Co-op libraries for Southampton?

An opportunity has arisen in Southampton for community organisations to express an interest in running 5 local libraries - the City Council are encouraging community, voluntary, social enterprise, not-for-profit and faith organisations to come forward to run one of the Cobbett Road, Burgess Road, Thornhill, Weston and Millbrook libraries.  There is also a pot of £25,000 up for grabs for organisations wanting to run 3 of them in particular. The deadline for expressions of interest is 19 October.

Is this an opportunity for co-operation?

First off, why co-operative and not just social enterprise?  I have yet to find a credible argument as to why anyone should be excluded from democratic involvement in community services.  I'm not talking about interfering in day to day operational matters, which would be the preserve of staff/volunteers and managers.  I am talking about the big issues like usage policies, opening hours, extra services and most importantly who gets to be on the Board that make these decisions.  Without accountability to the community, can it truly be run by and for the community?

A co-op of libraries or a library co-op?

Library co-op

Speaking to a local activist from Co-operatives Southampton, they suggested forming a new co-operative of people who support the need for a library and would be willing to subscribe £10 a year donations to bridge any financial gap.  I would take a different approach and suggest a co-operative of library users, volunteers and staff members (however many the business plan shows they can afford!) would be a better model to take over the running of all 5.  The Board could be formed of representatives of each of these interest groups or constituencies of membership. This approach (known as a multi-stakeholder organisation) provides a balance between the different interests at stake.   Below Board level there are a range of options for management structure, from a traditional style with managers to a more team based workforce.

Provided that "friends of" groups were established for each library with some influence over the specifics of how that library was run this would be perfectly feasible.

One risk of taking such an approach is that if 1 fails, it is possible it would take the other 4 down with it.  On the other hand, taking on all 5 may bring economies of scale.  One employer, one set of overheads.

 

 Co-op of libraries

An alternative approach would be to create a co-operative of libraries rather than people.  Of course each library could organise itself as a co-op of users, or volunteers or staff or all 3 if it chose to.

The co-op of libraries would be controlled by the 5 libraries - each with 1 vote and each with a seat on the Board of the co-op.  It could take the form of a Community Benefit Society and apply for "exempt charitable" status.

Each of the 5 libraries would be run by its own users, staff, volunteers or trustees - taking whatever organisational or legal form it likes.  So for instance Cobbett Road might choose to be a co-operative with the Board made up of users, volunteers and staff, registering as a Community Benefit Society. Thornhill might choose a traditional charity structure with a Board of Trustees etc.  Each library could focus on what the community it serves needs in terms of services and also what the market is for building based services which will ultimately need to generate income to pay for the building upkeep.

If one or more of the libraries needed a service, they could source it from the co-op.  E.g. if each library only really needed 1 day a week of a professional library manager, they could share this employee.  Accountancy, training, health and safety costs, policy development, event promotion, some back office services - all manner of issues could be shared across the libraries and bought through this collaborative approach - and importantly offered on a menu basis rather than all libraries being obliged to use all services on offer. 

In reality, until some feasibility work is carried out and the different interest groups get together it would be difficult to draw a conclusion as to which would be the most preferable model.

Will it work?

In Suffolk, the County Council divested itself of responsibility for running a library service (a loophole only requires local authorities to have the books, not to provide the access to them!). A new mutual was established called Suffolk Libraries - a Community Benefit Society with Charitable status. In their case the members of the Society who elect the Board are the local community groups who support each library.  The most recent annual review makes interesting reading.  They are cited as having achieved the "gold standard" of library services according to the independent reviewer of library services for the government.   Their mutual approach is what gives them this advantage.

Health warning

Managing libraries using a co-operative approach will not work if they are not sustainable - co-operative management is not a magic wand, it is a means to ensure democratic stakeholder control - although ownership & control has been shown to encourage greater investment of time and money from members. If the council needs to jettison building liabilities and costs of running a service that has no income basis, can a community organisation take this on without the means to meet those costs.  Alternatively, the community being firmly in control can unlock untapped resources - cash donations, volunteer labour, cheap/free repairs and also identify means of generating income that meet local needs.  This of course means that things may change, but with the community in control that change should be for the better.  Clearly any proposal requires feasibility and then full business planning to identify the potential and any critical factors that need addressing for it to be successful.

If you want help carrying out feasibility assessment or choosing the right legal structure?  It's my trade, how I earn a living, and I live in Southampton. If you have already formed a group aiming to take on this opportunity get in touch to discuss what you need - I wouldn't charge for an initial conversation.

A few issues to consider...just to get you started

• What other activities can take place in the building that will bring income or improve community benefit?
• What other services could you offer alongside the free library service that there is paying demand for from people in the local area?
• How is the building used now, and why isn't it used more?
• How much is the library service used, and why isn't it used more?
• What will your opening times be?
• What are the running costs for the building?
• What major works are due soon?
• How much will cyclical maintenance cost?
• Who will manage the space?  Staff or volunteers or a mix?  What will this cost?
• Who will the keyholders be?
• Will you transfer over existing staff?
• Have you costed pensions, cover for sickness, maternity etc?
• Who are your pioneer members?  How committed are they?  What skills do they have?
• Who is willing to be on the management committee for the first few years?  You probably need a core who are committed to seeing it through from start-up until it is bedded in.
• What skills have you access to?  Think particularly about finance, organisational skills, admin and local community links/networking skills.
• Who is in your group?  Just as importantly, who is not in your group?  Are identifiable sections of the local population not represented?  You need to get them on board and be inclusive.

