Kick-starting NFP Social Enterprises
13 January 2016 at 9:24 am
After decades of volunteering for social enterprises, entrepreneur Barry Green set out to create his own organisation with the mission of helping Not for Profits to become financially independent, writes Ellie Cooper in this week’s Spotlight on Social Enterprise.
Since the 1960s Barry Green has worked on social enterprise projects as an engineer – before the term itself was recognised. During that time he developed partnerships with organisations from the United Nations to Oxfam to achieve positive change in developing nations.
Three years ago he formed a connection with a Perth-based refugee organisation, the Karen Welfare Association, which inspired Green to set up Sesteem, a play on words of self-esteem.
“[The founder] had spent $200,000 in 1992 to set up an aquaculture project on behalf of these people as a social enterprise,” Green said.
“And finally the project actually failed because they didn’t have a marketing plan. They can produce 40 tons of fish a year, but they didn’t know where to sell it or anything.
“The project has been sitting stagnant for many years… so I put a business plan together, and I worked out that it needed $400,000 to get it started, but it could produce around $500,000 in profit a year once it was working.
“Because of all the infrastructure that was already there it was a very good project.”
Green said he became passionate about social enterprise as a sustainability project for Not for Profits, and conducted workshops with organisations to establish their needs.
“Many of them [NFPs] would like to become less grant dependent, but they don’t have the resources, they don’t have the funding and they don’t have the management capacity to set up social enterprises. So we will do that on their behalf,” he said.
“So that’s how the concept of Sesteem evolved. Sesteem is an organisation that will identify projects, and, out of our own development fund, we will provide the funding on a zero or very low interest loan.
“It’s a profit for purpose, but all the profit will go back into the development fund.”
Green said the funding provided to the Not for Profit is secure because the Sesteem management team develops the business plan and runs the project.
“In return, Sesteem will set up each project as an individual company, and Sesteem will hold 10 per cent of the shares in that company, and the NFP will hold 90 per cent,” he said.
“Generally in the type of businesses we’re looking at, the loan can be repaid in 12 to 15 months.
“Once that’s done, every year there’s a dividend distribution, Sesteem takes 10 per cent of the profits and puts it back into the development fund, and the NFP gets 90 per cent of the profits and become less grant dependent, which is our goal.”
He said that his social enterprise model could also generate jobs within the Not for Profit, and Sesteem would train people to run the business.
In Perth, Green has sought to partner with a number of Not for Profits to create social enterprise projects.
“We really want to make contact with other NFPs that have ideas – or don’t have ideas – that would be willing to work under this concept,” he said.
“It could be any NFP, even if they don’t have an idea, we will come up with an idea and structure a plan for them.
“We want to be a one stop shop for social enterprise development in Australia.”
For Not for Profits that don’t have a social enterprise idea, Green developed a system for growing fresh produce in vertical cages in climate controlled greenhouse conditions.
“These can be scalable because they can be as big and as many of them on acreage, or we can do it on a small inner city rooftop,” he said.
“So we can structure a vegetable growing program for a NFP organisation, whether it be on an urban derelict site or whether it be on a rooftop or whether it be on 5 acres in the country, we can do it.
“And funnily enough the vegetables grown under those conditions, because we can grow 365 days a year because of the greenhouse controlled conditions, there’s quite a large profit margin in it.”
Green said the greatest challenge in establishing the projects is fundraising. With a career in project management, and armed with solid business plans, he admits to being surprised at the difficulty of raising capital.
“The thing that is so frustrating is that, under the Sesteem model, once the project is up and running, it becomes self-sustainable after 12 months because it generates profit, but we’ve found the initial startup fundraising hard,” he said.
“Our difficulty is we have no runs on the board because we’re a startup concept and people don’t look at that, and we also have no bricks and mortar security.”
He also said the problem was that he thought big, seeking funding upwards of $100,000 that would also generate large returns.
“I did quite a lot of research, talking to financiers and philanthropic organisations, and I even submitted grant applications to governments,” he said.
“There’s a big void. Philanthropic organisations will generally fund small projects up to, say, $50,000, and then you go to the big boys who will only do sort of $5 million plus, there’s nothing to fill that gap in between.”
Green has since been refining his approach, and in December 2015 launched Game Changers, a dedicated fundraising arm of Sesteem.
He is now exploring emerging fundraising options, including benefit bonds and impact investing.
“There is no question that Sesteem is going to work. Gradually we’re getting there and gradually we’re building a new network,” he said.
“We also want to talk to NFPs large or small that are interested in a social enterprise operation because the more potential projects we can say we’ve got on the books the more viability we’ve got at getting out there and raising funds for each particular project.”