We get asked a lot of questions, so we've tried to answer some of them here - see if yours is covered. We add to these as we go along. If your question isn't here then please get in touch.
Remember there are more questions and answers in the Member's Section - to become a member click here
1. I've heard the term "Social Firm" but am not quite sure what one is?
2. Who do Social Firms provide jobs for?
3. Is there a difference between a social enterprise and a Social Firm?
4. What is the difference between a full Social Firm and an emerging Social Firm?
5. How do I become a member?
6. Where can I find Social Firms to trade with?
7. How do I set up a Social Firm?
8. I would like to set up a Social Firm, I've done some feasibility work and started a business plan but need some guidance.
9. Where can I find funding and/or investment?
10. How can I can access business support?
11. How do I write a business plan? Why do I write a business plan?
12. How do I know if my Social Firm idea will work?
13. There are so many different types of legal structure. How do I know which is best?
14. Should I set up a a CIC (Community Interest Company)? I don't really know enough about them
15. We are a charity, should we set up a Social Firm as part of the charity or as a trading arm?
16. Should I register for VAT?
1. I've heard the term "Social Firm" but am not quite sure what one is?
Social Firms are a unique form of social enterprise that focus on work integration for severely disadvantaged people. They are commercial businesses driven by the social purpose of creating employment opportunities within a supportive working environment for people who are severely disadvantaged in the labour market.
Social Firms aim to generate at least 50% of their income from sales of goods and services. They are non-profit distributing, with any surplus being shared by employees or re-invested in the business or community in order to meet the social purpose.
At least 25% of a Social Firm's workforce is people who are severely disadvantaged in the labour market. Social Firms have a ‘family business' atmosphere, providing an environment where team working and participation in the business are paramount.
Social Firm values are embedded in creating Enterprises that provide equal access to Employment that result in the Empowerment of severely disadvantaged people. For more information see the What are Social Firms section. Return to Top
2. Who do Social Firms provide jobs for?
Social Firms are created specifically to provide employment opportunities for severely disadvantaged people; people who are furthest away from the labour market and who are unlikely to be able to sustain open employment. We are also not prescriptive about what is viewed as a ‘severe disadvantage', but the more common disadvantages where individuals face one or more barriers to the labour market are, for instance, homelessness, being an ex-offender, being a drug or alcohol addict, having a mental health problem and having another kind of disability. Return to Top
3. Is there a difference between a social enterprise and a Social Firm?
A Social Firm is a specific type of social enterprise. All types of social enterprises share common characteristics - they have a social purpose, they reinvest any profits back into meeting that social purpose and they usually have an inclusive working environment. Return to Top
There are many different types of social enterprise including development trusts, community recycling ventures, social cooperatives and Social Firms. What differentiates them all is their social purpose. A Social Firm has the specific aim of creating employment for people furthest from the labour market. So whilst all Social Firms are social enterprises, not all social enterprises are Social Firms!
If you would like more information about social enterprise in Scotland please visit the SSEC (Scottish Social Enterprise Coalition) website at www.ssec.org.uk or the Senscot (Social Enterprise Network Scotland) website at www.senscot.net. The UK Social Enterprise Coalition (SEC) has produced a guide on social enterprise featuring stories from around the country on who is doing what - download here Return to Top
4. What is the difference between a full Social Firm and an emerging Social Firm?
When a Social Firm starts trading it does not immediately reach the criteria of 50% income generated from sales and 25% of its workforce being severely disadvantaged people. It usually has to work towards this. Therefore an emerging Social Firm is working towards meeting these criteria and a full Social Firm has reached this and usually has gone way beyond these criteria. Return to Top
5. How do I become a member?
Easy - just click here to go to our membership page. Return to Top
6. Where can I find Social Firms to trade with?
We regularly track our sector to ensure that we know what kind of Social Firms there are out there and what type of issues and successes that they are experiencing. We've used this information to develop a map of Scotland showing where all the Social Firms are and giving more information on who they are and what they do. Just click here to access the map and have a look at the Social Firms in your area. Return to Top
7. How do I set up a Social Firm?
The million dollar question!
There are many ways a Social Firm can develop - you can find more information here . The starting point always has to be the social mission. A Social Firm is merely the vehicle through which you can support people into work so you need to be clear form the outset that it is about job creation. Then you need a good idea, i.e. one that is commercially viable. For more tips see our Members section. Return to Top
8. I would like to set up a Social Firm, I've done some feasibility work and started a business plan but need some guidance.
Social Firms Scotland can offer various levels of support. We offer tailored support that will grow your own capacity to progress and launch the business idea. For your initial assessment and to find out more about what support we can offer click here .
