time to ditch the fetish of becoming a 'financially sustainable' business

In a social/networking session with fellow freelancers I was part of recently, a recurring theme amongst my fellow self employed, who are in their first few years of trading, kept coming up - namely a desire to become 'sustainable' (aka creating a pipeline of assured regular work).

Let's quickly clarify something about this - this isn't unique to freelancers.

While most businesses make it through their first year, most won't make it past 3. https://www.statista.com/statistics/285305/new-enterprise-survival-rate-in-the-uk/ 

This 3-year threshold is possibly why, if your business makes it past 3 years, it's officially recognised as being financially sustainable: 

https://www.freshbooks.com/hub/startup/how-long-does-it-take-business-to-be-successful#:~:text=list%20really%20expanding.-,Year%20Three,three%20years%20in%20the%20distance.  

However, within 2 years of reaching this magic milestone, 20% of these 'sustainable' businesses will then have had to close their doors for good... Just because you've made it to 3, doesn't automatically mean you're set for life.

So - if all businesses equally struggle to keep going (regardless of it they're large or micro), why do we keep chasing the dream of reaching a promised land of 'being financially sustainable'? The data referenced above shows this will never happen - but that's surely to be expected when you remember that markets, people, and fashions, etc keep changing all the time around us (so what we once thought everyone would want to buy, is now an anathema... disposable plastic cutlery, anyone?).

Surely it would be better to ditch the expectation of reaching a goal that's always going to be unachievable, and instead reframe our language and ambitions to something more realistic and honest: maybe something to do with cash reserves, and how long we can run for if we suddenly run out of paying customers (which would reduce the threat of facing imminent eviction from our homes, and therefore go a long way to helping our peace of mind and achieving a healthier state of mental well-being...).

When is a community not a community? (or, am I an Albatross?)

As freelancers and small business owners, there seem to be constant exhortations for us to be part of a community. And I recognise the various benefit of being part of such peer networks, having invested time, emotion, money (and even professional reputation) in many over the years.

But over the years, despite having been part of many 'communities', I'm starting to wonder if I'm accidentally having an 'albatross effect' on them, as they all seem to 'die' after my being involved with them..!

However, this post isn't about me suggesting I'm a potential jinx, but rather to ponder how the ending of a self proclaimed community might reveal just how far it really was ever a real community to begin with:

Of the gravestones raised in memorial in this post, I'm going to immediately discount Micro Biz Matters Day (which I was a keen supporter of, sometime roadie, and occasionally part of the line-up for), which was staged every year for 8 years, because it never presented itself as a community but rather as a part of a wider campaign that's been championed by Tony Robinson - and campaigns all have a natural life, and the small teams who lead them rightly decide when it's time to move on to the next thing.

In contrast, the other 2 examples are worth lingering over:

Freelance Heroes (FH) was created in 2016 and referred to itself as a community for freelancers - and indeed, created lots of things to facilitate such a sense and practice of community, inspiring many other freelancer communities to coalesce in response to their mere existence: from it's original Facebook group, conferences were added, chat forums introduced, twitter hours with member of the community being invited to lead and manage them, 'featured freelancers' profiled (published interviews and youtube lives), peer learning sessions by member for members, a virtual library of books written by its members, and optional paid subscriptions (with additional pirkx). 

But at the end of 2023, it was suddenly announced by email that FH would imminently be being closed, and all of its associated artefacts and IP (website, forums, blogs, etc) would be being taken down.

Reasons were given about financial pressures, and people's capacity etc, and while there's plenty that FH can be proud of having achieved and influenced, for a body that presented itself as being a community, the upset that many expressed in the immediate wake of the announcement is possibly based on all of us feeling we were part of just that: a community. That the owners of that community seemingly hadn't trusted or respected us enough to share that there may be tough decisions to be taken, or to try and engage us all in conversations about possible succession and legacy options, maybe helps to explain how and why so many people were upset by the announcement - after 7 years of feeling we were part of a community, we suddenly realised that we never were in any meaningful way when it came to the big important decisions about us.

And more recently, the Good Business Club (GBC), established 6 years ago has suddenly made a similar announcement about closing up in the next few weeks - a shock decision that's seemingly come out of nowhere after years of all us members of it being encouraged to be actively involved in leading and developing activities and initiatives for the benefit of the wider community of its members. So again, I'm left wondering, how much of a community were we really being allowed to be, if we can all be disbanded by a discretionary decision of the founders of it?

Importantly, for context, I think there's a lot of things that have been going on behind the scenes at GBC which are highly charged and emotive in leading up to this apparently 'out of nowhere' announcement - based on the official statement of its being wound up seemingly contradicting itself: 

(1) The founder opens by saying that they are stepping down from running the GBC after a tough professional and personal year (but no sense yet of this spelling the end for the GBC, as they'd always clearly managed their personal role and identity as being separate and distinct from that of GBC); 

(2) it's then immediately stated in a bold heading that the community will continue; 

(3) but it's then clarified at the very end that all the forums, websites, and membership fees will be cancelled and ended in the next few weeks (and we're signposted to another paid 'community' we can join instead - which costs 25% more). So actually, despite how this statement began, it really is a 'so long and thanks for all the fish' goodbye to all of it.

