Clare Bryden. Good Money Week: how to set up a social enterprise, Church Times, 29 September 2023. Available on Church Times website (paywall).
Churches can express their faith and respond to community needs through social enterprises. Clare Bryden explains how to set one up
EARLY on a Sunday morning, before the 9.30 or even the 8.30 service at St Leonard’s, Yarpole, in Herefordshire, a small team is working to collate the Sunday newspapers.
In 2009, Yarpole Community Shop (Features, 21 April) became the first full-time shop to operate in a church. In 2021, it picked up its most recent accolade, from the Countryside Alliance: Best Village Shop and Post Office in the Midlands.
“Social enterprise is a verb, not a noun,” says John Pitts, who chairs Yarpole Community Shop’s board of directors. “It’s a way of doing business for wider benefit.”
A social enterprise has a mission set out in its governing document to address social or environmental issues; it will seek to generate most of its income from trade rather than grants or donations; and it will invest most of its profit back into pursuing its mission. It is a suitable model for many church-run initiatives.
Any consideration of social enterprises must start with the idea and the business plan rather than with legal structures. “Function before form,” emphasises Diana Moore, of the Wessex Reinvestment Society, which helps to set up community-owned enterprises, and trades as Wessex Roots in Devon, Dorset, and Somerset.
“Do not set up a social enterprise because it is a buzzword, but because it provides the best framework. If the main aim is to use the church’s assets to meet a community need — or even if it is to improve the church finances while also providing a benefit to society — then a social-enterprise model may be appropriate,” she says. “But it may be better as an extension of the church’s existing ministry, or an unincorporated association.”
To any church with an idea for an enterprise, she advocates talking it through with a support agency, such as the local community council, or the Council for Voluntary Service. “Start from your business case, your people, and your ethos. How do your Christian principles show through?”
There may be considerations that might not be included in a business plan, she says, but are important for you.
Heather Cracknell, the director of HeartEdge, an organisation that works with churches to unlock imaginative and holistic approaches to mission, says that its “commerce” work encourages churches to see commercial activity as being about connection with, and empowering of, the community. She wants churches to see an enterprise or ministry as not just about serving people, but to ask: “How does it become integrated with Sunday morning? How is the church being transformed by that? How are these people converting us? How are we honouring their gifts?”
HAVING a particular ethos does not absolve a church from proper business planning. It takes plenty of work, which is why a group of committed people is key.
Your business plan needs to start with a clear mission statement describing the problem (societal or environmental need) to be addressed. It needs to cover governance and management; the positions and responsibilities of employed staff or volunteers; and policies and procedures, as well as any facilities that are required, such as equipment, materials, procurement processes, and customer support.
Any would-be enterprise must look at the market, too, and consider what demand there is for its products and services will fulfil it; who the competitors are, and whether it is right to compete with them; how to be distinctive; who are the target customers and communities, and how to reach them; and how to build custom loyalty.
In some business models, customers are also beneficiaries. The church-based community shop in Buckland Brewer, Devon (see below), is run by and for local people, both selling to the community and enriching it by providing an amenity and social adhesion.
In other models, customers and beneficiaries are separate. At Clean for Good, an ethical cleaning company set up by St Andrew-by-the-Wardrobe, in the City of London, to provide better working conditions for local cleaners (see below), the beneficiaries are the employees, while its customers are organisations in the City of London.
Milton Keynes Christian Foundation, investing in job training for young people (see below), has a mixed model: the young people in training are beneficiaries, and could also be customers, alongside other local people.
The marketing plan will cover audience engagement, timing of launch(es), messaging, and sales forecasts. Ms Moore advises market research at all stages of development, which will help build a supportive community, perhaps with a pilot to test different aspect of the plan.
The business plan’s financial section will cover revenue and cost projections. These will include start-up costs, such as staffing, facilities, production, sales, and marketing; and how these will be covered, for example through existing assets, grants, community share offer, and crowdfunding. Consider risks, uncertainties, and contingencies.
Finally, the plan needs to determine how to measure success. This will not just be the financial bottom line, although profit can be reinvested in purpose. But the business will also need to demonstrate how it is meeting its social, and even spiritual goals.