Or you could have a look at our resources
Additionally Social Firms UK have produced The Extra Elements: A Social Firm Trainer. In acknowledgement of the wealth of advice and information about general business development in the social enterprise sector already available, the Extra Elements has been designed purely to fill the gaps specific to setting up and running a Social Firm that these do not cover. It is therefore a tool which is complimentary to, and should be used alongside, what is already available. The report can be downloaded free of charge from the Social Firms UK website Return to Top
9. Where can I find funding and/or investment?
The Scottish Government recently announced details of funding/investment in the third sector.
Scottish Investment Fund - a £30 million fund to be delivered between 2008-2011 and beyond. It aims to build capacity, capability and financial sustainability in third sector organisations by investing in assets, business development and skills of people. For more information please view the Investment Strategy. The fund will provide a mixture of loan/repayable finance and grant funding to individual social economy organisations. Investments will be available to mature established social economy organisations that have been trading successfully, partly through income generation, for at least three years. The fund will open for business on 1st September 2008 and applications will be accepted from that date onwards. A website is currently being developed.
Enterprise Fund - this fund will support organisations that want to build their capacity to operatae in an enterprising way and who are not eligible for the Scottish Investment fund. Details of this £12million fund will be available over the coming months.
Big Lottery Scotland - offers a number of funding programmes. Currently the following programmes are open : Reseach programme, Investing in Ideas, Fair Share and Awards for All Scotland. Please check out their website for more information on the programmes, eligibility and deadlines.
Taking a Loan of Finance - a guide to borrowing for social economy organisations. Produced by Social Investment Scotland, you can download the full guide or, as it is quite a large document, sections of it by clicking here
Tips - It pays to invest plenty of time in the funding application process, especially the initial research and preparation stages to ensure that what you are applying for funding is well thought out. Before making your application it is worthwhile investing time in fostering a relationship with the grant-making organisation. You may be given an indication of whether or not your project is likely to succeed before you spend time and other resources on putting your bid together, and you may be given some tips on how to frame your application (do not become a pest though!)
Familiarise yourself with the details of scheme and any published guidelines: what it is seeking to achieve, what the eligibility criteria are, what you will be expected to deliver (and monitor). If you are applying to more than one organisation make sure that your application is tailored to the specific objectives of each scheme - don't just prepare a standard application for all bids. Find out who has previously been funded - contact them, they may be able to offer valuable advice.
Refine the details your project, make sure you know how much money you will need and how long you will need the money for. You will need to have a carefully costed budget, which does not understate or omit relevant expenditure
Make sure that you have included all the information requested (prepare a check list if one is not provided). Finally, get someone else (preferably uninvolved with the project) to read through the completed application, checking that it makes sense, figures add up and that it shows your project in the best light. Return to Top
10. How can I can access business support?
Social Firms Scotland can offer various levels of support. We offer tailored support that will grow your own capacity to progress and launch the business idea. For your initial assessment and to find out more about what support we can offer click here .
There are also a number of other organisations/programmes that can provide business support - they generally have their own eligibility criteria so please check them all out.
Aspire to Enterprise - programme providing a range of Business Support Services to ambitious, developing social enterprises in Lowland Scotland (anywhere below the H&I border)
Cranfield Trust - offers free management support to voluntary organisations and social enterprises addressing issues of poverty, disability and social exclusion. Download more information here - for an initial discussion about a free consultancy project, please email their Project Co-ordinator, Iain Ferguson or call him on 01794 830338.
Pilotlight - brings together charities and business professionals to work together to tackle disadvantage in Scottish communities. Download more information here. Return to Top
11. How do I write a business plan? Why do I write a business plan?
A business plan puts down on paper what your organisation will do to turn its vision into reality. It summarises the activities, systems, skills and resources needed to achieve your short, medium and long term aims.
There are already a range of business planning guides and templates out there and some are even tailored to starting up a social enterprise. Using their own and others experience, Forth Sector who run a number of Social Firms in Edinburgh have written a guide to map out a development route for you. This is a free resource and can be downloaded here - A Business Planning Guide to Developing a Social Enterprise
You can download a guide to drawing up a business plan for your Social Firm at the Social Firms UK website. Part one is the main guide and part two is the accompanying accounts spreadsheet.
Additionally Social Firms UK have produced The Extra Elements: A Social Firm Trainer. In acknowledgement of the wealth of advice and information about general business development in the social enterprise sector already available, the Extra Elements has been designed purely to fill the gaps specific to setting up and running a Social Firm that these do not cover. It is therefore a tool which is complimentary to, and should be used alongside, what is already available. The report can be downloaded free of charge from the Social Firms UK website Return to Top
12. How do I know if my Social Firm idea will work?
You have a business idea that you think will make a great Social Firm - how do you know?
