Business planning

Resilient social enterprises begin to outperform mainstream SMEs

The entrepreneurs leading Britain’s social enterprises are outperforming mainstream SMEs in a range of business metrics, according to a new report.

In it’s latest annual review of the UK’s social enterprise sector, Social Enterprise UK (SEUK) put the official number of people employed at community-minded businesses at 1m working to add over 24bn to the economy.

As well as the significant economic contribution, the study revealed several areas where social enterprise entrepreneurs had proved themselves equally capable business people as any founder.

The difference in profitability was among the most impressive. Almost half of social enterprises increased turnover in the last 12 months, compared to just a third of regular small businesses. In total, over 70 per cent registered a profit or broke even in the last year.

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Startup rates wereanother point of difference. A quarter of social enterprises are under three years old, according to the report three times the number of startups than the? regular SME sector.

Retail (16 per cent) and business consultancy (13 per cent) were the biggest sectors for social enterprises, and the report highlighted the trend towards diversification of income, away from the public sector.

Social enterprise leaders were also likely to adopt progressive employment practices. Some 78 per cent report paying the National Living Wage to employees, while over half looked over a majority female workforce. Another 44 per cent were recruiting from disadvantaged groups.

Despite registering impressive startup rates, turnover and diversity, challenges were also highlighted by the report. Just 12 per cent of social enterprise owners increased their workforce in the last year, compared to 30 per cent in the previous year. Alongside the decline in recruitment, 30 per cent even reduced the size of their workforce, as cash flow tests increase.

However, access to finance was cited as the greatest growth barrier for a social enterprise owners, with over half seeking but struggling to find under 100, 000 to invest in their company.

Commenting on the strong performance of social enterprise entrepreneurs in the UK, SEUK chair Victor Adebowale said they had demonstrated what the future of business can look like.