Of course charities should diversify their income. But how?

Of course charities should diversify their income. But how?

This week the Charities Aid Foundation (CAF) published their annual charity landscape research (read it here) and it’s not good news. Whilst the research doesn’t identify anything that will come as a great surprise to anyone in the sector, it shows an overall worryingly pessimistic view of the next few years.

As you’d expect, the looming spectre of Brexit features heavily, with nearly a quarter of organisations already starting to see a negative impact on service users as well as their own organisations (for example, struggling to recruit). Add into this the massive uncertainty around European funding pots like ESF (currently worth around £2.4billion to the UK), and the complete absence of detail from the Government about it’s apparent successor, the UK Shared Prosperity Fund (SPF) and it’s no wonder people in the sector are pessimistic.

The CAF research identifies income generation as the top challenge for 59% of charity leaders, with 21% of smaller charities (those with under a £1million income) struggling to survive. The Good Exchange also published research this week demonstrating that the average time spent completing grant applications (just grants, not public sector tendering processes) was around 38 days per organisation, with only around 3 out 5 being successful. This doesn’t appear to take into account the amount of time it takes to find grant funders, choosing which ones are worth applying for, all of the actual service design, bid planning, and good governance approval processes, before you get anywhere near filling in an actual form.

And this is for grant funders who tend to actually understand the sector and want to help. When you get into the mystical realm of public sector commissioning, charities face the double whammy of a) hugely risk averse public sector procurement teams who have little understanding of the voluntary sector, and; b) competition from the private sector who generally have the resources to invest in professional business development teams. It’s not a coincidence that only 6% of public sector commissioned funding goes to the voluntary sector.

The CAF report makes six recommendations for the future, and none can be argued against by anyone with any sense. However, several of them are easier said than done.

For example, “Charities should diversify their income”. Well…yes…of course they should. So should the average household, but how do they do that with no free time and no savings? Small charities with three or four staff and a handful of volunteers are spending a good two to three months a year filling in grant applications, a chunk of time on governance, going to contract monitoring meetings, filling in evaluations, building and maintaining partnerships, before they even get anywhere near a service user.

Can you get a second job, so you’re not entirely reliant on your primary one? Maybe. Can you do it and still be there for your children, make sure the house is kept tidy, do a bit of volunteering, and phone your mum every week? Probably not.

How does the average small charity (by far the majority of charities), facing ever decreasing funding and ever increasing service demand, find the time to develop new programmes, build up social enterprises (many of which fail in the first 12 months), or apply for local authority contracts that are not actually financially viable?

Income diversification is one of the biggest reasons charities speak to us at Simpact. And we can help. But even though we’re a social enterprise, specifically offering high quality, affordable consultancy to charities and SMEs, and providing pro bono work where we can (inevitable plug), we understand that most small charities can’t afford even our very reasonably priced services.

The CAF report also recommends that “charities need more certainty”. Again, they do. But what they need more is more money, more overt and consistent public support from politicians, and less time scrambling to keep up with funding bureaucracies.

CAF end their report on a broadly positive note, with 75% of charity leaders being more optimistic about their own charity than that of the sector, which is a good thing. It’s not all doom and gloom, and there is a good chance charities could do very well over the next few years, if they make themselves heard. CAF recommends that the Government should repeal the lobbying act, which should never have been passed in the first place, but whether it goes or stays, charities need to get out there and shout about what they do.

Be loud, be confident and remember why you’re there in the first place.

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