All of this leaves me wondering and feeling if its really worth my investing time, energy, money, and emotion into any self proclaimed 'community', when at any time, a small group of people within it can suddenly pull the plug on it all with no warning or notice (as added embarrassment in both instances, I'd been actively working on developing new strategic partnerships for FH with other national sector bodies on their encouragement and with their full knowledge, when their announcement was made with no prior warning - so first I knew of it, was also when the contacts in other bodies I'd been speaking with also found out. And a week before GBC announced its closing, the leaders of it had approached me to talk about my developing and running events and initiatives in the community's name). 

Maybe all these self-proclaimed 'communities' we see out there, aren't really communities at all, if the people who make them up are never actually trusted with hard truths or realities about looming difficult decisions facing it, nor given opportunity to step up and help to mitigate challenges that it may be being faced with?

What I'm taking from these knocks (there have been others over the years - I'm just reflecting on the most recent ones in this post), is that in the future, any group that presents itself as a 'community' and invites me to join, will get a bit more of a due diligence on my part to see just how far it really is a community, or it's actually just a club controlled by a selected few that would actually just like my money to help keep their idea going. And at any moment, the 'rug may be pulled out from under our feet' without warning, and we all find ourselves back in this stage of shock and disbelief about what's happening.

Finally, I'm aware that some people who may read this post will find it hard and painful, because they were part of the leadership teams for these communities, and so will naturally feel a sense of responsibility for how the ending of these groups played out, despite their best efforts and intentions.

This post isn't meant to be any smear or indictment of their character, but an opportunity for me to grieve these wider groups' passing (moving through the stages of denial, anger, bargaining, depression, and acceptance), and to reflect on the manner in which the process has been managed has on me for how I approach similar things in the future. Very often when 'communities' end, there's an outpouring of encouragement and support for those that made the decision and had bee the figures heads in leading/founding them (and rightly so), but rarely an opportunity or space for those of us who were part of them to reflect on what their ending means for us. 

darkness and light

Most people who know me (professionally) tend to associate me with stories about wacky props in zoom calls; encouraging people to play with Lego in workshops; and awarding prizes for whoever on a conference panel I'm chairing, delivers their presentation in the shortest time (or risk being chased off stage by me with my water pistols...). 

What some may not know about me is that part of the reason I try and bring such frivolity and apparent disregard for the accepted ways in which things are usually done by injecting more fun into proceedings, is that I also work in some very dark places: for example - researching trends and influences on the reasons why and how people choose to end their life by suicide to inform national policy; supporting refuges and services rescuing survivors of domestic abuse on how they can scale the number of women and children they're able to work with; coaching founders of start-ups who've just received a terminal diagnosis on how they think about their legacy; and consulting with Boards as to how their organisation should respond to their chief executive (or similar) unexpectedly dying in their sleep or in an accident.

Despite what may appear to be my default/usual positive and encouraging attitude that the world and (most) clients see, I'm always aware that however hard we might wish otherwise, there will always be suffering around us (albeit usually hidden just beneath the surface).

It's there for all of us to see if we choose to recognise it - or we can choose to ignore it; we can hope someone else deals with it; and we can hope beyond hope that we might never have to face those issues in or own lives.

Personally, I choose to recognise it - and in doing so, to try and break the taboos that surround it which means it remains hidden, and acknowledge it as part of the messiness of life. A choice that many people with lived experience of issues challenges seem to also share, based on the origin stories of so many social entrepreneurs, and founders of charities. 

However, if we do decide to accept these harder things that all around us, and try and figure out what our role might be in lessening the pain they cause, we need to be careful that we don't end up becoming overwhelmed ourselves (research shows that social entrepreneurs are the group of people who are the highest risk of burnout). For me, part of trying to figure out that balance involves encouraging apparent silliness whenever and wherever I can: because there's enough darkness out there already. We all need to try and bring what light we can for the benefit of all of us.

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?

merging not closing - the future of charities?

Regular readers of my blog will know that I enjoy analysing a good data set - and trying to turn them into simple charts that usually make everyone who seems them stop in their tracks and start to rethink what they thought they understood and knew.

Well, it's time for another 'pause and wonder' moment, as I turn my spreadsheets' gaze on charity mergers...

In the past I've looked at data on the 'churn rate' of charities (how many are being wound up each year, and also in comparison to the extent to which other legal forms are being wound up) - but recently, I came across the register of every charity merger since the end of 2007!

Now, despite my having been involved in 'refereeing' some mergers between charities in the past, it's always felt to me that there's something of a taboo about charities merging - Trustees don't usually seem that comfortable wanting to talk about it (unless their charity is in immediate threat of going bankrupt), by which point any other charities doesn't want to entertain taking it on as a liability which would drain and distract from their existing resources. Perhaps this is why about 3% of all charities are wound up each year in comparison to the 0.2% who merge. Does the variance in these figures suggest that charities are finding it easier to wind up, rather than be able to successfully merge with another charity?

