpaid for their work to build the sector– and all members are invited to participate in the discussion on how best to support  social enterprises in the country.

One of the key public activities of the SECC is to work with a local partner to present a national conference every 18 months to showcase success, share best practices, build capacity and develop policy recommendations. Past conferences have been held in Vancouver, Toronto, Halifax, Calgary, and most recently in London (Ontario). The next national conference is planned for the Fall of 2016.

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Make it easy for gift buyers to find your social enterprise

SEontario  invites any Ontario based Social Enterprise [SE] to tell them about their products and/or services available this holiday season.

All through the month of December the good folks at Social Enterprise Ontario will be updating their Social Enterprise Holiday Gifts page, tweeting, and sharing via their news section different offerings from great Ontario SE’s like yours.

Please fill out this online form  to let them know a little about your social enterprise and the products/services that you’d like highlighted.

They officially launched the page on Monday, Dec. 1st, 2014.

Get your products and/or services listed on this gift giving directory as soon as possible, as the page will be updated and maintained all through the Holiday season.

If you are looking to buy gifts from social enterprises…be sure to follow @seontarioweb on Twitter, and visit the Social Enterprise Holiday Gifts page for gift ideas.

Federal Government supports for Social Enterprise

The Canadian Business Network (CBN), created and maintained by the Canadian Federal Government, offers a wide array of support to start-up businesses.

Recognizing the unique needs of social enterprise, they have created a dedicated portal for entrepreneurs using  businesses to address a social need.  This social enterprise portal offers links to resources available across Canada  from community based support organizations and from various levels of government.  The links and resources include technical support on everything from how to do market research or write a business plan,  to funding support for start-up costs or human resource needs.

The Federal Government, in trying to make the CBN accessible to non-profits, co-operatives and solo social entrepreneurs, sought the input from many of us in the social enterprise community. This portal is a concrete step to acknowledge social enterprise and to ensure that programs run by the government (and others) are available for those of us wishing to use business to bring about social change.

Social Delta is of course willing to help you and your social enterprise understand, access and apply any of the resources  made available on the CBN site.

Just contact us to see how we can help.

 

Social Enterprise: How to make your organization stronger

There are many obvious benefits for a non-profit organization seeking to launch a social enterprise: Unrestricted revenue. Sustainable mission-based programming. Less reliance on grant cycles, reporting and application processes. Building new partners or constituencies.

However, often unseen and frequently unsung, there is also a truly transformative benefit that is realized by organizations considering social enterprise: Social enterprise planning and operations allows an organization to “operate more like a business.” Indeed, the very discipline of considering a social enterprise helps an organization focus its efforts on maximizing social value creation.

But what does it mean to “operate more like a business?

First, it is important to note that conceiving, designing, launching or running a social enterprise does not subsume the organization’s social purpose, nor does it convert all decision making to be predicated on money or financial profitability. By definition, social enterprises exist with the primary purpose of improving the social fabric of our community; therefore a non-profit organization starting a (properly conceived) social enterprise should not jeopardize—but will actually strengthen—the organization’s social mission and create a culture of seeking to maximize social value creation.

I acknowledge that operating more “like a business” might sound wonderful to some, yet heretical to others. To address the perceived heresy, I offer the following list of the beneficial changes that might be expected within an organization considering social enterprise:

