Business Management

Before deciding to set up a Social Enterprise, it is essential that the initial costs involved and estimated expenditure is determined. If this is not done then the new Social Enterprise could fail to get off the ground.

Working out accurate start up costs is an important element in deciding if the business idea is viable.

Why must all start-up costs be included?

Underestimating start up costs will result in the Social Enterprise being less profitable than expected. It might even be the difference between making any profit in the first year or two, which means potentially looking for additional funding. The last thing anyone wants to do is to invest time and money in a Social Enterprise that will never give an acceptable return.

Is it better to overestimate start-up costs slightly?

Yes: including some contingency money in the start-up and operating budget projections is wise as there are always unexpected expenses. Underestimating costs can be just as disastrous as making overly optimistic sales forecasts.

What start up costs should be included?

• Premises rent rates, refurbishment etc
• Stock perhaps
• IT and other equipment
• Office furniture
• Business stationery and office supplies,
• Marketing items e.g. leaflets/launch ads
• Website development
• Postage
• Travel and transport
• Heat and light
• Phone and internet charges
• Insurance
• Professional fees including Company registration, Legal accountancy
• Wages  including income tax and National Insurance

 

Note there are two types of costs both of which should be considered

2. 1. Fixed: A cost that does not vary depending on production or sales levels such as rent, property tax, insurance, or interest expense

   2. Variable: A cost of labour, material or overhead that changes according to the change in the volume of production units.

Is there a need to retain proof of all expenses?

Yes: To claim tax relief (and VAT if applicable), the Enterprise must have a valid (VAT) invoice and retain all sales receipts. If the Social Enterprise makes a claim for tax relief that cannot be supported by a valid invoice/receipt, HMRC can ask for the tax back, plus interest. Seek accountancy and legal advice to determine what the Enterprise can claim for and make sure to retain proof of all business purchases.

Why should start-up costs be minimised?

The Social Enterprise stands a better chance of making a profit – or even just surviving, if starts up costs are controlled. Also, it’s a good discipline to get into from day one. Remember in business operating costs should be kept as low as possible and avoid the temptation of buying things the Social Enterprise does not need e.g. the Rolls Royce Company car. Chances of long-term success are much greater if the Social Enterprise has a low cost base.

Download Template Business Plan

A Business plan in simple terms is a document that is used to give a Social Enterprise a strategic business direction and assist with obtaining financial support from funding bodies e.g. banks and investors.

The business plan is the document which establishes the organisations short, medium and longer-term objectives, including financial forecasts for 1-3 years. These objectives and forecasts can change as the organisation develops.

The business plan will highlight:

• Your skills and experience
• Legal issues (company structure)
• How the organisation intend to reach the customers (the marketing)
• The projected market for the organisations product or service
• Level of investment required and
• Financial forecasts

The recommended structure for a Business Plan is:

• Executive Summary
• Details of the organisation and you
• Strategy
• Marketing
• Operation and delivery
• Measuring what matters
• Management and personnel
• Funding and Finance
• Appendices

The Business plan is a living document and is a useful reference for showing the development of the organisation. It is therefore recommended that document version control is applied to all Business Plan documentation

The Data Protection Act is concerned with the protection of personal data that organisations hold on individuals.
If an organisation holds any information about clients, employees or suppliers they are legally required to protect the information. To comply with the Data Protection Act the following points must be adhered to:

• Process held personal data fairly and lawfully
• Personal data shall be obtained lawfully and only for a specified purposes
• Personal data  will be kept to a minimum for the specified purpose
• Ensure that the data it accurate and up to date
• Ensure that the data is not kept for longer than necessary
• Data will only be used for a specified purpose
• Data is protected against unauthorised access, processing and loss
• Data is not transfer the data to any country outside of the European Economic Area unless the country provides adequate data protection

All individuals have the right to see all their personal information that is held by an organisation and the maximum charge for providing this information is £10

Note: Personal information is defined as data that can be used to identify living individual. e.g. “the old man with a greyhound, who stays in Hamilton Street.”, though not naming this individual many people could easily identify this individual.

The use of CCTV can also fall under the Data Protection Act

An organisation may have to register with the ICO (Information Commissioner’s Office) if they are processing data automatically unless this is being done for standard business purposes e.g. payroll.

The following is a simple checklist for Data Protection Act compliance. If you can answer yes to all of the questions then although it does not guarantee compliance it shows that there is an understanding of the Act and policies and procedures are in place.

• Do I really need this information about an individual and do I know what I am going to use it for?
• Do individuals know that I am holding information about them and do they understand what it will be used for?
• Is the information being held securely, whether it is on paper, on computer files or web site?
• If details about any individual appear on the web site are they consulted about it?
• Is access to the information restricted to only those with a legitimate need?
• Is the information destroyed as soon as you have no more use for it?
• If you are using CCTV are the notices informing people why there is CCTV and are the cameras are sited so as not to intrude on anyone’s privacy?
• If you monitor staff e.g. use of email or internet, have they been informed why this being done and what is being monitored?
• Has staff been trained in their responsibilities with regards to the Act?
• Is there a policy for data protection issues?
• If asked to pass on personal information is everyone in the organisation clear when the Act allows this to be done?
• Do you need to inform the Information Commissioner?

For more information see www.ico.gov.uk