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The Four Horsemen of Social Enterprise

It may sound a bit over-dramatic to refer to the big issues facing social enterprises as “The Four Horsemen of the Apocalypse” but, having spoken to hundreds of social enterprises in the last few years, I feel justified in doing so. These four evils can scythe down everything in their path, stopping you in your tracks and having a serious effect on your impact as an organisation.

What shall we call them? How about:

Confusion

Famine

Failure

Ineffectiveness

Not quite as hard-hitting as the original four – Pestilence, War, Famine and Death – but it’s just as deadly when these marauders invade your business.

What do I mean by them?

Well, Confusion is A Lack of Clarity about your strategy and where you’re going as a business. This is the deadliest of all because without it you can’t go much further and your decision-making, your ability to take advantage of opportunities and deliver impact will be clouded by confusion and, ultimately, inaction.

Famine, in a business context, is A Lack of Resource, which means that you just can’t achieve what you want to, even if you’ve got your strategy sorted out. This can apply to time, talent and, of course, money. You have to be fully resourced and sufficiently funded or the going will be, at best, slow and soul-grindingly frustrating. In the absence of having unending resources at your fingertips, it’s vital to maximize those you do have.

Failure can mean lots of things but here I mean it as A Lack of Enterprising Culture. Social Enterprise leaders have expressed to us many times that they sometimes feel alone in developing their business as just that – a business, where sustainability and even, dare I mention it, profit are key features. This problem can be found even among CEOs themselves who, despite the commercial acumen they undoubtedly have, sometimes still shy away from seeing themselves as business leaders.

And, if it’s not coming from the top, you can’t expect anyone else in the organization to be switched on to the harsh realities of surviving in the world of business. A key to tackling this is developing what we call The Core Habits of Enterprise – Effective Communication (Understanding, Being Understood, Challenging and Transforming Conflict), Plan Do Review, Personal Productivity, Coaching and Being Comfortable with Numbers.

And then Ineffectiveness is A Lack of Social Impact. We’re all in the social enterprise sector because we want to make a difference but how easy is it to prove that you’ve done that?   You can work incredibly hard over many long hours but what does it all amount to in the end? What we find is that there is a lack of clarity on how social impact is actually defined and measured. I’m not talking about spending 1000s on measurement, just something that is appropriate for the scale and complexity of your organisation. Understanding the impact and change will ultimately ensure you deliver better quality services and provide the evidence for your communications and for funders, when you’re seeking investment.

So, taking all of these issues together, we can see that good intentions are all very well but are not enough. They have to be backed up by systematic planning and a set of solid foundations that mean your business is sustainable and the difference you make is real and long-lasting.

Where do these Four Big Issues come from, you may ask? I haven’t made them up. Talking to many, many social enterprise leaders over the last few years, my colleague Ben and I have heard these concerns repeated again and again. On Purpose, who also work with social enterprise leaders, have based their CEO Programme around very similar concerns, based on research they’ve carried out on the sector.

These issues stand out as the biggest challenges that face social enterprises and come from real-life entrepreneurs who are struggling to make that vital difference. So often, soc ent leaders we talk to are in danger of becoming disheartened or overwhelmed by these all-pervading issues.

And these challenges are not confined to the social enterprise sector. All business leaders face them and that is a vital point to remember: Soc Ents are in the same boat as everyone else and trying to survive the same conditions that entrepreneurs are facing in the commercial arena. The aims may be slightly different but we’re all subject to the same forces of nature in all its destructive power.

These Four Horsemen of Social Enterprise have given us the pillars of what we do at Bubble Chamber.   Our approach to business growth is founded on:

  • clarity of purpose (the starting point for everything that follows)
  • developing an enterprising culture throughout the organization
  • scaling up and becoming sustainable
  • delivering social impact

If you can hear the distant thundering of hooves, don’t ignore them but talk to us about the tools we use to help you un-horse these devilish riders and build a positive and effective future.

PS  If you’re wondering about the picture, it’s from the 1921 film The Four Horsemen of the Apocalypse but it could have been taken in some offices we’ve visited!

Top 5 Tips for Gaining Confidence in Numbers

In one of my earlier blogs I referred to one of the biggest barriers to getting on top of the numbers in the business as being around confidence.

There are a lot of very talented CEOs working in the Social Enterprise and charity space that shut down and run a mile when faced with a spreadsheet. A lot of this is down to leaders being told they are rubbish at numbers at an early stage but also not being helped by their accountants. The result is low confidence.

