How do community businesses differ from other third sector organisations?

Suzanne Perry, Power to Change Research Officer and Tony Chapman, author of new report ‘How do community businesses differ from other voluntary and community organisations?’ outline the findings that set community businesses apart.

 

Civil society – where do community businesses fit in?

The civil society is a complex thing.  There are many ways of describing what is sometimes known as the ‘third sector’, ‘voluntary, community and social enterprise sector’ or ‘civil society sector’.  This problem is compounded when we try to define specific types of organisations.

Community business is a case in point: how are these organisations defined, and how do they differ from others such as social enterprises or community organisations?

Looking at legal organisational forms does not always help. A community business might be a company limited by guarantee, a community interest companies, a cooperative or a charity. The third sector is like ‘variations on a theme’ in this sense – organisations with different forms, purposes, activities and impacts.

This new report looks at where community businesses sit within this range of organisational types and draws distinctions between them and other third sector organisations (TSOs).  The report helps readers to recognise what is special about community businesses, how they contribute directly to their localities and what opportunities and challenges they face compared with other types of TSO.

Evidence from a major survey in the North of England

The report draws on data from the 2016 Third Sector Trends study – a long-running study with more than 3,500 responses, of which 612 survey respondents (17% of the sample) were identified as community businesses.  As a category of organisations, community businesses tend to be larger than other TSOs (60% have income over £100,000 compared with just 27% of general charities that earn some of their income). They tend to have been established more recently (47% since 2000 compared with 35% of general charities that earn income). Community businesses are more likely to work in urban areas, and particularly deprived urban areas.

Ambition and growth

Community businesses tend to be ambitious and optimistic about their future growth, something that is reflected in Power to Change’s community business market in 2017 report.  Indeed, 70% want to get bigger so that they can achieve more for their communities. And they prepare well for the future; community businesses are at least 20% more likely than other TSOs to work on or plan to change their practices and (perhaps unsurprisingly) are also more likely to work on or plan to increase their earned income. Community businesses are not inward looking: more than 90% want to influence local decision makers to make an impact on policy and practice in their areas.

Funding

Community businesses are characterised by their involvement in earning income to sustain their organisation and contribute to their communities. Often this income is self-generated, where services are offered which can yield a profit to reinvest in communities. But often, community businesses rely on funding from the public sector to do their work – usually in the form of contracts to deliver public services. They are also more likely than other TSOs to have made successful applications for public sector grants than other TSOs in the last two years. The downside to this is that community businesses are vulnerable to the impact of austerity policies. Local public sector bodies struggle to fund community businesses to tackle local social and economic issues – especially in areas of relative deprivation where community businesses are often located.

Collaboration

A key theme of this report is that community businesses’ are particularly successful at working with other organisations. For example, 86% of community businesses (compared with just 67% of TSOs which do not earn income) want to work formally with other organisations to achieve more; and 29% (compared with 9% of TSOs which do not trade) bid successfully in partnership with other TSOs. In addition, a considerably higher percentage of community businesses plan on working with the public sector, business and other TSOs in the future.

The collective contribution of community business to their localities

Although we don’t know for sure whether the organisations community businesses are interacting with are in the same localities yet, we can assume that at least some of them are. In this way, these findings provide some evidence for Power to Change’s place-based hypotheses that community businesses are good at local collaborative working and are more resilient as a result.  The findings also feed into wider conversations around local wealth building as posed by Centre for Local Economic Strategy and others.

These findings, along with others in reports such as the Community Business Market in 2017 (shortly to be updated) illuminate the of the size, scope and discerning characteristics of the community business sector.

 

How do community businesses differ from other voluntary and community organisations? will be launched at an event hosted by the Institute for Local Governance in the Hartlepool council chamber on the 26th October 2018. Other speakers at the seminar will represent CLES, the Wharton Trust, Power to Change and the Development Trusts Association. Full details of the seminar can be found here:  https://www.stchads.ac.uk/research/research-news/securing-a-future-for-community-business/