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On 8 May 2012 - 12:53pm

An experienced businesswoman who identified significant service demand among local women in County Durham and managed to attract some local council and other funding, she nonetheless couldn’t make the sums add up. She found that the social enterprise rhetoric did not mean her, that Big Society Capital was aimed at the big boys and that little other dedicated funding was available or easily accessible either.

Cathy Pharoah of Cass Business School writing for Third Sector about the experiences of Linda Kirk, who set up the Just For Women Centre in County Durham. Few in the social enterprise sector are more critical of over-optimistic social enterprise rhetoric than me but I don’t think it make sense to blame all that gushing and bluster for the difficulties facing individual businesses.

Fortunately, Pharoah goes beyond this predictable cry of anguish to make some important points about the business challenges facing social ventures. She (rightly) rejects the ideas that social enterprise success is primarily driven by the creative, problem-solving genius of entrepreneurial individuals and points out two of the key challenges facing new local social enterprises: “One is poor access to intelligence and analysis of local market opportunities, and how they can best be used to meet need, or to fund ways of meeting it. The other is the ongoing lack of appropriate easy access to small-scale, higher-risk social finance. Small ventures need help to respond quickly and flexibly when a market opening appears.

From a social enterprise perspective, the first point is a polite way of saying ‘is selling product or service (X) really a viable way of funding social outcome (Y)?’. In the case of the Just For Women Centre, based on the information I have available that question becomes ‘is selling recycled rugs, cushions and jewellery really the most viable way to fund a centre providing a range of support for women in the local area?’ I don’t know much about rugs, cushions and jewellery in a general sense – and I know even less about the quality of the products made by this particular business – but it’s not a proposition that immediately inspires confidence.

At least, it doesn’t inspire confidence in the sense of it becoming a sustainable, unsubsidised business. In general, one of the biggest mistakes, made most regularly, in social enterprise is to attempt to carry loss-making social activities on the back of a small business doing something that isn’t directly related to those social activities. A mistake that’s made almost as often is to expect core activities with a clear social purpose – such as bringing some people together to make things – to become a viable business activity that will pay for itself, let alone generate profit to support other work. Of course, neither of these are impossible to achieve but they’re much more difficult than running a successeful small business (which is quite difficult in itself).

I don’t know if either of these models are in place in this case but, despite the local council paying its rent, the Just For Women Centre needs £40,000 to keep going. Linda Kirk believes that misunderstanding of the term ‘social enterprise’ is the key to her financial problems telling The Guardian: “I believe in the big society, but a lot of people think of a social enterprise as a business and think, ‘Why should we fund a business?’ It is a not-for-profit organisation – the difficulty is getting that across to people“.

As so often, it depends a bit on what you mean by social enterprise. I think that rent (which I’m estimating at around £10,000 per year) + £40,000 sounds like a pretty reasonable subsidy for a local organisation that, according to The Guardian story, has helped over 250 people in 15 months (since January 2011). If we round that down to 200 women using the centre in a year, that would be a subsidy of £250 per person per year. It costs the NHS around £60 an hour to provide psychotherapy.

I don’t think it’s useful to debate whether projects like Just For Women Centre – and the tens of thousands of other social ventures who deliver high social impact at a relatively low cost – are social enterprises. The people involved clearly are socially enterprising. What does need more thought is whether these ventures are likely to thrive in the current economic climate, and in the brave new world of social investment.

The social investment model promoted by Big Society Capital is about social enterprises generating a trading profit to pay off loans. That’s not much use to socially enterprising organisations who can’t sell their core social impacts as products but can, across their organisations as a whole, make relatively small amounts of public money pay for far greater positive social change than direct public sector delivery (or delivery by some larger charities).

There is, located somewhere in the future, the bountiful promise of approaches to commissioning that would enable projects like Just For Women Centre to get properly paid by commissioners for helping women rather than making rugs. What’s not currently clear is how (or whether) we’re going to support these kinds of social ventures until the promise comes true, if it ever does.