Do some feasibility work! Feasibility work is essentially all the questions that you need to ask before you start a business up. You don't go on holiday without a lot of planning and research so why should starting up a business be any different?
Social Firms Scotland and DTA Scotland have developed a workshop called "Making the Pitch! How to generate ideas and turn them into social enterprises" If you are asking yourself any of the following questions then this could be the workshop for you.
- Do you need to generate income and don't know where to start?
- Where do ideas come from?
- How do you get from idea to business plan?
- How do you know it is viable?
For more information on the workshop click here
Social Firm UK have developed a tool - the DIY Feasibility Toolkit - which enables you to test your business ideas and your own abilities to create a Social Firm business, You can use it to test several business ideas simultaneously and assess which have the potential to work. Using the toolkit not only saves money on hiring external expertise but will also empower staff and increase their sense of ownership of the business. It also enables people to focus on the need for a feasible and sustainable business as being key to Social Firm development. The toolkit is available to SFS/SFUK members free of charge and to non-members for £90. Return to Top
13. There are so many different types of legal structure. How do I know which is best?
There is no easy answer here. Different legal structures suit different organisations, it is not a case that one size fits all unfortunately.
Choosing a legal form is an important part of establishing a social enterprise. As the framework for your business, it is important to develop a form that makes it as easy as possible for your social enterprise to be successful.
There are a number of tools/publications out there that can help. There is specific information about social enterprises on the Business Link website
Keeping it Legal takes you through the main issues you need to consider when setting the rules and regulations that govern your business. Written for readers with little prior knowledge of legal forms, it will help you think about the major questions you need to ask when developing the organisation, and gives information on all the legal forms available to social enterprises. Case studies provide practical, easy to understand illustrations of a wide variety of examples. You can order this publication from the SEC website
Social Firms UK have also produced template M&As for a Social Firm Company Limited by Guarantee, available for £10 for members, £20 for non members. They have also produced a template Social Firm Share CIC (Community Interest Company) with comprehensive guidance notes to help understand the potential of this legal structure. The template has been checked and approved by the CIC regulator and is available to members for £10 and non members for £20.
If you are looking for specific legal advice on writing a constitution we would always recommend you speak with an expert. We can provide you with contact details of a very experienced solicitor that we have used in the past that has extensive experience of the social enterprise sector. Return to Top
14. Should I set up a a CIC (Community Interest Company)? I don't really know enough about them.
A CIC is a relatively new type of legal structure, it is a limited company with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage. This is achieved by a "community interest test" and "asset lock", which ensure that the CIC is established for community purposes and the assets and profits are dedicated to these purposes.
The best place to start is on the CIC regulator's website at http://www.cicregulator.gov.uk which gives a good amount of information about CICs and setting one up.
A CIC is registered at Companies House as per any normal company and uses the same incorporation documents. There are a couple of additional forms - a community interest statement confirming the company will benefit the community and detailing how and a declaration that you will not be an excluded company (is you will not be a political party/pressure group)
A CIC has Memorandum & Articles of Association which must contain a statement that the company is a CIC. For example M&As go to http://www.cicregulator.gov.uk/articles/introInfo.shtml
We often find the businesslink website useful and there is a CIC section
Finally, as always with legal structures we would recommend getting professional advice. Return to Top
15. We are a charity, should we set up a Social Firm as part of the charity or as a trading arm?
Social Firms UK have produced a very useful guide - "Guide to charities starting Social Firms" which is £20 SFS/SFUK members and £40 for non-members. The guide is intended to assist Charities that are considering setting up or 'floating off' a Social Firm. It focuses on the legal and technical aspects of the work and addresses such questions as:
- can a Social Firm trading activity be carried on as part of the charity, or should it be floated off, for instance in a subsidiary or linked company?
- how is running a Social Firm different from running a charity?
- what support can the charity offer - in cash or in kind - to a subsidiary or linked Social Firm?
- can a charity transfer its own assets and staff to a Social Firm, and if so, how?
DTA Scotland also commissioned a guide on a similar topic - you can download this from their website
It is also worth checking out the relevant section on the HMRC website Return to Top
16. Should I register for VAT?
It's definitely best to talk to the experts about this. You must register for VAT if your turnover for the previous 12 months is over a specific limit - currently £67,000 (please check with HMRC for the most up to date limit as this amount changes) - or if you think your turnover may soon go over this limit. You may register voluntarily at any time. Your accountant should be able to advise on the necessity and implications of VAT registration and the associated advantages and disadvantages (please note that grant income does not count as income in VAT terms).
We would also recommend that you look up the HMRC website in relation to charities and VAT and give them a call - 0845 302 0203 - if this throws up further questions. Return to Top
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