Solent Social Enterprise Place

I'm among the local activists promoting and growing the local social enterprise sector.  Between August 2015 and January 2017 I published a monthly update on advice, support, training and finance opportunities.  Following a survey of users, it appeared that its impact was not sufficient for me to continue to carry this out as a pro-bono (unpaid) investment in the local social enterprise community. I still continue to provide pro-bono support in other ways and to regional & national initiatives and organisations.
View previous newsletters.

Co-op Culture

I'm pleased to announce that I have joined Co-op Culture - another organisation through which I can help develop co-operative and community enterprises.

Co-op Culture is a co-operative consortium of co-operative and community advisors, entrepreneurs and enterprises.  Our members and associates have a vast and varied experience of supporting co-operative, community and social enterprise to start and grow.
 We deliver the following support and services:

• Feasibility studies and market planning. 
• Business Planning. 
• Financial planning. 
• Community finance support including drafting community share offers. 
• Advice on grant and loan finance. 
• Advice on legal and organisational structures. 
• Governance audit and advice on governance “health”. 
• Facilitated planning for start-up or organisational change. 
• Advice on measuring and reporting social impact. 
• Delivery of training on all of the above. 

We specialise in the following areas:
Community Agriculture. Community Food Enterprise (food, co-ops, processing, retail and wholesale). Community Energy. Housing Co-operatives Community Land Trusts. Co-operative Bakeries. Woodland Social Enterprise and Social Forestry. Co-operative shared workspaces and hackspaces. Transition Enterprise.

Solent Social Enterprise Place!

Last night I was at a Social Enterprise network event at Southampton Solent University.  It was organised by Social Enterprise Link Wessex but I threw myself into spreading the word.  After all, a network is only as strong as its members are active and is really owned by those who participate.

We did a quick count up and there were at least 16 social enterprises from across the south of Hampshire (Romsey over to Waterlooville).  There was a good mix of established and start-up enterprises with sectors representing including design, care, catering, training and consultancy (we get every where!)

Having agreed some priorities to enable growth of the sector, we all committed to sign up to create Solent Social Enterprise Place. Social Enterprise Place is a scheme promoted by Social Enterprise UK and denotes our commitment to promoting social enterprise in the local economy.  Watch this space

Show me the money!

Why you need to get to grips with finances before choosing  your legal structure

I often find myself delivering training or advising social enterprises around the issue of legal structures. Everyone wants to get registered as soon as possible, even if they have no plans to trade immediately.

Choosing the right structure is not just about understanding the way you are going to be organised (in terms of governance and ownership) but also about how finance is going to work in the business.  Today I am only talking about finance.

All businesses need finance.  Social enterprises and co-operatives are no different.  Start-up finance for businesses typically comes from investors with a stake or share of ownership in the business, loans and grants.  Once the business is up and running this will be supplemented by reinvested profits.  Social enterprises tend to avoid investor ownership but there are ways of involving investors in the business without fundamentally altering the purpose of the business.

If you decide on your legal and organisational form before you understand your financing requirements, you may soon regret it.  So get the finances sorted early.  Even if it is not accurate, having snapshot of how much investment you need and the likely sources is really useful when deciding on a legal structure.

Here's an example: Let's say a community enterprise decides to establish themselves as a Community Interest Company limited by guarantee thinking they will be able to access grant funding to help them raise a deposit to buy a local community building.  They also liked the idea of having an asset lock but they didn't want to be constrained from trading or barred from having employees on the Board which could have happened if they registered as a charity.  Once they have written their business plan it shows they can generate sufficient profit to pay the cost of a mortgage, but they have been unable to find funding to raise the deposit.  Based on comments from local people who would be willing to lend money if they had a say in the business, they realise that their preferred method of raising the deposit would be through a Community Share issue.  A Community Interest Company limited by guarantee is unable to issue shares. Even a CIC limted by share would not be able to offer a public Community Share issue as it would have to meet highly expensive regulatory requirements to make a public offer.  The facility they require, combined with an asset lock that they want, is only available to a Community Benefit Society.  They decide to wind up the CIC because it is quicker and easier to register a new Community Benefit Society than convert the CIC into one.  If they had thought through their financing before registering the legal structure they could have saved themselves unnecessary complications and time delays.

Another example: People involved in the business are willing to work as volunteers on the understanding they have a right to a share of the profits.  The only problem is, your chosen legal structure does not allow profit distribution so that avenue is closed unless you change the legal structure.

Key questions regarding finance you need to be able to answer before choosing a legal structure include:

• How much investment do we need for start-up costs and cashflow?
• What sources have we identified already, and how much?
• How reliable are these sources?
• What other sources might be available to make up the remainder?
• Are there any restrictions on those sources?

E.g. If you are applying for funding, does the funder require an asset lock and/or a bar on profit distribution, or couldn't they care less as long as you can prove delivery of social impact or job creation?  (Yes, some funding is just out there for any trading business!)  

Until you understand how you will finance the business it may be difficult to answer questions suchas these, which you need to consider before deciding on your legal structure:

• Will you distribute profits, and if so to whom and how?
• Do you need a facility to offer shares?  Who can own these shares? Should they be withdrawable or transferable shares?
• Who can become a member or Director?
• Is there any relationship between investment and decision making, and what is it?
• Do you want an asset lock of some kind and does it need to be statutory so it cannot be removed?

There is no stock answer to the question "What legal form should we register with?" so to give yourselves an improved chance of having the right structure, do yourself a favour - work out your finance needs first!