As charities adapt to the tough funding environment, a new free guide is launched today in response to a rise in demand for information and advice about how they can become a social enterprise.

The guide, Why Social Enterprise?, has been produced by Social Enterprise UK (SEUK) and Pilotlight, a charity that brokers free business coaching to small charities and social enterprises to help them grow and become more sustainable.

It also includes expert legal advice from charity specialist solicitors, Bates Wells & Braithwaite.

A social enterprise is an organisation that trades for social purpose and they can range from large national businesses to small, community-based enterprises.

There are more than 68,000 social enterprises in the UK and both SEUK and Pilotlight say they expect to see this number increase as social investment takes off and the Public Services (Social Value) Act comes into force in January 2013.

It is hoped the Act will create more trading opportunities for charities and social enterprises providing public services.

Gillian Murray, deputy chief executive, Pilotlight, said: “In the past twelve months we have seen a significant increase in interest from our partner charities about becoming a social enterprise.

"With the cuts in local authority funding and changes in the way charities’ services are being commissioned it’s no surprise that charities are exploring the opportunities social enterprise can offer. We hope this free, practical guide will provide them with clear information so that they can make an informed decision.”

The guide examines issues that charities should consider if they are thinking about becoming a social enterprise, ranging from cultural changes to legal structures.

It highlights that charities don’t always need to change their legal structure and emphasises that many social enterprises remain as registered charities.

For some charities a social enterprise will be just one part of their activities that will enable them to make a surplus so that they can grow and invest.

The guide explains where charities can trade without structural change and where they will need to set up trading companies.

It acknowledges that some charities may find it hard to make the change from grant funding to running a business, selling services or products at a profit and advises them to have a robust business plan in place.

Peter Holbrook, CEO of Social Enterprise UK, added: "We are delighted to be collaborating with Pilotlight on this topic- it's vital that we secure the future sustainability and social impact of our charities.

"Lots of information and know-how needs to be changing hands across the social economy as we deal with the economic and environmental changes we face.

Holbrook noted that many charities can have a greater social impact if they trade and reinvest their profits.

"Some of the most successful social enterprises in the UK today started life as small charities," he said.

The guide is aimed at charity leaders, senior managers and trustees to help them understand what the transition to social enterprise might mean for them.

It emphasises that the mission and the ethos of charities do not have to change just because they become social enterprises.

On this theme, June O’Sullivan, CEO of London Early Years Foundation, commented: “We started as a traditional charity, relying heavily on grant funding from the Government.

"I knew this wasn't a sustainable way to run our nursery, and with rafts of research showing the benefits of good quality nursery education, I felt it was our duty to support even more children and families across London.

"It was vital we diversified our income streams to help us survive and grow. The social enterprise model was the obvious transition, preserving our mission and ethos, but helping us adopt a more sustainable, business-like approach.

"The shift was met with some unease from staff, who believed it would affect the way we supported the nursery’s most vulnerable children, but in fact it allowed us to considerably expand our services and develop a model that increased our reach and revenue, while reducing our costs.”

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