Is social becoming less enterprising and more charitable?

Some people may know that I like both data and legal forms (amongst other things). I can play with both in isolation, but I particularly like combining the two because of the new insights it can offer us.

Each year I try to check in with the respective regulatory bodies who oversee the principal legal forms in use in the social economy (Charities, CICs, Companies, and Co-operative Societies), to skim through their annual reports and pull out the latest numbers on formations and dissolutions.

changing trends in who's registering what form

I share visual charts of these numbers in workshops I deliver on legal forms - not to try and influence people's choices about what they should 'be', but to offer an additional and alternative perspective that can help prompt more critical thoughts and questions so that they can ultimately be more comfortable and confident in whatever they end up being. I've been tracking this data since 2017 (nearly 10 years), and this years' spreadsheets highlight:

• the long-term trend for 'sustainability' (how likely you are to be wound up based on your legal form) shows CICs and Companies remaining roughly equal with about 12% of each being de-registered each year. This compares to charities and co-operative societies that are wound up at 3% each.

• But what's seemed to 'jump out' this year is the figures for 2025 compared to the previous trends: new CICs have been registered at a rate that's 20% higher compared to 2024, with no change in companies, (and a halving of the rate at which new co-operative societies have been registered). But the registration of new charities was double what it was in the previous year.

Which means if we're using legal forms as a proxy indicator (of sorts) to understand what social enterprises and social entrepreneurs are experiencing in their business models, this seems to suggest that there's a growing difficulty in their generating traded revenue (hence the static or reduction in the growth of 2 of the 3 legal forms that are designed to encourage trade), and a growing need for financial support in the form of maximising eligibility for grants and reducing tax liabilities (based on the doubling of new charities being registered).

less faith in the social enterprise model?

Most of us in the sector are aware of it being the worst time in living memory with regards to being successful in grant funding applications, but with wider economic pressures that we've seen growing over the last year, are we starting to also see the trading models that new social enterprises are considering reflecting this pessimism in marketplaces too? 

As always, I don't post and share these notes as a definitive position, but to offer perspectives that may hopefully help us have better conversations - and better conversations can help us create better impact (and can also include me changing my mind, as I have in the past!). 

missing the mark? what the latest research about social enterprises suggests about those who support them.

At the end of each year, most people get excited about what's behind the next door of their advent calendar, or the prospect of up to 4 weeks to indulge in unlimited mince pies.

Not me.

I look forward to the bi-annual state of the (social enterprise) sector research, that's published by Social Enterprise UK which is also released at this time of year.

(But I do also love mince pies...)

And that's because I'm always interested in what data tells us about what's really being experienced within the sector by those doing it, rather than the rhetoric of policy makers, infrastructure bodies, and people who speak about the sector - and yes, being led by the data and research does frequently see me being put in the naughty corner for the upset it can cause to other bodies because it can sometimes contradict their narratives and positions...

But to be clear: I never intentionally try to embarrass anyone publicly, but have an idea that if someone is going to be making decisions that affect their enterprise and personal future (and that of their family and wider community by association) then surely we should be offering the best-informed insights and options, because it's they who'll have to live with the consequences of those choices, not us?

So - to this latest research and what I'm reading from it (although other interpretations may be, and are, available: please check out the report yourself and draw your own conclusions): Backbone of Britain - State of Social Enterprise 2025;

and as with all research, remember to approach with caution: large data sets like these only reflect the 'main middle' - there will always be exceptional stuff happening around the edges...

the sector is very unequal

Roughly half of all social enterprises are below the VAT threshold by turnover (currently £90,000), yet their average number of employees is reported as being 6. Assuming that people aren't being employed on a 1-day week basis (the only way you could get these 2 numbers to line up), this suggest a sector that is made up of a lot of small social enterprises, with a disproportionate influence of a few very large ones on the overall picture we're being presented with.

legal structure choices and experiences continue to throw up surprises

The number of CICs in the sector appears to be starting to 'flat-line' over time (which is in keeping with longer-term trends about the numbers of CICs from the CIC Regulator), in contrast with Companies Limited by Guarantee (the most commonly used, and favourite choice for social enterprises for over half a century, before the CIC was proposed by government).

This contrast between CIC and CLG isn't constrained to their seeming popularity - CLGs are also reported as typically generating higher incomes than CICs.

But the historical OG of all legal forms continues to outpace all other choices when it comes to how large their turnovers typically are - co-op societies aren't going anywhere soon (which is also reflected in their having a far lower wind-up rate than both CICs and CLGs).

an increasingly weak financial position and outlook 

fewer social enterprises are reporting being able to generate profit, with nearly half now only able to achieve a financial break-even. But this seems to be galvanising social enterprises to focus more on making sure they're getting the most of what cash they are generating:

-  1 in 3 of all social enterprises seeking support say it's in relation to strengthening their financial management;

- there's a reducing trend of how far social enterprises are able to invest in training and development for their teams;

- there's a significant increase in social enterprises seeking support around the topic of redundancy, suggesting a sector that's starting to recognise the need to make hard choices about its future.

most social enterprise trading models remain in avoidance of delivering  public services

In keeping with historical trends, the main customer type of all social enterprises isn't the public sector to deliver contracts on behalf of, but us, the general public - only 1 in 5 social enterprises base their business model on delivering public sector contracts, and 2/3 have never engaged in this type of activity. 

But for those that do, 1/3 report struggling to engage with procurement processes and systems - suggesting still more needs to be done to level the playing field, despite 20 years of national campaigns, programmes, initiatives, and lobbying by different sector bodies.

social investment offers are increasingly out of touch with the sector?

