The Trading Triangle Framework
Through our role as a sector partner on the Enterprise Development Programme, we’ve supported over 50 mental health service providers to develop their trading-based income to help them support people to have better mental health and live fulfilling lives.
Although there are organisations successfully operating trading and enterprise activities in the sector, it is new and sometimes confusing territory for many, particularly within the small VCSE community. With this in mind we have used our programme experience to develop a framework to introduce the key components of trading and enterprise and the different ways in which it can contribute to an organisation’s mission.
The Trading Triangle framework comprises of WHAT, HOW and WHY, where:
- ‘WHAT’ is the service or product sold.
- ‘HOW’ is all about revenue and resources.
- ‘WHY’ is the ‘impact model’ or the way in which the trading activity supports the organisation’s social mission.
WHAT – the service or product sold
We’ve seen there is a variety of services and products sold by mental health providers, from therapeutic services to fitness memberships to room hire – reviewed in more depth here. They may be sold to businesses, individual consumers, or other VCSEs – but this also may be services delivered under contract for those manging public sector funds, i.e. NHS bodies, local authorities, central government.
HOW – revenue and resources
There’s lots to consider in regards to how a trading / enterprise activity successfully operates. When working with organisations we look to encourage a full understanding of:
- Skills and Resources – what an organisation needs to deliver / operate its product or service. For example, if an organisation is running a gardening enterprise, they require both (i) individuals with horticultural knowledge and experience, and (ii) access to tools and equipment, such as a van and maintenance tools.
- Revenue Model – this is the plan for generating sales income. This includes planning things such as; target user audience, who will pay, how will you price, how you will receive income (e.g. one-off payments, subscriptions etc), how income may fluctuate at different times.
- Finances – all organisations need to analyse their income (revenue model) and expenditure (skills and resources) in combination. Critically there needs to be an understanding of whether the trading activity can realistically generate a surplus (or margin) or whether other forms of income, such as grant are needed (for an interim period or consistently).
WHY – the impact model
When planning a trading or enterprise activity it is critical to set out the relationship with the organisation’s mission. Through our work with organisations we’ve seen there are differing scenarios of contribution. In turn, we’ve currently defined four main categories of impact model:
- ‘Direct Impact’ – probably unsurprisingly, the most common in the mental health sector. This is where products or services sold directly support people's mental health needs.
For example, selling therapeutic services to support families with children with additional needs. This could be paid for by the family themselves or by a local authority contract.
- ‘Influencing circles’ – the second most common category – this is where products / services sold look to influence the approach of those in connection with the people being supported.
For example, employers, social workers, emergency services. For example, selling training to a local authority to upskill their social care staff and better equip them to work with families and their unique needs.
- ‘Enterprise participation’ where people see their mental health improve from being part of a social enterprise, whether as a volunteer or an employee.
For example, operating a sensory soft play centre open to the public, with an objective of giving 6 month work placement opportunities to young people with additional needs leaving college and school.
- ‘Generating funds’ - where the trading activity’s key aim is to generate surplus funds which can be used to enable service delivery to those in need.
For example, renting out rooms and education facilities located the organisation’s premises to local businesses, private therapists and charities.
Why a triangle?
As organisations make trading and enterprise plans, there are important interdependencies between these three elements. For example, to identify a relevant and potentially successful product or service there needs to be an understanding of how it can be delivered, and importantly whether the organisation has the skills and resources already, or it needs to acquire those things. Equally, organisation’s need to always have their mission and overall strategy in mind when planning a trading and enterprise activity. From the outset there has to be clarity on what contribution it will make to the mission of the organisation, as this might influence how a trading activity is positioned in its market place. For example, if the goal is to generate surplus funds for other services that need to subside their costs, then there needs to be confidence that a product can be sold and create a profit. And to do this, certain taregt customer profiles and marketing strategies may be more relevant.
So in summary, we recommend the three dimensions are considered in combination!