Selling and Trading (Social Enterprise)
Voluntary and community groups can receive money through donations or because they sell something i.e. trading.
If you want some advice and support about developing a trading idea then contact Steve Place at BCVS who is a trained social enterprise adviser and mentor.
Donations are gifts where the giver does not expect anything materially in return. They might get a warm glow, or an official thank you, or something of small monetary value (like a sticker) but in general the giver does not expect to receive something of similar value in return for their gift.
Selling or trading is where there is an exchange of goods or services (by the seller) in return for something of more or less equal value (by the buyer). An expectation is set up between ‘buyer’ and ‘seller’ of there being an exchange and so forming a contract in law (this does not have to be in writing!). For instance at a supermarket at the point of your basket items going through the till a contract is set up whereby you take on ownership of the items and the store expects you to pay money totalling the advertised price of the individual items. This contract is enforceable in the courts which is different from donations. In most cases there will be an exchange of cash but it can also be an in-kind exchange where the items exchanged are seen as equal in value. What is important here is any assumptions made by the two parties as to whether a sale is taking place or not.
Trading is sometimes seen as what the private sector does, not voluntary or community groups, and perhaps particularly not charities. However there is a long history of organisations in our sector trading and all organisations can trade (although there are particular rules for charities, read Charities Can Trade). Every cup of tea or cake sold at an event, or a ticket for a disco, is a sale. Child care groups, community centres and many others have always relied on trading. The movement from grant payments to contracts by statutory bodies in the past 15 years has increased the amount of trading income coming into the sector. The big difference between us and the private sector is that we are trading not just to make money BUT also to make a difference (this trading for a social purpose is sometimes called social enterprise)
Trading is not necessarily ‘dirty’ or inappropriate for our sector. We tend to talk about surpluses rather than profits in our sector but at the end of the day it’s what you do with the money left over that is important i.e. using it to create more benefits for your users, not what you call it. Trading can be a valuable form of income generation and one that can have fewer strings attached. However it does need different ways of working to attracting donations and grants to be an effective way of raising income
Key questions for any trading initiative are:
Will the trading help you to carry out your organisation’s purpose, not compromise your values and importantly create community or public benefit (either directly or by helping to fund such activity)?
Do you know the true cost of your service?
Do you know the difference between cost and price (i.e. what buyers are willing to pay for the service?)
Do you know who wants to buy your service, why and how they will benefit?
Are there enough people and/or organisations willing to buy at the price you wish to sell it at?
Do you want your trading to cover its cost, create a surplus or plan to make a loss (because you can subsidise it to make it affordable or you plan for it to be a ‘loss leader' i.e. will lead to more ‘sales’ in the future)?
Who else is ‘selling' the same or similar service? (NB could be someone you collaborate with not necessarily compete with)?