There's a growing trend of social enterprises saying that social investment offers are too expensive and/or not designed to offer them what they need, with a growth in high street banks being turned to for finance instead.

But there's also a weaking of the wider sectors' ability to raise investment in general: the typical amounts being sought to be raised, and the likelihood of success in doing so, both continue to fall...

a determined sector, nonetheless

But in the face of the above, the social enterprise sector appears to be doggedly resilient and sheer bloody minded about finding ways to keep going:

- where investment is being sought, it's for stuff like buildings and equipment, showing a long-term strategic planning focus, rather than looking for 'quick fixes';

- similarly, the topics that make up the top 1/3 of all requests for support relate to strengthening systems for the long-term, rather than 'quick wins': governance, leadership, impact, and accessing training opportunities;

- and while the development of new offers and services continues to be the main way in which most social enterprises are seeking growth, that they're doing it with less investment shows 'frugal innovation' at work (pointing to a high degree of resilience and adaptability; although 1 in 5 also say that their ability to grow and adapt in these ways in being hampered by a lack of suitable, accessible, or appropriate support for them).

So overall, it initially looks concerning (although with some signs for hope) - but we should never read research in isolation: looking at comparable trends for both traditional charities, and private businesses, shows these themes are being similarly felt there (and usually to a more painful extent!).

And if this reflection seems overly critical, then maybe it is - but as a sector, social enterprise has huge potential if it can only plug into the right things. And from this latest mapping, it might seem that some of the things which were created to do just this for the sector may be starting to struggle to keep up with what's needed from them?

Why social entrepreneurs (can) never retire

In my decades of walking around different parts of the social economy, there's something that's always personally bugged me - far too few people encourage us to openly talk, and think about, how we get paid (and how much we should be paid).

The focus always seems to be on supporting a person or groups' shiny social enterprise idea, and how to help it create as much impact in the world as possible. There's an implicit assumption that the social entrepreneur leading it will not only be able to give the emerging and growing venture whatever it needs from themselves personally (time, energy, own money, etc), but that they'll be able to do so indefinitely without needing to take anything from it to balance/in recognition of this.

Also, there doesn't seem to be any talk of 'succession' or 'exit' (such as we see in 'mainstream' business support programmes). There's little or no option for social entrepreneurs to take any form of future 'sweat equity' in lieu of foregone wages, the lost time they've incurred in otherwise having been able to build up savings for their own retirement, etc; (does this mean we may see future generations of social entrepreneurs retire into poverty?).

This also creates problems beyond those for the individual person as outlined above - most people who pick up, or are offered the badge of 'social entrepreneur' aren't in privileged or independently wealthy positions. They (we) need to continue to earn money to pay our rent and bills with. And as social enterprises are usually relatively slow to start to be able to generate enough cash to offer and sustain wages, this usually means many start life as 'side hustles' alongside other paid work that the person needs to maintain so they can still afford to live. This in turn, creates more tensions and potential issues for these new social enterprises, as they're being managed with a part-time/split-focus founder.

But despite the potential gloom in the above, I'm starting to see/take some encouragement from a small but growing trend of people who seem to be similarly feeling able to start to talk more openly about the social enterprises they're developing, and who need to recognise and reconcile these tensions and possible contradictions - this has led to my being asked to explore more 'group structure models' (using combinations of linked legal forms to help best manage the tension between a founders' personal, and their respective communities' needs, both now and into the future). It's also involved my starting to be approached by the leaders of more established social enterprises and charities, asking for support with salary benchmarking (although to date, this has highlighted how in general and as a whole sector, we usually pay our people and selves less than in other sectors for broadly similar roles, and this includes with making less provision for future pension and retirement).

I also recognise the tension that underpins all of this - if what we're doing is to ultimately create social good, then to pay better wages etc, we need to charge more. But how can we feel comfortable doing this when we see that the communities we support are in poverty, etc? 

But if we don't find ways to start to address these elephants, then we risk losing talent and skills as people may begin to feel that they can't continue to trade off their personal futures for the sake of helping others today - and actually, research from Social Enterprise UK shows that social enterprises are generally more likely to be profitable if they're trading in areas of deprivation; so it seems that there are ways to reconcile this apparent contradiction.

 

I have an idea that the only way we can start to break this taboo of social entrepreneurs being able (encouraged, and allowed) to pay themselves both today, and with regard for their future retirement chapters without feeling guilty for doing so, and the limitations it's placing on the sector as a whole, is by trying to talk about this more openly and in grown-up ways.

To this end, I'd encourage anyone reading this to share, reply, and engage in these conversations where and how you're able to (although I recognise that talking about money isn't something we Brits do very well). But if no-one talks about it, then nothing can ever change...

How I've become a daily 1 minute habit for people in 20 countries around the world

As part of reflecting on 2025 being the 20th anniversary of my business, I started to wonder what else was similarly 'birthed' in the same year.

It transpires that YouTube and I both share the same anniversary!

So unless you've been auto-playing the contents of my channel there, I wanted to take this opportunity to do a mini-audit of how my life on YouTube has played out over our lives together so far.

What I've found is that since launching my channel, and generating content for it, most people who find me there do so through my shorts (the videos, not the apparel) or from a direct link from someone else's website.

They've come from over 20 different countries, and over the lifetime of my channel have watched an average of at least 1 minute of my content every single day of every single year.

That doesn't seem too shabby?

