Recovery and growth for social enterprises in a post Covid-19 world: what you need to do

Recent times have thrown a whole host of issues at social enterprises, entrepreneurs and business leaders which were truly unforeseen. Pre pandemic, the word 'furlough' wasn’t as common in our vocabulary, and everyone was talking about Brexit. All of this seems like a very long time ago now.

We’ve spoken to our wide range of clients, investors and network, and felt in the middle of something tragic – yet interesting at the same time. The overarching feeling has been encouraging. Those businesses badly affected had to ride out the storm by navigating and implementing the different government incentives and schemes. While businesses that were affected positively had to act quickly to take advantage of a changing economic environment and accelerate their growth. What’s clear is that the British entrepreneur was more than up for the challenge.

The overarching feeling has been encouraging... What’s clear is that the British entrepreneur was more than up for the challenge

We’ve now reached the stage where all types of business, however they’ve been affected, are entering the new world. In this article we will look into, both strategically and operationally, how businesses – and in particular social enterprises – can mitigate the risks elevated by the pandemic.

Revenue

Covid-19 has created unique opportunities for social enterprises to build on their disruptive spirit. They are needed now more than ever, and probably never had a greater sense of purpose. Indeed, we’ve seen a large number of entrepreneurs pivot their original business model into something new. 

Now is the time for the social entrepreneur to take a look at the assets their business has and how to maximise them, both in terms of social impact and profitability.

New revenue streams can be developed and carved out from the existing customer base, as well as looking at new markets. A diversified strategy will have greater resilience in the future and inevitably a wider social impact.

Covid-19 has created unique opportunities for social enterprises to build on their disruptive spirit

Additionally, it’s worth reviewing the terms of any grants awarded and ensuring, where possible, you’ve asked for extensions if you are struggling to fulfil the terms due to furloughing staff or lack of additional donations.

Charities and social enterprises should also consider if their work involves development or innovation of any kind. If this is the case, you may be eligible to submit a Research and Development (“ R&D”) tax credit claim, which could provide up to 33% cashback on any qualifying expenditure.

Reforecasting

Forecasting has been a hot topic during these times, mainly concerning the applications for emergency Coronavirus Business Interruption Loan Scheme (CBILS) loans. We’ve discovered the businesses with the most robust forecasts were best prepared to understand the impact of Covid-19 on them.

Forecasts which can be used effectively to plot scenarios and map cash pinch points are vital for any social enterprise. Management should also be able to use forecasts to map out strategies and evaluate the potential success or cost of significant events, such as pivoting or releasing new products or services with different margins. Stress testing forecasts to understand what the greatest deviation from plan that a business could survive is a useful approach to assessing the sufficiency of, or additional requirements for, capital finance and borrowing.

Financial management

Financial management involves being aware of the whole finance function of your business, and understanding the impact certain choices may have. The very basics of financial management are the production and analysis of monthly management accounts. All businesses and social enterprises should be able to provide an accurate snapshot of the company at any point in time to enable management to make decisions.

All businesses and social enterprises should be able to provide an accurate snapshot of the company at any point in time

The other side is ensuring that the cash you do have is working for you as effectively as possible. In difficult times, working capital management is critical. This can be as simple as paying your creditors later and encouraging your debtors to pay sooner (within the agreed terms of business).

You should also ensure that any government initiatives, such as deferral VAT of payments are being used, but also included correctly in your forecasts, so no surprises are met further down the line.

Mergers and acquisitions

Due to Covid-19 many enterprise’s income streams are no longer as sustainable and certain as they were before. Even for those currently sustained by government programmes such as the Coronavirus Job Retention Scheme, there are still fundamental uncertainties around the return of demand from consumers and businesses as lockdown is eased.

For those organisations in sectors that do remain well funded, mergers and acquisitions provide an opportunity to support and maintain the good work of those operating in their space who may be struggling.

A merger or acquisition would provide the struggling organisation with the backing it needs to continue operating and support causes it’s passionate about. There are also a wide number of benefits for the acquiring organisation, including increasing its charitable impact and integrating systems to improve synergies.

A merger would provide the struggling organisation with the backing to... support causes it’s passionate about

Other integration

There are other strategic options which could solve the issues mentioned above, including back office sharing and supply chain integration.

Covid-19 has affected businesses in different ways, but this has increased the opportunity for organisations to potentially work together and pool their resources for the good of them both and their continuing social impact.

More information

Now is a time of change. Those organisations able to embrace and plan for it will be able to use it as a long-term springboard to grow their social enterprise success. 

If you would like more information on how we can help your social enterprise plan for both recovery and growth post Covid-19, please get in touch.

Discover more guides, downloads and expert advice in our Fit for the Future series – helping social businesses build financial health, agility and staying power.