Here are my top tips for building confidence in numbers:

Tip 1: Keep the maths simple

Understanding financial information is all about simple arithmetic – adding, subtracting, multiplication and division – rather than anything more exotic. I know some people will think that’s easy to say but I can assure you it’s easy to do too, by taking a step back and look at the basics. Think of it as storytelling. You tell a story of the services that your organisation provides and the impact you have and numbers tell a story in the same way.

Tip 2: Make your accountants accountable

Accountants are not providing the services they should be. Many provide you information for your management accounts three weeks after month end and will file your report to Companies House for you. The first is not that helpful and the second will soon be able to be done through software like Zero, making accountants surplus to requirement.

That of course refers to those accountants that don’t provide you value. True value comes from getting the right financial info, which:

– can provide analysis and insight in past, present & future situations
– can provide training/support and, importantly for social enterprise, link your social impact measures.

It is suddenly like giving your car a full service history and warranty.

Tip 3: Use a template

There are so many basic templates on the Internet for a P&L and cash flow. Bite the bullet and fill it out with your numbers. Make it real, as there is an emotional attachment when you use your own numbers. After all, the 70/20/10 rule of learning states that 70% of our learning comes from doing.

Tip 4: Get to grips with the language

Like most disciplines, the language of numbers can seem impenetrable and in need of a code cypher to crack it. I had a good example of this only this week, when different enterprises in the same room used the words margin, profit and surplus interchangeably. Add the layer of was it ‘net’ or ‘gross’ and the looks start to get blanker. My advice is that it does not really matter what terms you use but ensure there is consistency within your organisation about what you mean.

Tip 5: Get the right people/structure/systems around you

Having improved your own confidence, and with good accountants adding proper value, the final piece of the jigsaw is having the right talent and structure in place.

Ask yourself:

– Is your organisational structure really matched up to what you need for the size of your operations?
– What financial systems and processes do you have in place?
– What are the skills and expertise of your finance staff and do they really fit into your structure?

This is where the accountants’ value can really come into play as they advise you how to set this up correctly.

Going through an investment readiness programme can assess this and advise on changes made to make your organisation more robust. Big Lottery’s Big Potential programme is worth a look www.bigpotential.org.uk

Cash will always be King!

The thought of working with figures and managing your cashflow is probably not the thing that gets a social entrepreneur out of bed in the morning!

However, having a grip on your numbers is likely to keep your enterprise in business. Dun & Bradstreet state that 90% of company failures result from cash issues and, having recently done a lot of investment readiness work with charities and social enterprises, I’ve realised that the “Cash is King” message is still not sinking in or being acted upon.

A crucial message to get across first of all is that the money is not the sole responsibility of the Finance Director and/or treasurer. It starts from the top and that means the CEO being able to understand and manage the figures. But then at every level, down to managing even a small project, people need to have the basic skills and processes to keep cashflow positive. There are skills and techniques to learn but a lot of it comes down to confidence with numbers. I can’t tell you the number of times I’ve heard a CEO say they were told at the age of 14 they were useless at maths. It can have a long lasting impact!

In a future blog I will look at emotional attachments to numbers but, for this one, I will concentrate on some simple tips to manage your cashflow.

Manage your cashflow effectively:

Tip 1: As mentioned, the cashflow is the ultimate responsibility of the CEO. There needs to be a finance strategy for the organisation that includes goals/targets for cashflow as well as other areas like profit and reserves.

Tip 2: Actually do a basic cashflow on an Excel spreadsheet – sorry, that sounds condescending but you would be surprised how many organisations don’t have one. There are literally hundreds of basic templates out there to choose from and all you need to do is list all your income sources and lines of expenditure.

Tip 3: A useful analogy that worked for me is to think of cashflow as a water tank. Filling up the tank with water is the ‘income’ and draining the tank is your ‘expenditure’. The obvious aim is not to let the tank run dry. It’s all about maintaining the flow in and out that allows you to effectively manage your business.

Tip 4: Credit control is the tool that controls the money flowing into the tank. Areas to really focus on here are your invoice/contract payment terms (number of days) and then have the systems/processes in place to chase/collect the money if the customer goes over the number of days.

Tip 5: Managing the flow of cash out – equally important here are the payment terms you negotiate with your suppliers on the timeframe you pay them. You can also look at options such as leasing instead of buying items outright to avoid big lump sums draining from the tank.

Tip 6: Every organisation should have a set of management accounts
. You need to be able to analyse your financial info to be able to make effective business decisions. The problem is that these accounts usually only look backwards at what has happened financially. This does not help with cashflow. You need to be able to look into the future and forecast what level the water tank is going to be at. Don’t forget you can then measure your progress against your targets in your strategy.

Watch out for more blogs on cash and other business principles for the entrepreneur. Any questions, contact me at craigc@bubblechamber.net