21.01.2016

Community ventures benefit from commercial guidance

Enjoying the same protection under the law as a well-managed ‘traditional’ limited company, Community Interest Companies are a recent spin on the theme of business enterprise. But instead of setting out to secure profit for its shareholders, a CIC – as the format is usually known – is a social enterprise which ploughs back trading surpluses into the community projects for which it has been established. To qualify as a CIC, the business has to satisfy the government-appointed regulator for this sector that it exists to benefit its target community in a way that would not be practicable through a conventional trading company or registration as a charity,

Recognition as a CIC may have its attractions to those involved in its management, but the enterprise is nonetheless a limited company with all its implications for fund-raising. Virtually all of the CICs created since 2005 when the relevant Act came into force have been SMEs, the least favoured tier of business in the eyes of the UK banking community.

High street banks and CICs have different perspectves

It would be fair to observe that the high street banking sector does not understand the special requirements of CICs; viewing them as high risk small businesses with uncertain income streams. Add to which, the people running community projects have generally come from social or public sector backgrounds outside the normal business environment: few can provide the credibility of years running successful trading companies.

Complete Kidz certainly meets all the criteria for CIC status. It was established to support children and young people aged between one and 24, their parents and families. The catchment areas are Sandwell and Birmingham and the Black Country area of the West Midlands. Its objective is to offer a non-statutory alternative community-based approach to education, sport, art and nutrition activities.

Sessions are provided in schools (during term time and holidays), the company’s own premises, leisure centres, community centres, health centres and multi-faith centres. The sub-text to all of its activities is the encouragement of a safe and healthy lifestyle, while those participating enjoy and achieve positive personal results. Towards these objectives, Complete Kidz provides an impressive array of resources from trampolining and rowing, to cookery and nutrition workshops.

Looking behind the scenes at Complete Kidz, it is apparent that the organisation is a socially-motivated enterprise through to its core. But, as a business, it is subject to the same constraints on its performance as any conventional enterprise. It must generate a revenue stream, for example, which is sufficient to meet its outgoings and, if possible, build a surplus to protect it against unforeseen changes in its trading environment.

The company’s funding comes primarily from delivery contracts with local authorities and the educational establishments whose students are being assisted by Complete Kidz. Inevitably, the timing of receipts from those clients rarely matches the demand for funds. The company is well supported by volunteers but requires a core team of paid staff to co-ordinate activities. Then there are rental payments to be made, along with the countless other costs associated with running this expanding social enterprise.

With commercial banks a ‘no-go’ area to Complete Kidz and its management, the prospects of finding the working capital to fund activities until invoices were settled were limited. An introduction to TAEFL supported by a sound business case, however, was able to secure the financial resources which the company required.

TAEFL saw a sound business case which it supported

After a thorough appraisal of the business ‘model’ and the quality of the clients involved, the UK EXIM finance specialist within the TAEFL group was able to take a commercial decision and make available an initial £25,000 funding which ensured that the vital work being undertaken by Complete Kidz was able to continue uninterrupted.

With the support and expertise of the TAEFL organisation, Complete Kidz has been able to put its business under the microscope and identify how best to move forward. The approach has been one of fine-tuning rather seeking out over-ambitious large scale projects which have little chance of coming to fruition in today’s public sector environment.

TAEFL has helped implement an incremental approach to the business of Complete Kidz; recommending small changes which, taken together, are setting the organisation on a course which will ensure its longer-term viability. The team from TAEFL has brought a fresh perspective on cost control, for example; examining ways in which overheads can be reduced without impairing the quality of the services on offer. Monitoring demand for the paid-for sessions which Complete Kidz provides flagged an opportunity to increase fee income where programmes were consistently over-subscribed.

Does the CIC concept work? Complete Kidz is not untypical of the enterprises which have adopted this format. It is perhaps unreasonable to assume that all of them come into the world firing on all commercial cylinders. The supportive but no less rigorous involvement of TAEFL demonstrates that well-run CICs can make a serious contribution to social good.

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