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From Asking to Earning: The South West Sustainable Funding Pilot

This section looks at the learning from the South West Sustainable Funding Pilot Project. What are the issues and challenges faced by voluntary and community organisations looking to generate income through trading?

The South West Sustainable Funding Pilot

In 2004 seven organisations from the south west of England took part in a pilot project that would explore the issues and challenges faced by voluntary and community organisations looking to generate income through trading goods and services.

The objectives of the pilot were to:

  1. offer practical help and support to voluntary organisations in the south west with an interest in developing a sustainable source of income. This would be achieved by offering a combination of mentoring, specialist training, peer group learning and financial support.
  2. capture key lessons drawn from the pilot to be disseminated across the sector.

Outcomes from the pilot are captured and discussed in the publication From Asking to Earning: Experiences of Trading (pdf, 3.35MB) and key findings are summarised below.

The sustainable funding pilot ran between March 2004 and April 2005. The seven organisations selected to participate were asked to work up a single idea for generating income through trading that would be developed through the course of the year.

The structure of the pilot comprised:

  • a series of learning days which covered issues that organisations would need to consider before trading
  • help to find appropriate organisations to visit, providing the benefit of sharing experiences of trading
  • participants were required to maintain a learning diary, outlining both their key accomplishments and hurdles along the way.

The Pilot Partners

NCVO's Sustainable Funding Project secured funding for the pilot from the Big Lottery Fund, Centrica and Charity Bank (who also agreed to visit certain participants). The Southwest Foundation ring fenced funding for participants that matched its funding criteria (grants up to £2,000) and RISE came on board to disseminate the learning. Midway through the project, the constancy VIVID was brought in to offer practical one-on-one support to enable each organisation to take stock of their progress and map out where they needed to go to reach their planned destination - to have developed a sustainable source of income.

The organisations and their trading ideas

Common hurdles

While the journeys of the participants were all very different, it became apparent that there were a number of hurdles that most or all of the participants were forced to overcome.

  • Organisational structure/capacity: getting a trading idea off the ground often forced participants to reflect and reshape their organisational structures and to consider where they could find the necessary skills within their organisations
  • Access to finance to develop trading ideas: trading ideas often required finance to get them off the ground. Identifying ways to find investment was vital for many participants
  • Identifying the market and setting the right price: due diligence on markets and pricing was paramount to the success of many trading ideas. Waiting until trading ideas were up and running proved to be a dangerous track to go down
  • Being realistic about the time frame: it was important that organisations did not expect too much, too soon. Enterprises rarely become sustainable overnight. Investment needs to cover any period before a venture becomes self-financing
  • Skills to develop the plan: Successful trading required skills. These should be in place before attempts to trade are put into action. Organisations should not be overly dependent on any single person in order to run a trading operation. Such dependency is a barrier to sustainability.

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Case Study: Liskerrett Community Centre, Liskeard - Community Café- 

The Liskerrett Community Centre had been running a café for about 12 months before the start of the Sustainable Funding Pilot. The organisation joined the pilot in the hope of ensuring its café would generate a sustainable income. In what became a rude awakening to running a successful café, the centre had a torrid year, but has emerged stronger and still determined to pursue sustainable funding.

About Liskerrett Community Cente

The Liskerrett Community Centre is housed in a former junior school on the edge of the town centre of Liskeard, a market town in southeast Cornwall. It provides accommodation for a number of organisations, including a pre-school group, a youth housing project, a cluster of local artists and a youth project working with 13-19 year olds including some socially excluded young people.

The Centre was established in 1996 and the organisation understood from the very beginning that it would need to generate income just to remain open. This was done through various resident community organisations, including the pre-school group, paying rent. Additional income would be generated through renting out space for local events or meetings. Plans were also produced to develop income streams from an IT suite and a community café. It would be the latter of these that would form the trading idea for the Sustainable Funding Pilot.

The trading idea

The initial idea was for a community café that would offer healthy eating options at affordable prices. The café would be marketed to local residents and users of the community centre for breakfasts, lunches and dinners. Catering would also be offered to organisations holding events at the centre. In addition, the café would help realise the centre's social goals by providing training and employment opportunities to local people. The café would appoint a number of volunteers, who would work in exchange for training in the catering industry. Another goal was to promote healthy eating using local produce, thereby supporting the local economy.

Stages in the trading journey

By the time of the first Sustainable Funding Pilot project meeting in March 2004, the café had been open in one form or another for almost two years. But it had been a journey beset with problems and progressed through a number of stages.

