A community event, there are balloons, people seated at tables having a nice time. There a two volunteers chatting and smiling at each other in the middle of the photo.

Step 1: Get people together

Start by getting a group of like-minded people together who can share the work – a committee or working group. Many amazing community projects have started with a get-together in a pub, coffee shop or someone’s living room.

Get to know each other

Understand what each person brings to the table (find out more about undertaking a skills audit), and their motivation for getting involved. Spend a bit of time of time understanding each other’s motivations and learning about each other’s skills.

Get organised

You will find it easier if you agree who is leading each meeting and who takes notes and shares them everyone at the end of each meeting. Concentrate on action points and who agreed to do what and by when. Switch round the responsibilities so no one feels overburdened.

Choose a name and purpose

You will need to use these once you start consulting with your community and recruiting more people to get involved. Here are some examples of purpose or ‘mission’ statements:

  • We want to bring our community together and make the best use of all the assets and resources within our neighbourhood
  • We want to save a building and open it up to be used by our community
  • We want to develop a Neighbourhood Plan which gives us more power over land use planning in our community
  • We want to improve our neighbourhood through working together to develop new services which benefit everyone in our community, especially older people.

You have now formed a community group and you can begin planning to take action to improve your community.

Step 2: Identify and listen to your community

How well do you know your community? How is your community defined and what do they care about?

Deciding on the boundaries

Where is your community located? If you live in a small village or town, this might be easy to identify. But if you live in a big city, it can be much harder. Are you defined by a political boundary, like a local ward? Or a major road or river? Or is your community defined by where people live, shop and socialise? This is up to your group to determine.

One thing to consider is how big a community can you realistically serve or engage with your project. An area of over 3,000 households or 10,000 people is challenging to reach even if your communication is good.

Neighbourhood Planning has developed guidance around defining your local area, which is useful to look at when considering boundaries.

Listening to your community

The best way to find out what people in your community think, is to get out and ask people directly through activities like door knocking, canvassing at local events, information booths on high streets and feedback sessions.

Community organising, engagement and consulting are all approaches you can use to listen to your community. Set a target for the number or proportion of people you want to reach in your community.

These are the main principles of community engagement to consider.

Once you have completed your first phase of listening, you will have found more people who want to get involved. Make sure you invite them to join the team or steering committee. The more help you have for the work to come, the better!

Secondary data

Now you have a base of information and views from your community, you can add to this with ‘secondary data’: information and research results that have already been published by others. Information is increasingly available online from central government, your local authority and other public organisations. Depending on what sort of community project you are planning, here are some suggestions for the kind of data you might find helpful:

  • The Local Plan – you can find this by looking on your local planning authority website
  • The Office for National Statistics (ONS) website has a postcode search so that you can find detailed census information about your area, including demographics, education, housing and crime data.

For information about activities and project already going on in your community:

  • Ask around
  • Search the internet and social media platforms such as Facebook or Twitter
  • Talk to your local newspaper or radio
  • Talk to local councillors and any local authority staff who work in your area.

Step 3: Setting up an organisation

Not all community initiatives need to be a formal organisation, but as you progress as a community organisation, there may come a time when you need to be formally recognised and legally constituted.

There are several types of organisations that you can investigate to suit the requirements and needs of your community project. Some smaller projects may not need a formal structure, but other larger projects will require an incorporated legal structure to apply for finance or undertake projects such as Community Asset Transfer.

The three main types of organisations

  • Groups: Simple projects and community events can be run by a group of individuals without any formal structure. Read more about Groups here
  • Constituted group: Adopting a constitution gives a group a set of rules on what they will do and how they will operate. Read more about Constituted groups here
  • Incorporated organisations: If you are taking over a community asset or local service, or starting a community enterprise which is based on trading and will involve managing significant amounts of money, employing staff and entering into contracts, then adopting an incorporated organisational form is highly recommended. Read more about Incorporated organisations here
  • Social and community enterprise: Social or community enterprises are business types, not legal entities in their own right.