  1. Place a value on time. Business thinking quantifies return on investment, and time is an investment. The discipline of business planning helps to quantify and value the time of staff, board and volunteers.
  2. View organizational assets as capital. In a non-profit, the organization’s assets—social networks, human resources, intellectual property, cash reserves, experience, networks—are frequently undervalued and it is worthwhile to consider how these various forms of capital can generate revenue and social impact.
  3. Ensure peak performance. If social impact is seen as “profit” from various forms of capital, then the goal of maximizing social impact creates a rationale to reallocate various forms of capital from one initiative to another.
  4. Create and assess new ideas efficiently. Using a business planning process in the non-business activities of an organization creates a sound framework to filter brainstorming results through research, internal capacity, financial feasibility, strategic planning, funding vs. financing, and measurement lenses.
  5. Understand the cost structure. By allocating costs (and revenue sources) to the “business and non-business” operations requires a solid review of the budget, often illuminating activities that may need review or which are unsustainable.
  6. Make solid investment decisions. Strategic planning can follow a more business-like approach, from an analysis of internal and external strengths and weaknesses to how best to maximize the social return on investments of money, time and resources.
  7. Build dignity into the social mission. A business perspective challenges organizations to price products and services based upon cost, and market ability to pay, not based upon a presupposition that everything ought to be free.
  8. Stop the bleeding. When measurements are in place to document social effectiveness, it is far easier to know when to cancel programs, projects, or products if they are not maximizing capital to create social impact.
  9. Release unwanted inventory. If there are assets that are not being used efficiently to support the social mission, then a business discipline offers a clear rationale to reduce staff, sell a building, cancel a contract, sell an “in-kind” donation, etc.

Through these examples and others, I hope it is clear that “operating like a business” is not a dirty phrase, and does not turn a non-profit or a charity into an unfeeling, profit-driven organization. Social enterprise is a discipline, and that discipline includes tools and concepts that can (and in my experience will) directly benefit the operational and strategic choices made by the whole organization.

Social Enterprise 101: Launchpad or Prophylactic?

There are many courses, webinars and presentations that are available offering an “Introduction to Social Enterprise” for non profit, co-operative, or even entrepreneurs in the private sector. What is the value of these introductory courses? Should you register?

These educational offerings are typically geared for those who are considering starting a social enterprise. They are often marketed as the first step on the path of social entrepreneurship. You may have seen promotions from progressive foundations, business schools, social incubators, shared spaces, or non profit intermediaries. Many of these courses are inexpensive or even free—especially webinars, where the overhead costs are low.

In fact, I offer presentations and workshops ranging from 1 hour to 7 hours providing an introduction to social enterprise definitions, trends, opportunities, challenges and business development processes. I have organized and conducted these trainings with the hope that the many attendees of my sessions would walk away as foot soldiers in an informed army of social entrepreneurs and by sheer mission-driven will would start a tidal wave of social enterprises.

The reality is that I think I have scared many of them away.

The more I offer this sort of course, the more I end up focusing on many of the risks and challenges associated with conceiving, designing, launching and running a social enterprise. I believe strongly that every business should operate with a mandate to provide social wealth in the process of conducting business, yet I still find myself highlighting seemingly dark realities, such as:

  • It is hard to operate a business in a competitive marketplace.
  • The organization needs to be ready BEFORE strategic business design.
  • The business operation must align with—and not compete with—the social mission.
  • Customers are a new stakeholder group and must be considered alongside volunteers, operational partners, staff, beneficiary populations, donors, investors, and board members.
  • Financial (seed) capital to start a social enterprise is hard to find.
  • The reality is that an organization may invest 3-5 years before they see earned revenue.
  • How do you protect intellectual property when you want to share it to maximize social impact?
  • Non profit or collectively run organizations are frequently safe, risk averse places and this can be debilitating.
  • There are legal restrictions placed on charities operating businesses.
  • It is a myth that the businesses social value proposition will immediately guarantee sales.
  • Social impact measurement can be complex, yet is vital to design a social enterprise.

Yikes!

Rather than creating a comfortable nurturing space for organizations seeking to design or build a social enterprise, I paint a picture of the brutal reality: social enterprise is harder than it sounds when initially proposed as a strategic planning retreat, a board table, a coffee shop or at a kitchen table of idealistic changemakers.

I’ve now come to terms with the realization that if I share the honest and accurate details of the stumbling blocks faced by most social enterprises, then the very few that will emerge from these introductory presentations to elaborate on their business idea will truly have what it takes to run a business. They must be unflappable, resourceful, risk tolerant, collaborative, resilient, and passionate.

