Finance a Social Enterprise
If you need to raise finance for your social enterprise then you are almost certainly going to need a robust and realistic business plan and ideally a 3 year cash flow forecast.
The Business Plan will provide 90-95% of the information that you will need for a funding application. You will then have sufficient information on hand to respond to tight funding deadlines and everything in one document to call upon when needed.
The cash flow forecast is also essential to ensure that the organisation does not run out of money.
- Start by putting in all the costs with your best estimate of when they will occur and include salaries for permanent staff etc. This will give you the breakeven figure that you will need to achieve month on month to cover your costs and work towards becoming a sustainable enterprise.
- Most enterprises that survive and prosper have a cost base that is 75-80% of their revenue or income and that is the figure to aim for and try to better. The surplus can then be reinvested in the social enterprise and used for future development.
Some funders will also require a business plan and cash flow forecast in addition to completing an application form.
Depending on the industry within which your social enterprise operates, there may even be the opportunity to ‘self-finance’. For example, if you’re a supplier of a service or product that helps institutions reduce their energy bills, the savings can sometimes be used to repay start-up loans. Salix Finance are one such organisation who offer funding for maintained schools.
It is likely that you’ll also need to show how you are creating a social impact through your work. For more information on how monitoring, measuring and recording information on the outcomes that you create can help you to develop your business even further, click here.
Need further help?
Research suggests that a large number of social enterprises still report a lack of access to funding and that finance is often a barrier to sustainability. It’s therefore encouraging to know that services like Good Finance exist, which aim to help social enterprises and charities navigate the often complex world of social investment.
Recommended further reading
- How to pick the right cloud accounting software for your social enterprise
- 4 classic cash flow mistakes social enterprises make
- 5 investor personas you might encounter as a social entrepreneur
- Is it time to update your social enterprise’s business plan?
- How to hold a successful social enterprise board meeting
- 10 ways to save money on banking as a social enterprise