You can also have the additional status of:

  • Charitable: Depending on your organisation’s purpose, you can apply to have the legal status of charitable.

Read more about types of legal organisations here.

You shouldn’t choose your legal structure until you have done some planning in Step 3: Make a Plan. At the very least, you need to know the answer to these questions before you choose a legal structure:

  1. Who is going to ‘own’ and manage your organisation?
  2. How do you plan to fund your organisation?
  3. What is your business model?
  4. What will you do with any profit you make?
  5. Who is going to benefit from your activities?
  6. Do you need charitable status?
  7. Do you plan to own a building or land?
  8. Do you plan to take out a loan or a mortgage?
  9. Do you want to raise money through donations and fundraising?
  10. Or do you want to sell shares in your business?
  11. Do any members or Directors want to be paid?
  12. Do you want a democratic, co-operative structure or something more hierarchical?
  13. Do you want a large membership which has a say in the running of the organisation or do you want to restrict control and ownership to just a small number of people?
  14. What is the level of risks to member of the Board and how much protection do they need as individuals?

Read more about types of organisational structure here.

Where can I get some help?

There are some good online tools which can help you choose your legal structure.

It may be helpful to get advice and support from a specialist or a legal advisor before setting up your new company. Your local Council for Voluntary Service (CVS) will be able to help with writing a governing document. Find your nearest CVS here.

Once you have formally registered your new organisation with the appropriate regulator (Companies House, Financial Services Authority or Charity Commission) and achieved Charity status if required, you are ready to start running your organisation.

Your Directors and /or Trustees are legally responsible for the proper operation and management of the organisation. There are a number of Codes of Governance available to help Directors to achieve the purpose for which the organisation has been set up.

For more information, see:

Step 4: Decide what resources you need

It’s important to have a clear plan on how you intend to run your organisation in order to sustain its operation in the future. One of the key questions to be answered is how you expect to generate an income e.g. donations, grants, selling products and services? This is what we call the business model.

Your business plan will help clarify your project idea and define your long-term objectives. It provides a blueprint for running your organisation and a series of benchmarks to check your progress against. It is also vital for convincing your bank, your community and any potential investors to support you.

Choosing a business model

As a community organisation or charity you may not even think of yourself as a business, but every community business has the same elements as a normal business – customers, products and services, finance, marketing and profit. The key difference is that any profit generated is for social and community benefit, not individual gain. However you still need to generate profit (or ‘surpluses’) to return to the business or to spend for community benefit.

In order to write a convincing business plan, you need to understand and articulate your business model and make sure it is reflected throughout your plan. Your business model is the plan for the successful operation of the business, identifying sources of revenue, the intended customer base, products and details of financing.

Business models for community businesses tend to be more complicated than for conventional businesses. You will most likely have a mix of income including fees and charges, sale of services, donations and possibly contracts with public sector bodies. Your business model may be based on cross-subsidising one part of the business to support another, such as using income from pitch hire to subsidise coaching for children, or having differential hire rates for local residents, clubs and commercial businesses.

Another complication for community business planning is that the customer doesn’t always pay – so you may have users such as children or older people for example, where the service is paid for by a donor or a public sector client rather than directly by the user.

Every community business has a different business model. What matters is that you are clear about yours and that the rest of your business plan reflects this in terms of staffing, financial projections, governance, etc.

Part of the business model for every community business is its ‘social return’ i.e. its benefit to the community, so your business model also needs to show who benefits and how. If you are taking on an Asset Transfer, the Local Authority owner of the asset will be scrutinising your business plan to see that you have properly costed and planned for continuing to generate a social return into the future.

Business Plans

A good way to start your business planning is by using Locality’s Balanced Scorecard to create an overview of your business plan on one page. The Balanced Scorecard is a simple business tool, designed to capture on one page various aspects of the organisation – business model, organisational development, financial return and social return – setting out in each case where the organisation is now and where it wants to be soon (e.g. two years time) and later (e.g. five years time).

There are many other business plan templates and guides available, for example, Unltd’s information on putting together a business plan.