The specifics (if you want to get grainy about it) = 

Firsts

1) The first video I uploaded was in 2010, being interviewed for a national project about empowering adults experiencing mental ill health to create their own social enterprises:

https://youtu.be/8AduAsnWMjE 

2) The first content I purposefully created wasn't until February 2020, and was about why should never trust your business adviser (which includes me!):

https://youtu.be/ZpPYqBlt1Ek

3) and my first short was in November of the same year (2020), celebrating the special relationship that social enterprises share with toilets (the first, but not last, time I sat on the porcelain throne to record content!):

https://youtube.com/shorts/EFLDDvLwOrU?feature=share

Biggies

1) My most viewed short on YouTube was about how I'd made a low-tech Meeting Owl Pro:

https://youtube.com/shorts/flf0GExdbsc?feature=share

2) My most viewed video was a rallying cry to stop people using the word 'pivot' during a pandemic: 

https://youtu.be/4G-iHsWIszQ

Guesting

1) The first video I appeared in anywhere on YouTube that someone else had created and uploaded (to my knowledge) was in May 2013 - effusing about the Responsible Business Standard:

https://www.youtube.com/watch?v=EBx1qWHWt_U

2) The most viewed video of someone else's that I guested in, was recorded in Sept 2023, about redefining the concept of social entrepreneurship with Anne Scottlin:

https://www.youtube.com/watch?v=jxm8p7w59uQ

Playlists

I curate several playlists in my channel, the most popular of which is my collection of shorts and being interviewed by other people on their podcasts on the topic of imposter syndrome:

https://www.youtube.com/playlist?list=PLbjwTqLUXg99vP8ZLwQhn_vPYY1xlF0ON

So, if you're a Youtuber too, how does your content and audience compare?

After 20 years, people's love affair with CICs seems to waning (or, did anyone else spot that CICs are now becoming rarer in the wild?)

I've always had a personal interest in the government's flagship legal form for social enterprises, the Community Interest Company (CIC), for lots of different reasons.

And I find myself regularly revisiting various published data sets about them - not (always) for idle curiosity, but usually because at least once a year I'm asked to write a feature article about them, or offer comment as part of a national programme or event. And I always try and make sure I'm speaking/writing from a place of actual fact, rather than regurgitating truth illusions about them...

Now, if you know my reputation in relation to CICs, then you may be thinking that I'm about to talk about the data published by the CIC Regulator into how many investigations they've opened in response to complaints and concerned raised with them about the conduct of CICs. Sorry - I'm not, although this number (and trend) is worryingly still zero, despite public frustrations shared by the Fundraising Regulator earlier this year about complaints people are making to them about CICs; and the BBC, Police, and others publicly raising concerns about CICs last year...

I'm instead looking at trend lines - those things you can draw on a chart that show a pattern between a set of numbers that keep changing each year.

I've been tracking data annually, as published by the CIC Regulator, about how many CICs they register each year, and how many they agree to wind up (spoiler: the closure rate of CICs is broadly the same as for all regular private companies, and always seems to have been). 

This is a pretty chaotic chart at first glance, but when you ask excel to plot the 'trend line' (the overall year on year average based on all the numbers across all the years), then there suddenly appears to be a tipping point emerge:

Somewhere around 2023, the average rate at which new CICs are forming (their year on year % growth) became less than the average rate at which they're being wound up (how many are wound up that year as a % of the overall total).

Which means that unless something shifts (and its hard to see what, after the announcement earlier this year that the CIC Regulator will be being wound up itself before the next general election, with no real detail of what this means for existing or future CICs), then CICs will become increasingly fewer in number (based on more of them will be being wound up than are being registered to replace them).

I wondered aloud several years ago if the honeymoon for CICs might be over in light of the exponentially growing number of complaints people were making about them to the CIC Regulator (none of which were ever acted on) - but this data which now shows how people are now choosing them (or not), seems to suggest that 20 years after they were launched as part of a government policy agenda, the honeymoon for them really is now over?

Did I help kill the CIC Regulator?

I'm aware that in some quarters of the social enterprise sector, I have a reputation as being "the CIC killer" - and I've never hidden my confusion about the Community Interest Company form, on the basis of the weight of evidence and research showing that none of the claims made about it seem to actually stack up, and its the only legal form that was created as a direct result of a government policy agenda (in contrast to the wider social economy who, at the time, said that they didn't need any new legal structures).

And as part of this, I've also sought to constructively challenge the CIC Regulator (in the spirit of trying to help build a stronger wider sector through more critical debate) - both through attempts at direct contact and conversation, but more often through various published articles in sector media, public posts, and fact checking that I've shared through this blog (because they've usually not reciprocated my efforts).

So it's with a strange mix of feelings that I read the recent news that the government has decided to wind up the CIC Regulator (and transfer its functions to Companies House) - on that basis, I can't help but wonder how far the CIC form ever had anything that special in it after all, because they've not been able to identity any justifiable reason or benefit to keep them in place?

(Some may recall previous posts I made about the 'unique features' of CICs actually having always been available to any limited Company, and that for 20+ years, Companies House has been enforcing these already and has been continuing to do so; and that I've repeatedly highlighted how the CIC Regulator doesn't seem to be able to discharge its most basic functions...).

So - I once changed CIC legislation, and I now seemed to have helped remove their Regulator. What are the chances of me pulling of a hat-trick on CICs in the years to come..?

  

https://www.gov.uk/government/publications/a-new-approach-to-ensure-regulators-and-regulation-support-growth/new-approach-to-ensure-regulators-and-regulation-support-growth-html

https://www.gov.uk/government/news/proposed-merger-of-cic-regulator-to-companies-house

more awkward moments for CIC Regulator?