Milton Keynes Christian Foundation measures the progression of its young people from training into employment, and undergoes OFSTED inspections. Clean for Good is a Certified Social Enterprise, is accredited as a Living Wage Employer, and has the Fair Tax Mark. It recently gained B Corp Certification (granted by B Lab, a non-profit organisation that offers third-party verification for businesses taking steps to improve their environmental and social responsibility). Such accreditations give workers, potential investors, customers, and beneficiaries confidence in the business. Other examples are the Social Enterprise Mark, and the Community Shares Standard Mark.
At this point in your planning, it should be clear whether or not your idea is viable, whether you can go it alone or need partners, or whether the church should hand the idea over to, say, a team of members of the congregation to pursue. You should also have an idea which of the following legal structures would best fit your enterprise, although you may need further research into how the structure affects access to grants, or your financial liability:
Note that this box includes more detail than the published article.
Company limited by shares (CLS)
Owned by shareholders who have certain rights. Legally separate from its directors. Usually businesses that make a profit. Regulated by Companies House.
Example: Clean for Good is a CLS with two types of shareholder.
- Relatively straightforward and inexpensive to set up.
- Flexible company structure.
- Simple and flexible share structure, that also enables different classes of shares (ie membership) with different rights, and enables fundraising through share capital and loans.
- Convenient for joint ventures.
- Popular as a whole or part-owned subsidiary of charities and other social enterprises that can gift aid trading surpluses.
- As the main legal structure for commercial enterprises, may be tainted by association and lead to misconceptions.
- Charities incorporated as a CLS are not common.
- May not offer shares for public purchase, which rules out community share offers.
- Can include restrictions on director and member benefits, but asset lock is not common.
Company limited by guarantee (CLG)
Owned by individuals and/or corporate bodies who act as guarantors of the company’s liabilities. Legally separate from its directors. Usually “not for profit” organisations. Regulated by Companies House.
- Relatively straightforward and inexpensive to set up.
- Familiar structure for ‘not for profit’ organisations, and hence to potential funders and
- Usually democratic voting with ‘one member one vote’, but flexible structure allows for different membership classes with different rights.
- Limited as a means of attracting outside investors.
- No share capital and so cannot raise equity, except by debt.
- Usually prohibits distributions of profit or assets to directors and members, but this asset lock is non-statutory and weak.
Community interest company (CIC)
Conducts business or other activity for community benefit. A compulsory statutory asset lock ensures that the assets must be used for community benefit and not transferred (except to another CIC) or sold, and payments to shareholders are capped. May be Limited by Shares (with large or small membership) or Guarantee (without membership). Regulated by the CIC Regulator and Companies House.
- Flexible company structure.
- Requirement to satisfy the community interest test and a strong asset lock gives clarity and confidence to members, customers and potential backers, and enables grant funding in addition to trading.
- If CIC ceases trading, assets are preserved for the community.
- More complex and expensive than a CLS or CLG to set up, requiring dual registration.
- Reporting requirements are more complex, although any company should provide a community interest statement or similar.
- Cannot be a charity, although some local authorities may grant rate relief.
- Public share offers are more costly and time consuming than for a CBS or Co-operative.
Community-benefit society (CBS)
Primarily for the benefit of the general community, not its own members. Registration with the Financial Conduct Authority of initial Rules and any amendments. Can be a exempt charity for tax purposes, subject to HMRC approval of objects and asset lock, though is not registered with Charity Commission.
- Simpler registration process than for a CIC, with similar costs.
- Less stringent administrative and statutory requirements than for CLS and CLG.
- Share capital brings advantages similar to CLS, and can also raise capital through offering shares to the public – often via a formal share offer prospectus, but this may not be required if exempt or certain conditions are met, with cost and time savings.
- Above exemption applies only to withdrawable and non-transferable share capital, which may limit its appeal.
- Fewer government resources behind administrative processes than for companies, and fewer sources of professional advice available, although both are improving.
- Statutory maximum share investment per individual of £100,000.
Primarily for the benefit of its own members, who will participate in the business of the co-operative. May be Limited by Shares or Guarantee. Open membership, one member one vote, limited return on capital. Registration with the Financial Conduct Authority of initial Rules and any amendments.
Advantages and Disadvantages:
- In general, similar to a CBS.
- Pros and cons compared with a CBS will depend on the particular context and goals.