Here are the main sections we would expect to see in a business plan:

  • About the organisation and/or people behind the business
  • Mission/purpose of business and how you intend to achieve it
  • Product/service, pricing and projected sales/outputs
  • The market, the competition, the operating environment
  • Risk analysis
  • Resource needs and business operations
  • Income & Costs projections
  • Funding and finance needs
  • Cashflow forecast.

Costs and Income

Forecasting your future costs and income is the core of your business plan. You will need income and spending projections and cash flow projections for at least three years.

Read more about forecasting here.

Cash Flow

Cash flow is the way in which money flows in and out of your bank account.

When the capital, revenue costs and income have been projected and show that income exceeds costs, it is important that these are put into a cash flow for the first years of the project and that the timing and assumptions about timing for income in the cash flow are clearly explained and presented. Businesses often failure due to problems of cash flow rather than their overall profitability.

This resource also includes an example of a cashflow forecast.

Whole life costing for assets

Whole Life Costing is the systematic consideration of all relevant costs and revenues associated with an asset. Typically, a surveyor estimates over a 20-25 year period what it will cost to operate, repair, replace and renew building or landscape elements.

These costs are then given a current value in order that the owner can make decisions about and plan investment in the asset. It involves making judgements about which elements (windows, doors, etc.) will need replacing or repairing and what kind of cyclical maintenance (like decoration) will be required.

Step 5: Secure investment

Successful fundraising happens through good planning and investing time and energy in the process. Generally speaking, prospective funders (including your own members) will be looking for some or all of these:

  • Trustworthiness & credibility of key people
  • A compelling vision
  • A proven track record
  • An appropriate legal structure
  • A thorough feasibility study
  • A business plan
  • Support of partner organisations (which themselves have credibility)
  • Visible community support
  • A well-written pitch.

The finance you can access depends on the legal structure of the organisation, the project being financed and when and how much funding is required. This table details the funding options for different legal structures.

For example, only charities can apply for some charitable grants and there are restrictions to how much charities can generate income through sales of products and services which aren’t ‘on mission’.

Types of finance

When raising investment for starting or growing community projects, there are two main types of funding streams you can consider:

  • Non-repayable:
    • Grants (from government or charitable trusts)
    • Donations (from individuals and philanthropists)
    • Crowdfunding (online fundraising from lots of donors)
  • Repayable:
    • Bank loans & mortgages (from commercial & specialist banks)
    • Equity (e.g. Community Shares)
    • Social investment (a range of repayable finance from specialist social investors who expect a social & financial ‘return’).

‘Blended finance’ is a combination of the different finance and funding you need to reach your fundraising targets and is the reality for most community businesses. Read more about Blended finance here.

What type of funding or finance you can access depends on the type of project, your legal structure, your business model and the makeup of your community. It also depends on the stage of your project, your organisation or business.

For example, if you only need short term funding whilst you wait for a grant to be paid, you may need a bridging loan. To take on new premises for expansion you might secure a mortgage. For a very risky new business idea, you might need to crowdfund finance from friends and family or sell shares to your local community.

Getting investment ready

There are steps to take to ensure that your organisation is ready to take on an investment. This includes having strong leadership and governance, a good business plan, a market for your product or service and the right resources in your organisation to launch or grow your project or enterprise.

There are many tools available to help you get investment ready:

  • Locality’s Community Enterprise Checker: an online tool that assesses your organisation by asking a series of questions about your business, systems, people and finances.
  • Big Potential: an investment readiness fund that helps organisations prepare to apply for equity or loan finance. This BIG Lottery Fund grant fund will deliver approximately £10m of grant funding over three years to eligible VCSE organisations with the aim of improving the sustainability, capacity and scale of voluntary, community and social enterprise (VCSE) organisations in order that they may deliver greater social impact.
  • UnLtd offer financial support and mentoring for social entrepreneurs at various stages of their journey through an awards programme.
  • The School for Social Entrepreneurs runs a range of courses covering topics such as starting a social enterprise, scaling, replication, and moving an existing charity towards a social enterprise model.

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