OK - so this post is in my bucket of 'more likely to cause upset and controversy', but sometimes you have to be unpopular for the sake of trying to further a debate or conversation, in trying to figure something out for yourself...

I've never hidden my confusion about CICs since they were first mooted by a drunken solicitor, as to what it is that they actually add to the social enterprise sector (there's nothing unique in them that you can't have in any other legal form, they're no more attractive or eligible to apply to grant making bodies than a 'regular' company, and don't enjoy any of the tax breaks that charities do).

But I was always encouraged by the CIC Regulator in its early days - for its being open to engage in critical debate, and willingness to hear and receive arguments that there may be parts of the CIC design which needed to be reviewed.

However, in more recent years, I can't help but start to think that the CIC Regulator is increasingly doing not just itself a disservice, but also the CICs that it oversees, and the wider social enterprise community:

In the past the CIC Regulator has:

• Publicly stated that in order to protect trust in the CIC brand, that it will never disclose or reveal any investigations it opens, or actions it takes, against any CIC (including to the persons who may have initially raised concerns about it with them). But such secrecy surely only builds mistrust, especially as its in complete opposition to the position of every other regulatory body.

• Stated untruths about the general public's relative trust in CICs over Charities.

• Created a governance code for CICs, to help guide and inform Directors of them as to best understanding the legal duties associated with being such, and how to effectively lead a CIC in this capacity - but never told any CIC about it (and it's not even hosted anywhere in their website pages).

• Admitted that there are parts of the CIC legislation that don't make sense, and shouldn't be as they are, but don't have any direct powers to act on this when it's brought to their attention.

And more recently: 

from late 2023 to the present - I've noticed that I'm increasingly meeting more 'new' CICs (registered in last few years) who are missing core details in their registration documents which should have meant that the CIC Regulator automatically rejected their application: 

• they don't have any stated social objects clauses in their Articles; 
• they don't have any statements about how their profits will be used; 
• there's contradictory details about the named recipient in their asset lock.

- These are part of the key features of being a CIC, which are apparently regulated and assured by the CIC Regulator (except they're obviously not).

in 2024 - the BBC exposes a the illegal, unethical, and questionable management practices of a CIC that have been taking place over several years. The feature drew national interest, response, and comment from the Fundraising Regulator, Police, safeguarding bodies, and even the Charity Commission. But there were no responses from the CIC Regulator to any requests made to it for comment (including not even an acknowledgement of the request).

in the spring of 2025 - I've just been approached by a CIC who's annual accounts were accepted by Companies House, but it's taken the CIC Regulator a further 6 weeks to spot and request that they amend the CIC34 part of their return in relation to an oversight on the CICs parts about a note in the accounts. 

But the CIC has fulfilled its filing obligations with Companies House, so is surely legally compliant - its hard to understand how the CIC Regulator would then take nearly another 2 months to check what was submitted: a Regulator is surely supposed to check everything is in order before accepting them as being filed? So if Companies House have already accepted the accounts (which the CIC34 forms part of), then it's hard to see what/how the CIC Regulator can do to enforce getting any such oversights subsequently resolved, as they relate to documents that have already been legally accepted? 

The only resolution I can currently think of to this contradiction is that CICs are subject to even more confusing regulation, which means that even though they've been told by one regulator that they're compliant, another could then overrule that decision - which in this instance would mean that the CIC in question is suddenly and unexpectedly facing backdated fines, prosecution, and being struck off the register by Companies House for not submitting compliant accounts when they were supposed to have (even though they were told they had at the time), because the 2 regulators that CICs are subject to, don't seem to be able to work that well together as we all think they do?

I know many people extoll CICs as a great legal form - and I've always been open to hearing their arguments, experiences, and evidences. On occasion, I've also agreed with them that this legal form really was the best choice for them. But when the regulator of a legal form that was so publicly marred in controversy as it was in the national media last year; and when so many 'advisers' seem to keep reiterating 'truth illusions' about CICs; and that their Regulator seems to be increasingly 'asleep at the wheel', surely only makes us more concerned about how far we can trust and have confidence in any enterprise adopting this status?

But as always, I'm open to people helping me spot what I've otherwise missed, and if the weight of evidence so compels me as it has in the past, to once again change my mind...

  

  

why cowbells, 3-year olds, and punching bags are a better way to create social enterprise policy

"We need to get more experimental with creating national policy" - is the encouraging takeaway I took from my recently being part of the global Social Enterprise World Forum Policy Forum event.

Showcasing a range of insights and experiences from around the world, the Forum offered a rare opportunity for people within all parts of the wider social enterprise ecosystem (from start-up social entrepreneurs, to global policy managers in the UN), who wouldn't normally be able to meet each other to question, challenge, encourage, and inspire in ways that don't usually happen.

It was also far from what some might have expected in terms of how research was shared, ideas provoked, and people engaged, as the title of this blog post suggests!

Listening to the debates; reflecting with others in the speed networking slots; (and yes, for those of you who know me, I was also doing lots in the chats of each session I joined); it struck me that a lot of policy we've seen in the UK over the last 20-30 may actually not have been that great for the impacts they've created.

Sharing stories through the conversations made me realise/re-enforced my ideas that:

- the reason we have an apparent glut of social investment that most lenders are struggling to 'get out', is because it was a government policy agenda that said it would be a 'magic bullet' that the sector needed (but with little research or evidence to substantiate this)?