Industrial and provident society (IPS) — no longer in use
Replaced by Co-operative and Community Benefit Societies in 2014. Former IPSs are now referred to as Registered Societies.
Examples: Yarpole and Buckland Brewer Community Shops are now Registered Societies.
Charitable incorporated organisation (CIO)
A form of business designed for, and since 2012 available to, charities in England and Wales. Charities can transfer the ownership of any trading subsidiary company to a CIO. Has a board of trustees, who are legally separate from the business and have limited liability. Regulated by the Charity Commission.
Example: St Leonard’s Management is a CIO responsible for the church building that hosts the Yarpole Community Shop.
- Requirement to register only with Charity Commission reduces complexity and costs.
- Subject to less regulation than the CLG, the usual alternative structure for non-profits.
- Must be registered, and cannot be an exempt charity.
- Must submit annual returns and accounts to the Charity Commission regardless of income.
- Law is relatively untested, and Charity Commission funding cuts are leading to staff cuts.
- Lower familiarity among funders and professional advisors.
- Costs of converting, eg transferring assets and liabilities.
Charitable company limited by guarantee
Has a board of trustees, who have limited or no liability. Regulated by Companies House and the Charity Commission.
Example: Milton Keynes Christian Foundation, though switching to CIO.
WHEN you have decided on a legal structure, you will then need to adopt a constitution, rules, or governing document for your business. Different models are available from either the Government or the various sponsoring bodies.
Ms Moore of Wessex Roots says that writing your own rules would be very time-consuming and costly. Sponsoring bodies are recognised by the regulators, and can advise on options and provide training. According to Mr Pitts, “the Plunkett Foundation is very active, and recommended. Their rules didn’t exist in 2005, but Yarpole was able to change, and recently adopted them. There is a growing community of community shops nationally, and Plunkett cohere that.”
Finally, you will need to register your new social enterprise with the relevant regulator, and are then ready to spread your wings.
For more information:
- Government guidance: gov.uk/set-up-a-social-enterprise
- CIC model constitutions: bit.ly/CT-CIC
- CBS model rules: for example, Plunkett Foundation and Wessex Roots are sponsoring bodies
- Co-operative model governing documents: uk.coop/resources/model-governing-documents, or bit.ly/CT-Coop
- CIO model governing documents: bit.ly/CT-CIO
- Charitable Company Limited by Guarantee model governing documents: bit.ly/CT-Charity
- HeartEdge: heartedge.org
- Plunkett Foundation programme: plunkett.co.uk/community-businesses-in-places-of-worship
- School for Social Entrepreneurs: the-sse.org
- Social Enterprise UK, trade body and accreditation as Certified Social Enterprise: socialenterprise.org.uk/get-involved/about-seuk-membership.
- B Corp Certification: bcorporation.net/en-us/certification
- Social Enterprise Mark: socialenterprisemark.org.uk
- Community Shares Standard Mark: uk.coop/start-new-co-op/support/community-shares/standards/standard-mark-societies
Buckland Brewer Community Shop
BUCKLAND BREWER is a small civil and religious parish in north Devon. From the early 1800s, there were two Methodist chapels operating next door to each other. In 1932, the congregations came together, and one chapel was closed. For ten years, Buckland Chapel and the Parish Church of St Mary and St Benedict have been worshipping together, although not formally a local ecumenical partnership.
The old Wesleyan chapel became a village shop. When this closed about ten years ago, the village community met in Buckland Chapel to discuss the future. A church steward, Dave Watson, describes how “a small group ran with the idea of starting a community shop. They contacted the Plunkett Foundation, and at first considered a Portakabin located behind the chapel. But the church council instead thought ‘Why not?’ and offered the chapel’s under-used vestry area for conversion.”
Church members and other residents formed a committee, and, with the advice of Plunkett, set up the shop as a co-operative to enable buy-in from the community. Residents were able to buy shares. There is no financial reward; no dividend is paid. Investors must also view their shares as a donation, i.e. be willing to lose their investment, but, while the shop is operating, the shares still have value and can be withdrawn.
The church was responsible for getting permissions and fund-raising for the physical conversion; a development officer in the Plymouth and Exeter Methodist District provided grant application support. Plunkett enabled funding for the shopfitting and start-of-trading costs, and employment of a manager for the first year.
