These are tough times for small charities. One in seven charity chief executives say their organisation is struggling to survive, growing to one in five among smaller charities – according to a 2015 survey by Charities Aid Foundation (CAF) and the Association of Chief Executives Voluntary Organisations (Acevo).
Given that smaller charities (defined as having an annual turnover of less than £1m ) make up 96% of the UK voluntary sector, this struggle is being felt by thousands of organisations across the country. Which ones will stay afloat?
The answer, says David Hopkins, senior advisor at Charities Aid Foundation (CAF), depends on their resilience. As funding cuts deepen and demand increases for services, only the most robust organisations will cope with setbacks – such as grant cuts – and be able to thrive.
For Duncan Shrubsole, director of policy, partnerships and communications at Lloyds Bank Foundation (LBF), charities need to display three core attributes.
First, it’s about leadership and governance: the chief executive, trustees and staff must have “a clear sense of what they’re trying to achieve,” he says. Secondly, clients and service users must also be positive about what they are getting from the charity – and be able to articulate this.
Thirdly, the charity needs to be entrepreneurial. “That doesn’t necessarily mean running an enterprise,” he explains, “it’s about looking forward, being prepared to do different things and making bold steps where necessary”.
Dawn Austwick, chief executive of the Big Lottery Fund agrees, and emphasises the importance of mission alignment. Simply dreaming up exciting revenue-generating schemes is not the answer.
“If a charity opens a café that adds nothing to the achievement of their mission, I am not sure how successful they would be,” she says. “Yes, they need to be more entrepreneurial and ingenious – but mission alignment is crucial.”
She points to Newcastle arts charity Live Theatre, which has gradually acquired neighbouring buildings to expand its asset base, and has developed new revenue streams, including exploiting intellectual property rights (by licensing a new digital box office system), renting out creative studio space, and running online courses – all of which are closely aligned to its mission.
To develop greater resilience, Austwick also recommends that charities devote their energy to building even stronger relationships with local communities. She highlights Tyne Gateway, a small charity that has used the strengths and knowledge in its local communities to design and develop new approaches to tackling child poverty.
“Many [charities] love the thrill of the ‘new’,” says Austwick, “but sometimes looking after those people who are closest will pay dividends.”
For funders like LBF and the Big Lottery Fund, resilience has become an increasingly relevant factor in grant decision-making – and an area where they can provide support. In 2015, the Big Lottery Fund ran the Local Sustainability Fund, on behalf of the Cabinet Office, to help charities review and transform their operating models to find more sustainable ways of working.
This isn’t just about the financial bottom line. While healthy balance sheets and reserves are always helpful, says Austwick, it’s easy to underestimate the importance of attitude. Shrubsole agrees: “In many ways, resilience is a state of mind.”
Truly resilient organisations will see finance as a “strategic tool”, adds Austwick, rather than something they have to do in terms of budget. “Instead of just balancing the books, they will make money work for them.”
CAF’s David Hopkins confirms the value of a well-informed, strategic mind-set. “A strong charity knows all of its financial options, when to use them, and is comfortable about doing it,” he explains.
“Whether that’s through securing grants, pursuing earned income, taking on traditional loans or social investment they are able to embrace a range of financial tools – and aren’t overly reliant on one income stream.”
This has been a lesson learned first-hand by youth volunteering charity, vInspired. Founded in 2006, the charity relied on public sector funding, which was cut under the coalition government. Since then, vInspired has undergone a significant period of transformation, says director of commercial services, Rikki Garcia.
“[Becoming more financially resilient] was a big cultural shift for us,” he says. “First, we had to look very hard at what the charity needed to do. There were some tough decisions, but we have now moved towards a combination of funding sources – from donations to public sector contracting, and running a social enterprise.”
The key to success, says Garcia, comes back to alignment. “The commercial side shouldn’t be in conflict with anything else in the organisation,” he explains. “For us, [our different revenue streams] are a continuation and expansion of what we were set up to do. To make it work, we’ve needed an absolute focus on our charity goals and to bring staff along with us.”
In the wider conversation around voluntary sector resilience, it is easy to underestimate small charities – and forget that they are natural born fighters.
“Most [of them] found a gap that the state wasn’t filling, and have always had to beg, borrow and be resourceful to find space, staff, volunteers and equipment,” says Shrubsole at LBF. “But resilience isn’t just about hanging on – and not making any impact. It’s about standing on your own two feet and thriving. That’s the challenge.”
At CAF, Hopkins says that the charities who will best weather the current funding storm are the ones who truly understand themselves and their donor base. “Charities need know what they’re good at, be able to articulate that in their marketplace, and understand what gets their donors excited,” he says.
“There’s empathy out there among donors – they know charities are going through tough times. And they want them to do well.”
Content on this page is paid for and provided by the Charities Aid Foundation sponsor of the Guardian Voluntary Sector Network’s Charity Money hub.