- it was also government policy that gave us the Community Interest Company (CIC), at a time when it admitted that the wider sector had no stated need or appetite for any new legal forms. It also created them in a way that simply 're-badged' various existing company features as something 'new and unique'. Perhaps this the is reason why CICs seem to have always struggled to have more longevity than regular private businesses, and are usually more reliant on grants than charities are?

- and those early policy agendas also drove the impetus for social enterprises to be delivering public sector contracts: yet the researches that have been published in subsequent years point to most social enterprises not using this as a mainstay of how they trade, and for those that do, they often do so at a trading loss?

But despite this, having had separate policies as we have, has meant the profile and awareness of the concept of social enterprise is higher than it might have otherwise been.

However... I was also reminded as I traded stories with others in the Forum, that most of the research about the specific needs of social enterprises shows that they have more in common with private businesses than not - and in the very early days of the explosion of interest and activity around social enterprise (at the turn of the millennium), it was 'regular' business support bodies and services, and the policies that informed them, that sought to integrate the majority of support for this 'new' sector.

There was subsequently a 'parting', but now, 20-ish years on, I'm starting to see some signs that there's thought and interest in exploring how they might be re-integrated (through the likes of Growth Hubs, Shared Prosperity Fund programmes, etc). 

And perhaps this emerging possible refocussing of policy is coming about because we've now had sufficient time to understand the impact of these early policies? As one of the key speakers suggested, "it can take at least 5-10 years to understand the impact and effects of a policy, so we need to treat them as more experimental". In those early days of social enterprise, there was scant data to base policies on, in comparison to what we now know and understand - so maybe policy makers need to start being braver in resetting the paradigms that they're working with? 

However, creating such a shift will take time and effort - and for those making the policies, represents a scaring foraying into new unknowns.

Maybe the best way we can be part of bringing this change about, was an idea shared that social enterprises might best create influence amongst policy makers by 'stealth': offering and asking to engage in staff secondment schemes, so that those informing the design of future infrastructure get first-hand experience of the realities of how it would be likely to be actually experienced by those it's intended to benefit. This may not be the usual 'showy' way that we're encouraged to try and lobby and advocate (with huge petitions, and PR stunts), but reminds us that everyone in the wider (eco)systems are ultimately human beings, and we can best get things done by engaging and building relationships with each other as such.

For more reflections on the Forum, see - https://sewfonline.com/empowering-rural-communities-and-youth-sewf-policy-forum-highlights/ 

profiting from despair - the unfortunate truth about how social enterprises become successful?

There's a common narrative that social enterprises step-in where private businesses can't or won't, and when public services are lacking, to plug gaps in order to ensure people have access to support and activities that they need - something that has been re-iterated in every government national policy document for/about the sector since their first one in 2001.

And ongoing surveys by the likes of Social Enterprise UK into the sector show how it appears to be more resilient and diverse than its counterparts in the private sector.

But...

I've come across a few studies and research reports recently which make me wonder if we should be having a discussion about the ethical implications of this, rather than keep congratulating ourselves each time the updated State of the Sector report is released?

And also, if we should be re-visiting our expectations and understanding about the factors that help drive the growth and successes of social enterprises? 

- A research paper about social enterprises in France found that they prospered more when the wider economy was suffering, and tended to simply 'get by' when the country's economy was performing well (in contrast to private businesses, who grew when the economy grew, and struggled when the economy struggled): https://emes.net/publications/conference-papers/9th-emes-selected-conference-papers/ownership-structure-over-the-business-cycle-evidence-from-france/ 

This trend would also seem to be evident here in the UK, based on data reported by the ongoing VCSE Barometer study, which shows that charities seem to have an opposite hiring trend to private businesses: when private businesses slow the rate at which they're investing in growing their staff, charities are increasing their recruitment, and vice versa:

Could this suggest that social enterprises are a bit like spider plants (also sometimes referred to as the entrepreneur in plant form): if you tend to it too much, it'll wilt. It tends to prosper best when faced with harsher circumstances (less water, less light, etc) than most plants need in order to survive. 

And this is potentially a key understanding - we know our economies go through rounds of repeating recessions and boom periods, as part of natural cycles that will always happen (despite what politicians might like to otherwise hope and believe).

And we know that just as booms tend to create more opportunities for people, recessions tend to see jobs being lost, firms being wound up, etc.

We therefore need to recognise the important role of social enterprises in helping to 'prop things up' in those times of recession (a period when the data seems to suggest that they perform at their best), to help mitigate the negative impacts of the downturn in the wider economy; and crucially to provide a hope and assurance that things will keep going and remain open for people.

But what is it about such harsher trading environments that force private businesses to struggle, but enable social enterprise to thrive?

 

- Also, Social Enterprise UK's State of the Sector mapping raises some potentially important questions that may merit exploring further, through an ethical lens?

* while social enterprises are more likely to have women, BAME, and people with disabilities in leadership roles than private businesses, those that do are usually smaller and generate less income than those that don't.

* those social enterprises that are based in areas of higher deprivation are more likely to be profitable than those that aren't. And as most social enterprises' main customer is usually the general public, this surely prompts a question about how far should social enterprises go in ensuring that they're financially sustainable by generating a profit, but how much should that profit be, if it seems to be increasing where their customers are in greater need of support?

* and social enterprises seem to be less present in sectors and services relating to supporting employment, housing, and social care - areas where there's widespread agreement about there being the most need. 

As with (mostly) all of my blog posts like these, this isn't intended as a bashing of the sector, or the bodies that support and advocate for it - but a reflection on what various sets of data are potentially highlighting. 