The shop pays a lease to the chapel, and is governed by Methodist rules: it does not open on Sundays, and cannot sell alcohol. Shop staff are volunteers from the community, overseen by the committee. The parish council donates towards running costs. Otherwise, the shop covers its costs, with small profits, and maintains a reserve. It celebrated the tenth anniversary of opening last February.
The shop’s success depends on the community’s working together, Mr Watson says, and it could not have been an independent church project. Benefits have included supporting local suppliers, a means for new residents to get to know others through volunteering, and a hub for distributing shopping during Covid.
Clean for Good
THE story began in 2014, when St Andrew-by-the-Wardrobe started to ask questions about who was working in the parish. The church commissioned the Centre for Theology and Community to conduct a listening exercise in the area.
“As they listened,” the current managing director, Charlie Walker, says, “they met with many people in the cleaning community, who were overworked, tired, and often exploited by a lack of decent HR practices.” The church considered the possibility of providing a prayer room, or a church café, but that is not what the cleaners wanted. They did not want handouts, but rather dignity and fair pay.
The Corporation of London funded a feasibility study, then the parish’s social-responsibility liaison, Miriam Goodacre, won a Dragon’s Den-style competition organised by the Church Mission Society (CMS) at the Greenbelt festival. CMS provided funding, and became a founding investor alongside St Andrew’s and the Centre for Theology and Community.
For Mr Walker, prayer has been significant part of the journey, and wrestling with questions such as “How can the Church be a force for good earthed in a really nitty-gritty business context?” Clean for Good is a company limited by shares, seeking to generate profit and return to shareholders, while locking in distinctly Christian social purpose.
The three central “A” shareholders, with overall control of the company, have been joined by many “B” shareholders, who have ownership but no control. They could be anyone, although as yet no cleaners are among them. Mr Walker says that they have considered an employee-owned model, but, at present, this is not realistic. Instead, the company has a profit-sharing policy, whereby the cleaners gain a portion of the profit based on hours worked.
Their is very different from some other cleaning companies. The company pays a real living wage, has Fair Tax Mark accreditation, and has recently achieved the challenging B Corp accreditation.
And there have been other initiatives, such as a portrait exhibition, and a national poetry competition. A number of the cleaners worship in the church, and are involved in spreading the gospel in very practical ways.
They have been advising other congregations, such as St Katharine Cree, which is working with the low-paid workers in the City more generally.
Milton Keynes Christian Foundation
IN THE 1980s, early in the development of Milton Keynes New Town, the local churches worked ecumenically to establish ministries focusing on different sectors of everyday life. The Milton Keynes Christian Foundation remains the training ministry sector.
In the mid-2000s, as the current director, Simon Rudiger, describes, “the social-enterprise delivery model was seen as an innovative way to meet communities’ needs, with the young people themselves as partners in delivery.”
Then, the foundation chose the Charitable Company Limited by Guarantee model. Now, however, the Charitable Incorporated Organisation is also available, with only one regulator and allowing for younger trustees aged 16-plus. The foundation is in the process of switching.
Under the charity’s umbrella today, there are a number of enterprises — including a nursery, a farm, bicycle refurbishment, and a café. The employees manage and staff these enterprises, and provide education and training for about 70 people aged 16 to 19, or up to 25 if they have special educational needs. Each is funded by the Government’s Education Skills Funding Agency.
The young people receive training in functional skills, such as maths and English, plus vocational skills, through hands-on experience. They can also work for industry-standard qualifications in, for example, childcare, or food hygiene, and qualifications in bicycle repair and horticulture are being considered. They also pick up confidence and communications skills. Most have special needs or mental-health issues, and value the opportunity to be in a normal place of work.
As providers of post-16 education, the Foundation is subject to Ofsted inspections. One member of staff deals with qualifications and progression, and, according to Mr Rudiger, on average 85 per cent of trainees move on to further education, employment, or apprenticeships. This is one measure in the foundation’s triple bottom line: financial, social, and environmental, and spiritual. The umbrella structure enables a balance between enterprises that are less profitable but otherwise hugely beneficial, and those that are stronger financially.
The foundation continues to be part of the Christian community, but is not closely linked with congregations, and improving integration is one of the current objectives. The young people are aware that it is a Christian organisation, and the foundation sees them as partners in doing God’s work locally, but does not proselytise directly.