Initially the café had been run to offer training to adults with learning difficulties, however it was soon realised that this would neither generate the income required nor offer the training opportunities anticipated.

In July 2003 grant funding enabled the employment of a qualified chef/manager. Success was almost instant, with the café quickly gaining a reputation for serving London restaurant-quality food at café prices. It was also attracting motivated and enthusiastic volunteers. The business model seemed to be exceeding everybody's expectations. However by March 2004 (the time Liskerrett Community Centre joined the Sustainable Funding pilot) the volunteers were becoming increasingly vocal about their disillusionment at the lack of opportunities to receive formal qualifications, such as NVQs (the community centre was finding it difficult to gain accreditation as a training provider due to its small size).

A further blow came in April 2006 with the chef's resignation. His departure highlighted how reliant the whole operation was on the expertise of one individual: not only in the quality of what was produced, but also in terms of planning the daily menu and the cash-based system of purchasing supplies that he had operated. It was also clear that not enough account had been taken in pricing the meals, or of the long-term sustainability of the chef/manager position once the funding had finished.

 

With funding for only four months of chef's wages left, a local chef/restaurateur agreed to take on the chef's job for the interim period and put structures in place which could enable it to be managed without depending on any single individual. The new chef concentrated on the business side of the café and shut it over the summer to put necessary systems in place, such as finance, food safety, training and waste management. It was planned that he would then recruit a cook and an assistant cook who could take over the reigns and run the café on a more sustainable footing.

But once again things did not go as planned. Customers remembered what they'd had before and how little it cost. The café no longer had the flair and skill that had once distinguished it from the cafés in town. Sales feel and food was wasted. The business systems that had been put in place at least gave an accurate picture of the situation, however the assistant cook had to be made redundant and the cook left soon after, not to be replaced. The business at this time had effectively ceased to exist.

The Liskerrett Community Centre has not given up on its trading idea. Indeed, the centre believes its experience to date, combined with some lessons learned on the pilot, has put it in good stead to realise its dream of launching a truly sustainable café.

For the time being, a self-service canteen, selling snacks and drinks to the centre's users, has been launched. It is currently generating between £50 and £60 a week. But the centre is also offering buffets for events held at the centre. The larger buffets are prepared by outside caterers and the centre charges a mark up; the smaller ones are being prepared in-house by volunteers. The aim is to maintain this method of operating, building up the business first until it generates enough income to employ a new cook and reopen the café. The café is to be renamed -The Hub- and work is underway to create a distinctive brand.

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Lessons learnt

  • Develop a more professional approach: Sometimes there is a tendency in the voluntary sector to be too generous, and to not be aware of how much it costs to provide something. Our aim now is to understand the market better than everyone else. We have a different mind set than we did 12 months ago,- says Jenny Foster, treasurer.
  • Reputation management: After the head chef Larry Moody left, it became clear that the café would need to reduce its cost of production. The subsequent reduction in quality was noticed by the customers. It demonstrated how important it was to manage both the business reputation and the customers' expectations.
  • Volunteer management: Volunteers need to know exactly what they are going to get out of their time. When the volunteers started to voice concerns that they wanted qualifications, the café could not deliver. This resulted in disaffection among staff and volunteers, despite the efforts of the centre to meet their requests.
  • Financial systems: The importance of financial systems cannot be better demonstrated than the fact that the café was losing money at a time when it was full of happy customers. Business experience and support would have been invaluable at the early stage of developing the business model.
  • Understand your market: The café was competing in an already competitive market. Being on the edges of the town, it needed to stand out as something different from the other cafés in town. After having to cut overheads, maintaining this difference became harder and harder to achieve.
  • Consider marketing: In a bid to encourage the café's target market to take notice, the community centre plans to use half of its £2,000 grant from the South West Foundation to develop a new brand and implement a sustained marketing programme.

Liskerrett Community Centre provided a case study about their experience of trading at the Sustainable Funding Project's 2006 Annual Gathering. Download the PowerPoint slides (81.2MB). - 

This case study has been adapted from the publication From Asking to Earning: Experiences of Trading (pdf, 3.35MB). - 

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Case Study: Westbank League of Friends, Exminster - Events studio

 

About Westbank League of Friends

Westbank League of Friends was registered as a charity in 1987. It began as a small collection of people organising transportation for those needing to attend medical appointments. In the late 1990s funding was raised to purchase ex-Exminster Hospital premises and extra services, such as a Day Centre for local older and sick people, were added. The high demand for the services on offer meant that larger premises were soon required.