That's because I've an idea that we need to get better at looking at numbers like these, if we're to properly understand how to best make sure that we're enabling social enterprises to realise their full potential for all of us - and surely we can only design support that we can be sure works for the benefit of everyone, if we keep asking questions like these?

The blind leading the blind? (is it any wonder people are confused about social enterprise structures when national sector bodies' advice is lacking or wrong..?)

Some of you will know that I seem to have a reputation in relation to legal structures and social enterprise. Based on ongoing research and evidences I try to source about all the claims, experiences, and realities made about them, I:

• get asked to deliver masterclasses for university business schools' MBAs on the subject;
• am the lead adviser in some national bodies' mentoring programmes on the subject;
• 'accidentally' changed CIC legislation so it stopped forcing the governance of social enterprises to act in ways that were contrary to the sectors' values;
• am commissioned to create resources and train sector advisers on the subject;
• have created a simple framework that people say is a great way to help them better approach starting to think through/navigate the options available to them;
• help unpick and restructure social enterprises who realise they've incorporated with the wrong form (which they usually picked on the basis of an 'expert advisors' encouragement); 
• have been subject to personal attacks, and investigations by regulators, because I've spoken out about when research and evidence seems to contradict the policy and direction of some sector bodies'...

But whichever of the above guises I'm working in, people usually have the same starting point of feeling "confused by it all" - and after recently sitting in on a national webinar designed to help social entrepreneurs best think about how they choose a legal form, I'm worried that future social enterprises will be in even bigger messes.

Over the course of about 20 minutes the lead adviser of a national social enterprise sector body revealed that:

1. they were unaware of how many options there currently are that a social enterprise can be created with (14);
2. they didn't understand why Companies limited by guarantee, despite being the most popular choice for social enterprises to always adopt, are able to be recognised as legitimate 'social enterprises' (Companies Act 1986);
3. they weren't able to state what the potential benefits of having exempt charitable status might be if you were a Community Co-operative Society (less tax on trading surpluses, greater ability to apply for grants than a limited company, business rate reliefs); 
4. and that they didn't fully understand what the rules around 'Persons with Significant Control' were, which apply to all companies and CICs, and form part of the legal statutory rules which a social enterprise would have to comply with if they chose this form.

On the basis that you don't know what you don't know, and the questions people brought with them to this session highlighted that the lead adviser's knowledge about the scope, range, and detail of what relates to the subject of legal forms for social enterprises seemed to be more limited that they realised it was, is the sector increasingly becoming "the blind leading the blind"..?

turns out I may have been right about CICs ever since they were first introduced!

13 years ago I posted my first blog about my ideas relating to the much hyped (and sometimes fetishized) legal structure for social enterprises, the Community Interest Company.

But I've been interviewed about CICs for other people's podcasts and blogs since before that (2006 seems to be the earliest reference I can find to my name or voice in someone else's on-line space!)

And in all of these posts, there's a bit of a common thread: a concern that this legal form may not be everything that most people make it out to be, and understand it can do for you - and how the Regulator for them may not always be that au fait with them either! And all of these positions are based on multiple published sources of evidence and research.

http://thirdsectorexpert.blogspot.com/search/label/Community%20Interest%20Company

Every conversation I've subsequently had with individual social entrepreneurs and/or social enterprises about this form ends up the same way: with those people asking why anyone would ever want to be one?

But over the years this 'open questioning' about what the actual benefit and relevance of the CIC form might be hasn't been without fall-out: I've seen people professionally attack my reputation, sector bodies unofficially blacklisting me, and some regulatory bodies opening files on me...

Yet the edict of "CICs are great - keep setting yourself up as one" seems to have continued over this intervening 15 year period. Until now.

Because now, national social enterprise media are starting to share the data from the CIC Regulator that I've been looking at over the years, and like me, starting to ask questions about how fit for purpose this form really is.  You can read the full Pioneers Post feature over on their website (https://www.pioneerspost.com/news-views/20220812/community-interest-company-closures-72-latest-financial-year), but I've collated their key charts from the piece below which seems to reveal something of a trend - even allowing for "pandemic exceptions" that might otherwise be skewing the data:

* the number of CICs being wound up each remain seems to remain pretty steady at around 12-15% of all all CICs - which suggests that there's a consistent notable proportion of people who are adopting this form, only to realise it doesn't work for them;

* the growth rate in CICs seems to be falling over time.

Which take me back to the title of this post - despite not being a qualified solicitor or statistician, it appears that everything I've ever posted, and talked about, in relation to this legal form has been right after all!

But so what? I'm still hearing lots of people who are being wrongly advised about this legal form and what it can offer them, despite all the evidence and research to the contrary that I've been openly sharing for over a decade.

This is perhaps where you can help, as the reader of this post - please consider sharing it to your contacts and networks through social media, etc: not as any form of endorsement of my ideas, but in hopes of continuing to widen and further this conversation....

social enterprise legal structures for humans

Some people regard me as an expert authority on legal and governance forms for social enterprise, community businesses, and co-operatives - and while I always encourage people not to trust any guidance I offer them on this topic (because I'm not academically accredited in legal stuff, and more importantly because I'm not the one who's going to be legally responsible for administering the chosen form), people take encouragement from my achievements in changing company law, navigating Society Rules with the FCA, and finding paths through charity legislation.

Over the decades that I've been supporting people understand these choices, I've created a few tools/prompts to help focus discussions and reflections ('CHAMP' and 'Adrian's 4-boxes') - but this post isn't about those tools - instead it's about a 3-part limited youtube series I was invited to be part of the 'main cast' for.

