A continued priority for the Association’s work is sustainability of VCSEs, ensuring the continuation and growth of the sector’s crucial services. There are various factors which impact sustainability, but two key areas are (a) access to unrestricted funds and (b) levels of income diversity. Trading and enterprise income can be an important contributor to both of these.

We use a ‘catch-all’ term of Trading and Enterprise to describe any activity whereby products or services are sold to a customer. Such products and services vary greatly, for example, from therapeutic services to food & beverage to training and consultancy. And customers may be individuals, businesses, other VCSEs, or public sector bodies.

Our experience working with VCSEs suggests there is variety in how such income is referred to and categorised. For instance, many Community Interest Companies will refer to themselves as Social Enterprises, and be comfortable with the term ‘enterprise’, whereas charities in the majority tend to refer to selling activity as ‘Charity Trading’.

It’s important to note that trading and enterprise income is very rarely the single ‘silver bullet’ solution, however investing in trading and enterprise can be a vital part of building financial resilience and ensuring that charities and social enterprises can adapt quickly to the rapidly shifting external environment. As crucially, income from enterprise can cover core costs and provide greater financial freedom and flexibility.

The role of trading and enterprise can have different roles within an organisation, in terms of (a) relationship to mission, and (b) the importance of profitability. In many cases the products/services sold are directly contributing to the organisation achieving its mission. In this scenario, significant profit margins can be targeted (to support future development and sustainability), but are often unlikely to be realised – particularly when selling to public sector or individuals in disadvantaged circumstances. In other cases, product/services can be sold with the primary intention of generating profits to support other activities within the organisation – for example, subsidising the costs of other services, making up shortfalls in funding, or providing resources for future development. In this scenario, there is a greater importance attached to higher profit margins, to ensure time spent is worthwhile. We have developed a ‘trading triangle‘ framework to help explain this in more detail.

Across the last 3 years, the Association has played a Partner role on the Enterprise Development Programme, launched by Access, the Foundation for Social Investment. Taking a sector-led approach, the programme supports small groups of organisations working in similar areas to establish new trading and enterprise models or grow existing ones. During this time, we’ve supported over 50 mental-health focused VCSEs and have generated knowledge and insights into the realities of developing and operating trading and enterprise activities in the Mental Health sector.

Across 2022 – 2024 we will be sharing insights and spotlighting different models in the sector, to support other VCSEs explore trading and enterprise activities to support their sustainability.