This hypothesis, coupled with the time that a merger between charities can take (6-12 months if you want to do it properly?), seems to suggest that merging as a means for a charity to continue to see its purposes achieved beyond it's own existence is usually not taken up or enacted, even if it may transpire to be the best choice: Trustees are simply leaving things too late in the hope that something will magically resolve before feeling they can start talks with other charities about a merger option while there's still plenty of time (and reserves) to do things calming and in a less risky way.

But what of this 16-year data set about charity mergers I teased you with at the start?

And to help you make sense of the squiggles in it 

• the number of charity mergers happening each year started to significantly increase in the years BEFORE the Covid pandemic, and have now started to drop, even during the cost of living crisis. This suggests that massive financial shocks to the sector are not having any influence on charities exploring merging.
• a linear trend of charity mergers over the last 16 years indicates a very slow rise, but it's rising nonetheless, which suggests that ever so slowly, more charities are starting to pursue the merger option to best safeguard their purposes and support for their communities. For example - in the period 2016-2022, the likelihood a charity would merge increased by roughly 75%, in comparison with the likelihood a charity would be wound up increasing by approximately 10%. 

But is it too little too late?

We're still seeing only 0.2% of all charities completing a merger each year in comparison to the far larger 3% who are wound up.

Perhaps this will help more Trustees start to explore the merger option sooner rather than later, and so better protect the people they were originally set up to support?  And if they do, could this see a flipping of the current numbers, so that in the future, more charities merge than are wound up?

Does social value make us more sustainable?

This is part 2 of a blog chain I started previously, exploring further some of the queries that were put to me following my 'opening provocations' at Social Value UK's recent member exchange conference.

(for the back story see - https://thirdsectorexpert.blogspot.com/2023/10/is-our-social-value-our-legacy.html)

This post focuses on the second question that was posed after my opening ramblings: "does social value make us more sustainable?"

Having slept on this one since the event, I'm not sure that I've changed my position on what I said at the time:

- Social value is of interest to different people in different ways, and at different times. For example: if you're reporting your social value to increase your chances of winning contracts, or being awarded grants (to support you be financially sustained), then the social value priorities of those people will be changing every few years. Does this mean that your approach to social value should be constantly changing too? While that may not seem like too much of an initial problem, let me put it this way: what if you changed the way you did your financial accounts and reporting every few years?

- And when do you know you've become 'sustainable'? Statistics show that most organisations don't make it past their first 5 years, so the technical definition/benchmark for your having become 'sustainable' is that you're still going after 5 years. But the world keeps changing around us (see above point); and just because most organisations don't get to their 5th birthday, doesn't guarantee that those that do will always be able to continue riding off into the sunset... 

- For me, sustainability is about the relationships we have with each other (a continuation of my idea in the previous blog/question), and my idea is that understanding our social value, and how its come to be created, means we can better manage, engage in, and ultimately sustain these relationships so that more good stuff can hopefully keep happening as a result of them.

All the other questions put to me at the time, I think I resolved and answered in a way that I was happy with - it's been these 2 questions (about legacy, and sustainability) that made me pause in the moment on the day, and I wanted to revisit to make sure I'd best considered them.

But MemEx2023 was live streamed and recorded - there's a chance that people may yet reach out to me in the future with other questions that the ideas and arguments I shared provoke... And if they do, then this is the place where I'll share what I think might be the really interesting ones.

Is our social value our legacy?

Earlier this month, I was invited by those nice people at Social Value UK to speak at their annual members conference about the promise and perils of how we approach creating a financial value to represent the good stuff we deliver and create through the work we do - suffice to say, not everyone participated in the customary applause when I was ushered off the stage, but others came up to me throughout the rest of the event to thank me...

However, a couple of questions were put to me by the audience in the room, and those watching along on-line, that I wanted to reflect on here.

The first of which went along the lines of "is the social value we create and report our legacy?".

My initial response to this is that I tend to try to not think about how people in future years will remember me (after all, chances are that 50 years from now, no one will even remember my name, let alone what I did or didn't do) - my interest is therefore in the relationships I have today; and my interest in understanding the social value and impact I'm creating in different ways, is in how this helps me to develop these relationships to realise their full potential.

But I realise that that's a very blinkered response, and very biased on my part - after all, as a business, I'm not trying to influence or lead systemic change (get laws reviewed etc), but other people are. And in their cases, then absolutely, their identifying and reporting their social value is a crucial way of helping them to make sure that they're achieving this as part of helping them manage how they work in pursing this goal.

So on balance, social value isn't our legacy, but it can be a critical element of helping us make sure we create the legacy we may be striving to leave to the world after our time is up.

As for what the other question was... you'll have to check back in with this blog later! 


(kudos to Natasha Jolob for snapping this pic of me unawares, hence the lack of usual dramatic posing! 

https://www.linkedin.com/feed/update/urn:li:activity:7119974691779293185/)