Cost management in “hard core” solution to woo social enterprise investors
Posted by: Ron Yellon
Rebecca Birbeck, Deloitte’s director in consulting strategy in her article, “Soft outcomes need hard evidence” (Guardian Professional, Sat 21 January 2012), argues that in order to attract the most investors, social enterprises should balance social impact with maximising profit.
Profit is not a dirty word
Where a social enterprise has the creation of social impact as its primary objective, making profit can be relegated to a poor second. Profits provide a means to sustaining the mission over the longer term, but the statistics show that perhaps only half achieve this with the result that potential investors, ideally seeking both a social and financial return on their investment, are put off. The difficulties for socially minded investors lies in evaluating the social return on their investment when they have only “soft“ outcomes to show and where the wider benefits to society, though compelling, are difficult to quantify.
Don’t fall short
To help to address this impact assessment challenge a number of methodologies are available. In my view, these are supported by some quite brilliant and dedicated people. But, as Rebecca explains, the concepts are by no means straightforward and even where there is a demonstrable impact the analysis can still fall short of providing sufficient evidence of value for money required by certain investors.
Go “hard core”
Her solution to address potential investors’ concerns on return on investment is to be achieved, in part, “by social enterprises making their commercial delivery more hard core”. For organisations looking to improve their chances of obtaining finance Deloitte include engaging with cost management among their recommendations – along with growth and marketing; having a clear business plan and model, and building and demonstrating business skills and management capability. They see a reluctance to engage with business topics like cost reduction or competitiveness as a very real risk as this can result in a failure to convince investors of both the impact and long-term sustainability of their investment. “Becoming more hard core in their delivery”, Deloitte say, “will increase the chances of being viewed as reliable investments”.
Need to hook up?
Established social enterprises looking to engage with commercial cost management – either with a view to investor readiness or simply wishing to raise their game – should ask about our self-funding outsourced cost management service. It is already helping many NFPs succeed. Investors will love it, and it may not even cost you a penny!