In fact, I suspect many “Social Enterprise 101” attendees will forget the detailed course content, and will end up learning it all again through their own experience.  Arguably, the value of the introduction course is not, therefore, to prepare a veritable “army” of social entrepreneurs; the value of the course is to stop the individuals and organizations who don’t have what is needed from spending time, resources and social capital on starting a social enterprise.

Perhaps one can say that a good introduction to social enterprise workshop is not a launchpad; it is more of a prophylactic that prevents the birth of enterprises that may not possess the necessary conditions for life.

Earned revenue for charities is more than private donations

In 2012, Charities earned more revenue than they were given by individual donors.

According to the recently released Blumberg’s 2012 Summary of the Canadian Charity Sector, earned revenue by charities was $17.7 billion, (up 3.8% from 2011) while receipted donations summed to only $14.3 billion.

Fundraising is also a costly business (and this I know, as I was a fundraiser for more than 17 years). Of the only 975 charities who reported to have paid fundraisers, those fundraisers generated $471 million, while getting total compensation (primarily set salaries) of $110 million. In other words, the equivalent of 23% of donated funds was used to manage the donor programs.

This impressive data collection project underlines the fact that charities are generating more revenue than they are gifts, and this is a sign of how they are investing their time, resources and efforts to sell products and services in support of their mission.

2012:

  • 75,232 active charities
  • $17,562,376,314 in non-government earned revenue
  • $182,195,300 in government revenues (up 36.5% from 2011)
  • $14,283,486,806 in donations

2011:

  • 73, 793 active charities in 2011
  • $16,953,792,416 in earned revenue in 2011
  • $133,474,682 government revenues in 2011.
  • $13,867,060,684 in donations

NOTE: To create the summary, Blumberg’s Law compiled the data from all the T3010’s submitted to the government by charities for the 2012 year end.  The T3010 does not offer sufficient detail to describe the types of business activities in which charities are involved, and there is also the possibility that each of the T3010’s is not perfectly accurate as they are prepared without audit.

Social Enterprise Advertising

I welcome any attempt by a social enterprise to advertise their products or services. When I was reading a recent copy of my community newspaper, I was delighted to see an article on Cigbins, a social enterprise started by three creative University of Ottawa students with whom I’ve worked. Their company collects used cigarette butts and recycles them into one of a number of useful products, such as insulation, thereby helping to clean up the scourge of litter while making something of value in the marketplace. The sale of the final product pays for the initial service. Moreover, the company has partnered with a local charity, Causeway Work Centre, to provide employment and training opportunities for individuals with mental health concerns.  This article, written by Michelle Nash at Metroland media, is a wonderful form of free advertising, although of course, getting articles written about your business is not always easy, or replicable.

Meanwhile, the Ottawa Carleton Association for People With Developmental Disabilities (OCAPDD) took a more direct approach. In the very same newspaper edition, they placed a 6.5″ X 5″ advertisement to sell the garlic that they grow on their farm near Bells Corners. I’ve attached a scan of their advertisement to endorse not only what they are doing, but how they are doing it.

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Grant or Government Service Contract: What’s the difference?

Social enterprises, by definition, generate revenue and social value through the sale of a product or service.  At the same time, charitable programs providing social value are often funded by government grants.

But what happens when a government agency elects to HIRE the charity to fulfill a service contract? In fact, it may not be easy to see the difference between a government contract and a grant.

What are the benefits of one over another?

The Grant

In the grant model, a government provides cash to a non-profit or charity and with that money the charity then delivers the necessary service to fill a social need in our society. The charity then has to account for the expenditure of the funds and report to the funder on activities undertaken and the net effect (impact) of those activities.

Funding relationships give all the power to the granting body, which sets the terms and format of the application and budget and sets the parameters about how, what and when deliverables are to be met. Creating a funding application is also time consuming for the hopeful grantee, often requiring letters of community support, sharing of financial statements, providing names of board members, and painstaking hours of wordsmithing to fit all the good, innovative ideas into a predetermined (often online) format.

