Following a first year of leading the Mental Health strand of the Enterprise Development Programme, the Association’s Enterprise Development Manager, Greg Woolley, has written up some of his findings and reflections – particularly in relation into the types of enterprise models present within the Mental Health sector.
Access, the foundation for social investment, launched the Enterprise Development Programme (EDP) because the growth of earned income is one key way that charities and social enterprises can achieve greater resilience. EDP uses a sector-focused approach to identify relevant charities and social enterprises and provide them with an appropriate combination of grants and peer-learning opportunities.
In 2020, the Enterprise Development Programme added two new sectors, Equality and Mental Health, with partners Equally Ours and the Association of Mental Health Providers, respectively. The addition of these perspectives has already provided some intriguing insight into the nature of enterprise within different sectors.
One area of particular interest for Access is that of building a better knowledge base around the enterprise models across each sector and their characteristics. As discussed in the programme’s interim report, an emerging typology of enterprise for the Homelessness sector has formed, consisting of 17 trading activities across 6 broad themes. That same typology has been used as a foundation for the incoming Mental Health sector. Coming to the end of its first year on the programme, the Mental Health sector has recruited two cohorts totalling 26 VCSEs, who have been a selected from 61 eligible applications to date. Analysis of the enterprise models across these 61 applications suggests there are some similarities but probably more differences when comparing Mental Health and Homelessness sectors.
Our first year exploring enterprise in the Mental Health sector suggests that the concept of earned income is relatively nascent, when compared to other sectors, such as Homelessness. Or if already present, it is a secondary or tertiary form of income, after grants and perhaps fundraising. This is highlighted by only 12 different trading activities being present in the MH applications to date (however it should be noted that trading activities beyond those 12 may be represented in the wider sector). The ratios of applications in terms of organisation type (e.g. charity or social enterprise) is perhaps a further indicator, with only 18% of applicants being Community Interest Companies (CICs) (where you would expect earned income to be considered the primary source of income), and the remaining being a form of registered charity.
Providing a service for a fee is present within the charities of the Mental Health sector, however, this is predominantly found in scenarios of VCSEs being paid via public sector budgets, such as Clinical Commissioning Groups or local authority, which often are stuck in the grey area between contract and grant (unlike the more progressive position introduced by BNSSG CCG in 2019), and also have their obvious risks related to the current and incoming financial crisis. With this in mind, we are keen to build our knowledge of such models, but perhaps more importantly those which sit outside of these more traditional routes to earned income.
[It’s worth noting that for the Mental Health strand of the programme, a revenue cap was utilised within the eligibility criteria and therefore all organisations have a turnover of less than £1M. This was not utilised for the other sectors on the programme, so this needs to be considered when comparing the results below.]
As discussed in the interim report, last year the programme made its first attempt to classify its findings, identifying 18 trading activities across 6 categories. The Mental Health sector has identified 12 individual trading activities, with some being new. This has resulted in a potential framework for the overall programme of 21 trading activities across 6 categories.
Similarly as the Homelessness sector, the Services-based category is by far the most common category among the MH organisations seeking support (74% of all applicants). However, where Food & Drink was the most common trading activity within Services for Homelessness, it is the category of Wellbeing which is most common for Mental Health (39% of all applicants). Training-based trading activities are the second most common in the Services category overall (21% of all applicants). To get a further understanding of these common trading activities, it is helpful to consider the most common products / services specifically offered;
- CPD Training for frontline staff (e.g. trauma-informed training to inform their delivery / communications etc) (Training) (21% of all applicants)
- Mental Health focused Employee Assistance Programs (Wellbeing) (13% of all applicants)
- Individual Therapy / Counselling / Coaching (Wellbeing) (8% of all applicants)
Given we’re looking specifically at the Mental Health sector, these results are probably expected, and suggest such organisations are taking the well-tested path of utilising existing assets (of the organisation and staff) to develop earned income streams. However, going forward this does present an issue for the sector of high competition in a small number of areas.
The second most common theme, although way short of Service-based models, was Agriculture with 8% of all applicants offering either fruit & vegetable produce or horticultural-based products. Again, this is not overly surprising given the well-evidenced connection between gardening / growing activities / spending time in nature and improved mental wellbeing.
New dimensions of enterprise considered
To continue to deepen the programme’s understanding of enterprise models in terms of how they operate, we have used the Mental Health sector to assess a further two dimensions of an organisation’s enterprise model and how these interact with the aforementioned trading activities.
By Revenue Model, we mean the enterprise’s primary paying customer, and by Impact Model, we mean how that enterprise primarily supports the social mission of the organisation.
Our initial analysis gives some interesting insight (although it is a little limited given the relatively small data set and high frequency of a small number of revenue models.) Using a ‘heatmap’ style analysis (i.e. trading activity cross tabulated against primary customer) we can see that selling wellbeing services to businesses is by far the most common combination to date (23% of all applications). The second most common combination is training services being sold to public sector bodies (11% of all applications).
However, from our analysis it is also interesting to note that the Public is the most common primary target market (very narrowly from Businesses 33% vs 31%). The data suggests that there are many trading activities whereby the public are being considered a primary customer (but in small frequencies), whereas for Businesses, charities and community and for public sector there are more limited product options being considered, but with a higher rate of repetition.
We were also keen to understand the role of social impact within the revenue models as this can be a key differentiator for charities and social enterprises competing in the market. From our analysis to date we can see that the majority of organisations (85%) are ‘impact-sellers’ (i.e. services / products are sold directly to improve lives (these can be purchased by beneficiaries, but often by others responsible such as local authority, schools etc)). The remaining enterprises have a model of being a ‘profit donor’ (i.e. where products / services are not directly related to the mission or primary beneficiary, but they offer good surpluses to re-invest in mission-led services) or being an ‘impact employer’ (i.e. where the primary social objective is to provide employment-based opportunities to those with lived experience, within the operations of the enterprise). Given the high percentage, it felt important to further understand the approaches present within the ‘impact seller’ model. Our further categorisation gives the following breakdown:
|33%||Impact Seller via 3rd party payor
e.g. a company purchasing on behalf of employees
|28%||Impact Seller – 2nd tier intervention
e.g. training an individual in their approach to dealing with MH issues
|12%||Impact Seller – paid for and received by customer|
|2%||Impact Seller – via cross-subsidy model
i.e. individuals pay prices relevant to their ability to pay, and those charged higher prices enable lower prices for others
Given the high frequency of wellbeing services in general, it is unsurprising that the most common revenue vs impact model combination was Wellbeing services being paid for by a 3rd party to impact their group (e.g. employees at a company). But it is worth noting that 15 further combinations of revenue model:impact model are present within the cohort, so there is lots of opportunity to learn how and when these different approaches are applied, particularly as the cohort increases over the remaining 2 years.
It is too early to assess the comparative commercial success of different model combinations across the Mental Health cohort but going forward it is the goal to get a clearer understanding of what works at different scales of enterprise and with what sort of profitability. But on reflection, an early promising observation for the sector is the more frequently present models above share a likely ability to be replicated in many localities up and down the country. We see this potential as in many cases organisations are seeing interest and converting opportunities to sell their products and services (whether it is training, counselling or produce) to businesses or members of the communities local to their area, as opposed to targeting large national businesses or senior decision makers in regional public sector institutions. And in turn, this often means enterprises can gauge interest of their market, and potentially make sales, more quickly. As we work alongside organisations we will be keen to capture key drivers of success and challenge in different models so we can disseminate learning to the wider sector.
[Our analysis of enterprise models within the Mental Health cohort to date can be accessed here]