A contact through one of my networks had approached me to ask if I could help them explore and understand what the best legal form for a new social enterprise they were developing might be. And as we talked about how I might offer guidance and assistance, we hit on the idea of making this a 'performance piece' - drawing back the curtain on how people usually go through this process as an encouragement to the wider sector, and also a working out of some of their (and the emerging enterprises') values.

So we scheduled 3 afternoons to talk though approaches to not only understanding why this legal form question is so important to get right, but the different ways we can pick and choose between them, and finally, applying all of this learning in real time/live to their nascent social enterprise.

There's an 'official' long post on LinkedIn by Matthew Bellringer (the contact that sparked this) where you can get the official story of how this series came to be: https://www.linkedin.com/pulse/foundations-thriving-social-enterprise-matthew-bellringer/ but I wanted to take the opportunity to reflect on how I found this process, in it being different to the ways in which I usually offer this type of support - to pull out what surprised me that I hadn't considered before, what was an encouragement in allowing more time and space to explore than is usually available, and some of the things which you don't normally hear or read about in this area.

So - the below points are what I think are useful framing/warm-up for anyone thinking of approaching either choosing or reviewing a legal or structural form for their social enterprise - if you want to know more about them, you'll have to follow the links to youtube and watch all 3 episodes...

- Comparing legal structures to buying second-hand car: you wouldn't buy a car without wanting to know some of its history to assure you that it's been built well, and looked after, so why don't we seek the same assurances when deciding between legal forms?

- The risks of using data that maps legal forms used by social enterprise in helping us choose one for our own: as part of the episodes, we looked at research into how far different legal forms are popular/less popular by the wider social enterprise sector. But as you'll see as you watch this segment, this mapping - as undertaken by national sector bodies, often presents a contradictory picture of findings. As with all research, what you find depends on how you ask the question, and whom you ask it of. And it seems that our sector leaders can sometimes do this in ways that might not seem to be that robust..?  

- None of the existing tools designed to help you plan your social enterprise model (social enterprise canvases, specialist business plan templates, etc) help you relate your ethos and values to the legal form you'll pick. Which seems a bit bonkers, because your chosen legal form is probably one of the best ways you have to make sure said ethos and values can be best protected into the future. That's why I developed my 'CHAMP' framework, which is profiled in detail through these episodes.

- Your legal structure as a social enterprise can influence your credibility to lobby and speak out on social issues. For example, charities and CICs are banned from undertaking political activities: but if we're serious about creating systemic change as a social enterprise, then at some point we have to engage with the policy and law makers (which perversely, our chosen form may actually prevent us from being able to do!).

- The problem with all of the toolkits designed to help making the process of picking a legal form easier is that they assume you understand the jargon, and underlying concepts associated with legal forms and governance. Which most of us don't, which explains why these toolkits are so underutilised by the wider sector.

- There's a confusion about Members, members, and membership, that knots so may people up when approaching social enterprise legal forms: one has legal power over you, one is a supportive friend, and the other is about collective activism that influences your decision making. Can you tell which is which?

- Stickers and badges, or legal power – which would people prefer to have in your social enterprise? And which would you want people to have? (remember that there are wider trends going on in society that means formal membership bodies are generally seeing their numbers start to plateau and decline - people may be more interested in being part of you for specific periods, rather than for life).

- We managed to compress over 400 years of legal structures for social enterprise into just over 10 minutes. A new personal best for me!

- How the regulator for your chosen social enterprise legal form can strengthen others' trust in your venture. None of the toolkits or other materials 'out there' that I come across to help you decide about legal forms ever talk about the regulators: what they can do to you, how they can support and protect you, and how they may influence how others see you. But this is also a far wider issue and problem: I also see it a lot of start-up programmes, where social entrepreneurs are supported and encouraged to start-up and incorporate their ventures, but then given no support in knowing how to 'look after it' with their respective regulator - leading many early stage social enterprises to suffer fines, penalties, and even enforced winding up because no-one explained to them about the regulators... 

- It turns out that knowing how to bake cakes can be very helpful in informing how we approach designing different membership models in social enterprise legal forms.

- Campfire songs can be equally important in the selection of choosing a legal form for a social enterprise.

- and finally - why every social enterprise should be wary of S&M clubs if they’re going to be a CIC.

I've found myself enjoying this process of working with a group to find an answer to a question, and also that it's encouraged us to take more time in how we consider the options and implications - despite doing the whole thing remotely to each other with video calls, etc, it's felt like it's helped to make choosing a legal form a process that's allowed us to be more human. 

Episode 1: what's a social enterprise, and why do I care?  

https://youtu.be/5T7TzanQh0s 

Episode 2: what do social enterprise legal structures mean to me? 

https://youtu.be/EaRRsWPfDK0

Episode 3: social enterprise in the real world. 

https://youtu.be/JmEi3b6f9_g 

Is the growth in CICs actually damaging the wider social enterprise movement?

Some people may be aware that I've always questioned and challenged the Community Interest Company (CIC) legal form (see previous blog posts here) - largely because I've found that most social enterprises who've incorporated with this form have subsequently learnt that it wasn't actually the 'best fit' for them and their business model, and because what they're usually presented/'sold' as it being, doesn't actually stand up to scrutiny when looked at by evidence and research...

However, there are several social enterprises out there that I've supported to gain this status - I've always seen my role as an adviser to help people make better informed choices, not to tell they what decisions they should be making.

