Why Buy a Business?

Why would a social enterprise, or better yet a charity, buy a private business? And not just any private business but a profitable one that is ready for expansion and growth. The answer is: because they can.

The Third Sector has traditionally worked very hard historically to convert projects into social businesses or to start up social businesses from scratch or even utilise franchising and licensing to develop new social businesses. These models of growth require resources and have associated risks, business acquisition is the next step along a continuum of growth models for an organisation seeking to deliver commercial and social outcomes.

There is no risk free or cheap way to grow an organisation and business acquisition has its specific risks and costs. However, business acquisition has a place in Third Sector organisations’ strategies for growth and sustainability. We have created some cameos (very brief case studies) sharing the great ideas which various organisations have developed during the programme to use business acquisition strategically.

Many of these ideas include the sustainability. Funding for social enterprises is becoming more and more limited, organisations that want to continue to deliver their social mission need to finance it differently. Income, earned through product sales and service delivery, is not exactly free money but it does give an organisation greater freedom in how it allocates those funds. If a business needs money for a new van or a social project, it looks at how it can make more money – a project or charity usually seeks to find a grant to fill the gap. Buying a business can give an organisation a jump start on its commercialisation journey.

That of course raises a new debate about how commercial should social enterprises be and there are many views on that topic. The rationale behind encouraging Social Firms to be more commercial and earn more income through trade is that since they are businesses offering employment to those who are severely disadvantaged in the labour market – they need income to pay wages and as businesses they can earn income.

The AB4G programme is now delivering joint venture, collaboration and merger support as well as helping with specific acquisitions. All this support is focused on helping organisations to become better positioned for the future both financially and in social outcomes.