With the rise of interest in the social economy and the advent of a less certain funding environment, sustainability has become a big issue for many community and voluntary organisations in Northern Ireland.

The stories of social economy activity such as those included earlier in this book have certainly inspired and encouraged many voluntary and community organisations to consider becoming involved in the social economy themselves. And as they embark on this journey, it raises the question of the extent to which organisations can become sustainable through trading activity.

The answer to this question is not straightforward, as sustainability inevitably means different things to different people. However, in our experience, one thing seems clear: very few community and voluntary organisations will be able to sustain themselves, without grant aid, solely through income derived from trading activity.

Indeed, for most organisations, this would be inappropriate anyway, as they are addressing social needs that require and deserve the support of government, statutory agencies and the wider society.

However, there is no doubt that the funding climate is changing and that there is an expectation from a range of perspectives that organisations should take more responsibility for their own sustainability.

While there are examples in this book of organisations that are involved in trading activity as a way of delivering their core programmes (for example, Orchardville developing a project to provide training and employment opportunities through its business centre) this article addresses voluntary or community organisations that have set up ‘ordinary’ businesses with the aim of making a profit and then using that profit to fund what they really want to do in terms of social or community benefit.

In some ways the only difference between these businesses and private businesses is in their ownership; rather than being owned by a private individual or a number of private individuals, the business is owned by a charity. However the aim in both cases is the same: to make a profit that the owners can use to meet their needs.

Case study: East Belfast Partnership

The example of East Belfast Partnership is one with which all three authors of this book have been directly involved; it has also been chosen because the Partnership has set out with the express purpose of establishing trading businesses so that in the long term the profit from these can cover its costs either with reduced grant aid or possibly with no grant aid at all.

East Belfast Partnership is an interagency partnership established with core government funding from the Department of Social Development with the remit of coordinating and delivering urban regeneration.

In light of a very unclear and constantly changing urban regeneration government strategy, and numerous difficulties with core funding, East Belfast Partnership at an early stage in its development included in its strategy a plan to move towards self-sustainability.

Because it was 100% government funded when it started, the Partnership had absolutely no reserves, as all grant aid had to be fully expended. This provided an added incentive to raise additional income, as having no reserves put the organisation in a very precarious situation, dependent on the goodwill of its banking partner to survive during the many times it waited months for grants to be paid ‘in advance’!

The first company the Partnership established was ECOM Management, later to become Avec Solutions. This was initially established in order for Partnership staff to take on a limited amount of external consultancy work; but the Partnership then accessed grants from Belfast City Council and the Local Enterprise Development Unit to establish the new company as an IT consultancy.

Shortly after this, another company was formed called Landmark East. In addition to practically addressing physical dereliction by accessing grant aid to buy and refurbish derelict properties, Landmark East was also seeking to build up a property asset base which, while it would not necessarily generate any immediate income, would in the long term be available to the Partnership as income from rent.

In more recent years the Partnership has started two more businesses, a weekly paid for local newspaper and an espresso bar, although with limited success. The newspaper did build up a significant circulation and associated loyalty over the 15 months or so of publication, but could not reach financial viability before its start up finances ran out and the newspaper closed and ceased publication.

The espresso bar was managed relatively successfully by the Partnership through Avec Solutions, but was taking up an inordinate amount of management time for very little return and the decision was taken to license this operation to a private individual who was also a former employee. This is now operating very successfully for the licensee and also for Avec Solutions, which now receives the licence fee, and for Landmark East which is the landlord.

Unlike the newspaper and the espresso bar, however, both Avec Solutions and Landmark East have proved to be both successful and profitable companies. Avec Solutions has already contributed £100,000 of profit to East Belfast Partnership and is expecting to be in a position to contribute a five figure sum annually in future years.

Landmark East now has around 20,000 square feet of new or refurbished property worth an estimated £1.5 million against which it has borrowing of around £400,000. All properties are fully let, mainly to other not-for-profit or social economy organisations, with a rental income of around £100,000 per annum.

Therefore, at this stage, trading activity has certainly contributed in the short term to the sustainability of the Partnership, primarily by creating a significant amount of reserves which allows it to operate in a much more stable manner by covering short term cash flow difficulties caused by inefficient grant distribution or other unexpected financial difficulties.

Without such reserves, the Partnership would continue to be dependent on bank facilities, which would be very difficult to obtain had it no assets, and would be continually building up debt through banking charges and interest – costs which are usually not met by grant aid. Thus, even with significant and annually renewable funding, the Partnership would have had some difficulty surviving were it not for the funds generated towards its reserves by trading.

So what would happen if the Partnership were to lose all or most of its funding?

Obviously the profit from Avec Solutions could not replace the current grant income, which before costs and various projects can range from £200-400,000 a year.

However, even at this stage, a combination of profit from Avec Solutions and taking all profit from Landmark East without using any for future development, would certainly allow East Belfast Partnership to cover its core running costs with a small executive and administrative staff team.

To some extent, therefore, it is already sustainable, at least in terms of being able to exist and manage itself, and on that basis secure funding where necessary to deliver specific projects. However there is no doubt that its activity would be greatly reduced.

Nevertheless, with the current funding climate it is not expected that core funding for regeneration partnerships will cease and there is certainly scope for both Avec Solutions and Landmark East to continue to develop and build to a position where they can become more profitable in the future.

Landmark East in particular has significant potential as it is already working on a project which will double the space under its ownership and management from 20,000 to 40,000 square feet and add perhaps another million pounds to its asset base.

Both companies are currently undergoing strategic review in which they will look at the most effective way of developing so as to benefit their ‘owner’ East Belfast Partnership.

In one sense, therefore, trading activity has already contributed practically to East Belfast Partnership’s sustainability by allowing it to operate with a significant cash reserve and, if necessary, the trading activity would be in a position now to completely fund the Partnership but with a greatly reduced operation and staff team.

However the plan over the next five to ten years certainly has the potential of creating assets and profits which could potentially fully fund the activity of East Belfast Partnership or indeed any other organisation of a similar size and nature should the Partnership for whatever reason cease to exist.

Conclusion

The above case study certainly demonstrates that trading your way to sustainability is not only theoretically possible but it is also a practical reality. However, it is definitely not a possibility for every voluntary or community organisation.

The nature of voluntary and community activity is such that it is addressing deep and real needs within society. It is right that this continues to be funded and unrealistic that anyone should expect them to be funded solely or even mainly by establishing businesses.

It also needs to be recognised that East Belfast Partnership was perhaps in a unique situation given the broad range of people with skills and experience who were involved from the beginning, both as board members and as management staff.

Trading to sustainability is possible, but certainly not for everyone.