And it's in that vein, that I come to be typing this latest blog - prompted in part by a recent article by Pioneers Post on the 'explosion' of CICs during the pandemic: https://www.pioneerspost.com/news-views/20210825/record-number-of-community-interest-companies-amid-rise-of-grant-funds and CIC regulator wind up extent and causes

My concern about this sudden 'blossoming' of CICs is that rather than being a good thing in showing the growth of social enterprise in general, it may actually be more damaging to the sector in the long run...

Let me walk through through my thinking here, so as to try and help clarify and explain this rather bold assertion - and as always in my blog posts, you can leave comments to refute or challenge any of these:

1) Social Enterprises should be trading businesses, but most CICs aren't

In the absence of an overarching legal definition of what absolutely defines a social enterprise, the sector bodies have reached a consensus on what their defining characteristics should be (interestingly, none of which specify particular legal forms). Front and centre in these is that a social enterprise should be (or be clearly moving towards) generating most of its income from trading activities - but there is no requirement for CICs to need to trade, in order to generate their income or achieve their social mission! 

• when you apply to be a CIC, the application asks "if" you make a profit, not "when" - so the CIC Regulators' assumption is that most CICs' default business model will be that they expect to them lose money each year and/or will be reliant on grant funding to achieve their social purpose (you can't make a profit/surplus from grants);
• according to the CIC Regulator in their own published annual reports, most of the CICs they register will be wound up within 18 months - usually because they were unable to access the grant funding that they thought this legal form would enable then to be awarded.

2) Why are social entrepreneurs being encouraged to set up social enterprises in ways that mean they don't need to trade? 

As this legal form seems to be oft promoted to start-up social enterprises and social entrepreneurs as being the 'best form' for them, but it doesn't actually require them to act in ways that facilitate them to better meet the qualifying criteria of being what they say they want to be - how do we reconcile this apparent contradiction?

3) Are the public now seeing CICs as another form of charity, creating confusion about what social enterprise really 'is'?

If the most feted legal form for social enterprises to adopt therefore doesn't encourage the 'social enterprises' using it to act as social enterprises (with some evidences finding that CICs are actually more reliant on grants than charities are!) - it's going to cause confusion amongst others (who are already confused about what social enterprise is from the lack of a legal definition). If CICs are seen as not trading to achieve their social purpose - how will this not confuse people as to the need for social enterprises to trade: are social enterprises therefore just another type of charity, rather than a revolutionary/innovative/transformative way of doing business?. And this confusion will surely mean its harder to create more consistent messages about what social enterprise is and can do, in order for the sector to realise its full transformative potential.

However, as will all things, there are exceptions to the above - there are social enterprises out there who've never taken a penny in grant funding; who have found clever ways to harness what many feel to be 'too risky' elements of the CIC form with regards to the powers of the CIC Regulator over them; and who are trailblazing for the wider sector as a result.

My interest here isn't to decry this specific legal form wholesale, but rather to try and contribute to a wider ongoing discussion that means as a sector we can be more coherent, and ultimately make it easier to achieve the things we aspire to.

So how do you actually start a social enterprise?

'Social enterprise' is a phrase that seems to be increasingly commonplace, and something that we're all being encouraged to start-up to if we think we have an idea for a new project or a business that might do some good in some way.

There's also a lot of 'stuff' about them out there: mapping by Social Enterprise UK; webinars on how they can best report their impact and how they're changing the world for the better by Social Value UK; offers of funding for how they can support local communities continue to recover from the impact of the pandemic; and such like...

But I'm often approached by people who want to know the answer to a much more basic question about social enterprises - how do I actually set one up?

Well, the good news if that I've been running seminars, boot camps, and webinars covering this for about the last 20 years, and hopefully will be able to distil them down into a few pithy bullet points in this blog to help you start to chart your adventure into the lands of social enterprise...

1) You'll already have a (social) idea, but is there actually the potential for a trading enterprise in it? 

Have you identified people or organisations who might be willing to pay you money (which is different to offering you philanthropic grants) for what you're going to be doing? 

2) How are you going to raise the money you need to get it started?

It's very rare than a start-up enterprise of any kind will have customers who line up in advance of it officially opening for business, to pay for the services and goods before they've even seen them. So have you thought about not only how you'll raise the cash you need for those early bills, but also where you'd be happy to seek it from?

3) Do you see yourself as a lone hero, or part of a 'Scooby gang'?

Creating any new enterprise is hard work and risky. Social enterprises even more so, because of the additional dimensions they have (balancing social mission with need to generate cash; trying to keep a set of values and ethics central in every decision made; feeling a responsibility to try and save the world...). So do you feel you can take it all on by yourself, or are you looking to recruit others to work with you in developing, leading, and managing it (and how will you ideally structure these relationships between you all)? 

And what measures can you think about putting in place to support yourself (after all, if you're supporting the birth of this exciting new social enterprise, whose looking out for you in return)?

The next steps in starting up a social enterprise flow from these, and may seem far more mundane in comparison, but are true for any enterprise thinking about starting up:

- create some budgets to help you manage costs and make sure you're going to be charging the right prices;

- pick a legal structure that will help you manifest and protect all of the above;

- register the enterprise with HMRC and whichever regulator is responsible for the legal structure you've picked, and open a bank account;

- do some marketing;

- Oh yes: and get out there to tell people you're now 'here' and so some selling!

Once these are in place, then everything else you come across out there about how social enterprises can thrive and prosper should start to make more sense.

But if you'd like to explore these steps in more detail, chat about how to tell if your idea really does have sufficient potential to be a trading enterprise, or would like to know about any other aspect of social enterprises, feel free to get in touch: I'm always happy to have an initial conversation by phone or video without charge or obligation.