During 2004, a grant of £750,000 was secured from the Big Lottery Fund to purchase an adjacent derelict building and convert it into a Healthy Living Centre (HLC). This incorporated an IT suite, crèche, gymnasium and advisory services. However, there were well-founded fears the HLC could make the organisation more prone to commercial risk. The New Opportunities Fund (NOF) grant would contribute to the running costs of the new centre for its first three years, but after that the organisation would be left to fend for itself.

Because of the added overheads of running both the HLC and the services it would host, Westbank was aware that it would not be able to depend on short-term grants and handouts to survive. It was these impending financial pressures that formed the backdrop to the organisation's application to participate in the Sustainable Funding Pilot.

The trading idea

By the time of submitting its application to participate in the Sustainable Funding Pilot, Westbank had already been exploring two initial trading ideas designed to generate a sustainable income stream.

The first was to realise the organisation's long-held plan to open a community centre/meeting place, complete with café and shop, in the neighbouring seaside village of Starcross (an idea that has since gone ahead and generated an operating surplus of £11,000 in its first year of trading). The second idea - and the one that was subsequently chosen to be pursued part of the pilot project - was to generate an income by renting out a large 100-seat room in the Healthy Living Centre known as the 'Events Studio'.

The possible commercial uses of the Events Studio had already been noted. The room was complete with a sprung floor, moveable partitions and kitchen facilities. The initial plan had been to develop the Events Studio into a viable business by renting it out as a conference, meeting and training venue to the public, private and voluntary and community sectors. Further opportunities seemed to present themselves in the form of catering for these events.

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Stages in the trading journey

The first phase of the Sustainable Funding Project helped Westbank focus on the issue it was most concerned about: skills and capacity. This was highlighted by the management team in its Learning Contract:

-We lack commercial experience and we need to know how to run a business- Most of our operational experience has been with grant-funded projects. These usually involve short-term contracts for both activities and funding. We believe that in order to succeed with sustainable projects we will need to change our style in the planning of staffing and management so we can handle the organic growth that sustainable funding should produce.-

The original business plan aimed to rent out the Events Studio for three half days each month at £50 for each session. Initial marketing was done mostly by word of mouth and through existing partnerships with the voluntary and statutory sector. This ensured the studio was booked out from early on.

But it soon became apparent that the pricing structure would need to be amended to take account of the work in preparing for the events as they soon realised that similar amounts of preparation were needed for both full and half-day events. To account for this, Westbank continued to charge £100 for a full day, but increased the half-day rate to £60, or to the full day rate if more than 30 people attended.

The catering plan generated additional issues. The original plan was to provide in-house catering for events hosted, but this proved to be unviable, creating unnecessary overheads and logistical problems. A move to using external catering with an added an overhead to renter of 25p per head was found to hardly cover the cost of the time taken to put out the buffets and then clear them away. - Another unforeseen aspect to the business model was the lack of demand among private sector organisations, with the vast majority of bookings made by public and voluntary sector organisations. 

Looking to the future, Westbank is keen to resolve these outstanding issues, including reviewing its pricing structure to see if it is under-selling itself in comparison to alternative venues in the area, and seeing how they can market themselves as a training venue to the private sector.

The hard work seems to have paid off. In the ten months up to March 2005, the Events Studio generated £13,000 of income for the Healthy Living Centre. While everyone is aware how invaluable this amount will be when the NOF funding for the centre comes to an end, it could be the new found attitude of the staff that ensures the centre continues to be an asset for the local community for generations.

Lessons learnt

  • Culture shift: Not everyone embraced the prospect of organisational change in an enthusiastic way. Some trustees were concerned that a shift towards trade would undermine the organisation's social mission.
  • Pricing scale: Getting the prices right took time. To begin with, the HLC was not accounting for the time of staff and volunteers. Once they began to understand these as assets of the organisation it became easier to ensure charges covered costs.
  • Monitor skills needs: It was important to consider the limitations of the organisation's skills and capacity at an early stage. This enabled the organisation to address skills shortages and develop solutions.

The Westbank League of Friends presented an update of their organisation's trading idea one year on, at the Sustainable Funding Project's 2006 Annual Gathering. Download the PowerPoint slides (4.74MB). 

Case study adapted from the publication From Asking to Earning: Experiences of Trading (PDF 3.35MB). - 

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