Once the grant is awarded (often after months of patient waiting) you get the money, up-front. This is good for cash flow. However, then there are typically arduous reporting requirements to document activities, expenditures, variations in budget and requests (read: apologies) for material changes in scope (often learned only once a social service project starts). Fulfilling the reporting requirements cost your business money (in staff time and resources); these costs are rarely covered by the grant. And, if there is an allowance for reporting or administration, the amount is insufficient to pay market costs or wages.

When you apply for funding, you don’t sell your services, you adjust your business idea to meet the needs of the funder. You don’t create demand; you simply meet an existing demand.

The Service Contract

Social enterprises, however, want to generate income from business activities, not grant revenue.  By seeking governments as “clients,” they can access different pots of money in the public sector.  This is strategically prudent, as governments are reducing available grant programs in so many social service areas, yet they continue procurement activities through competitive bidding in order to provide public services.

When you respond to a request for proposals in a competitive bidding process, such as the federal procurement process at www.buyandsell.gc.ca, you sell your business, and the government buyer determines if you are the right supplier. You sign a contract which states that “if you provide X, you’ll be paid Y.” Admittedly, you don’t necessarily get the payment up front. However, you can negotiate terms that allow for a first payment to be made early, and with a signed government contract in hand, you can access bridge financing at reasonable rates.

As with writing funding proposals, you don’t get paid for your time for this business development, but your government proposal can be branded to your business, and it can frequently take a format that is convenient (even a template) for other sales proposals. Your wordsmithing angst can now be allocated to clarity, accuracy, quality, passion, and not about fitting a response into 750 characters.

If there are problems in the contracting scenario with government, there are arbitration procedures, access to information requests, and public documents that you are eligible to engage at little or no cost. Rather than asking for changes on bended knee (as a grant recipient), contractors frequently negotiate change requests; such requests are almost an expected part of a service agreement.

Best of all, results speak for themselves. Very rarely will a government contract require a “final report” unless the report is an agreed upon deliverable in the contract.  If it is in the contract, then the preparation, copying, editing, distribution, of the report are all paid for at market rates.

Ah, and competitive bidding for contracts has the possibility of the dream of all contracts: the standing offer, or the retainer agreement. It is very difficult to get multi-year funding for social enterprises. However, through competitive bidding processes (which actually cost the government a lot of money to administer) multi-year agreements are more common, and standing offers or preferred supplier agreements are possible.

So what is the downside of getting the government as a client? First, if you don’t perform, they may find another supplier.  Funding agreements are typically set for a year, but contracts can be broken based upon poor performance. There may also be extra requirements for government service contracts, including proof of liability insurance, documented prior experience including client references, and possible security clearances for staff, to name a few.

Also, if the value of the contract is greater than 50% of your total annual operating budget or if the contract dictates the strategic planning of the charity, the contract may cause concern with your charitable registration, as stipulated in the “related business” clause.

Another possible downside is that if you are competing for a government contract, you’re competing against the marketplace, including for profit companies who may be well capitalized, well connected, and well diversified.  And finally, government contracts are typically larger in total value and expected deliverables. Some social enterprises may not have the capacity to scale up to meet the demands of the public sector client, or they may have to form a consortium with another company or another social enterprise to fulfill the contractual terms.

Many charity-based social enterprises may not distinguish between a grant and a contract. After all, both scenarios provide money from the public purse to the charity to deliver social value.  An easy way to tell the difference: if you have to invoice for services rendered, it’s a contract; if you have to report on how the money is spent, it’s a grant.

For a social enterprise, it is arguably better to engage government as a client, rather than as a funder, for the following reasons: You will be forced to perform against market standards; you’ll be tapping into dedicated government expenditure budgets; you have access to transparent processes for recourse to address changes in contract terms; your administrative burden will decrease;  you can pay your staff market wages; and there is a significant possibility of longer term contracts if you meet your client’s expectations.

Oh…and invoicing is far easier (and more rewarding) than reporting!

 

NOTE: this article originally appeared at: http://www.seechangemagazine.com/articles/how-to/743-grant-or-government-service-contract-what-is-the-difference

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