Hr Investment Readiness Cst 3


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Hr Investment Readiness Cst 3

  1. 1. Community Sector Trading Hugh Rolo Head of Assets and Investment Development Trusts Association Chair The Key Fund Yorkshire Delivery Partner Adventure Capital Fund
  2. 2. Core Ideas <ul><li>How people learn /what people learn </li></ul><ul><li>Vision and leadership </li></ul><ul><li>Interrogating the “business model” </li></ul><ul><li>Investment Readiness </li></ul><ul><li>Grow change or die: resilience </li></ul><ul><li>Pitching ideas </li></ul><ul><li>Helping people is hard </li></ul>
  3. 3. Maths <ul><li>10 sq feet =1 sq metre </li></ul><ul><li>Construction Costs Land plus £70 per sq foot </li></ul><ul><li>£100k costs roughly £13k per annum to repay over 10 years at 6% fixed (surplus 3 x cover) </li></ul><ul><li>Base Rate is 1.0% per annum </li></ul><ul><li>Borrowing over base rate (2%) </li></ul><ul><li>Fixed rates—linked to Gilts (ACF/FB currently 6%) </li></ul><ul><li>Borrowing periods 1,3,5,710,15,20,25 </li></ul>
  4. 4. Some basic concepts <ul><li>Size matters (£1mn generates £100K) </li></ul><ul><li>incremental growth—the trend is your friend </li></ul><ul><li>capacity for abd (£100k turnover+?) </li></ul><ul><li>Sweat equity (£50k per £1mn) </li></ul><ul><li>Gross Margins (capital employed/value added/cost of entry) </li></ul><ul><li>Organisational capacity (governance/finance) </li></ul><ul><li>Investment Readiness </li></ul>
  5. 5. Quality of Income <ul><li>Earned and grant </li></ul><ul><li>Established streams </li></ul><ul><li>Joe Public/commercial market </li></ul><ul><li>Diversity of income </li></ul><ul><li>Large and overlarge contracts </li></ul><ul><li>One trick pony </li></ul><ul><li>Rental income is potentially high margin </li></ul><ul><li>Pig on Pork </li></ul>
  6. 6. Liquidity <ul><li>Cash is king </li></ul><ul><li>Current Ratio—cash flow </li></ul><ul><li>Dig below the numbers </li></ul><ul><li>Cost control </li></ul><ul><li>Going concern ---trading when insolvent </li></ul><ul><li>Reserves </li></ul>
  7. 7. Accounts and stuff <ul><li>Limitations of Financial Accounts </li></ul><ul><li>Best we have got </li></ul><ul><li>Audited and management accounts </li></ul><ul><li>Timely ability to produce and understand own numbers </li></ul>
  8. 8. Getting Investment <ul><li>Building Confidence and Capacity </li></ul><ul><ul><li>Understanding the market and benchmarking against the best </li></ul></ul><ul><ul><li>Understanding the business </li></ul></ul><ul><ul><li>Being real about risk </li></ul></ul><ul><ul><li>Knowing the numbers </li></ul></ul><ul><ul><li>Selling - sound bites and stories </li></ul></ul>
  9. 9. Getting Investment <ul><li>Building Confidence and Capacity </li></ul><ul><ul><li>Integrating with Mission - your Vision, Strategy and Business Plan </li></ul></ul><ul><ul><li>Ownership of the Strategy – your Board or Trustees/stakeholders/staff </li></ul></ul><ul><ul><li>Preparing for the longer haul </li></ul></ul>
  10. 10. Investment finance <ul><li>What Do You Want It For? </li></ul><ul><ul><li>Development Finance – grow change or die - (for R&D, new project development, future planning) </li></ul></ul><ul><ul><li>Capital development – acquiring assets - for refurb, new build, equipment </li></ul></ul><ul><ul><li>Working Capital – for early trading/monthly turnover </li></ul></ul>
  11. 11. Types of Finance <ul><li>Working Capital – reserves, creditors/suppliers, factoring, overdrafts </li></ul><ul><li>Equity – selling part of the business as an investment to others e.g. joint ventures and community share issues </li></ul><ul><li>Debt – borrowing (serviced financially) and Programme Related Investment (serviced with Social Returns) </li></ul>
  12. 12. Borrowing and Quality Revenue Streams <ul><li>Gearing </li></ul><ul><li>The amount of debt shown as a ratio of business value. Some businesses can sustain more than others </li></ul><ul><li>Get it right - go further faster </li></ul><ul><li>Get it wrong - crash and burn </li></ul>
  13. 13. Borrowing and Quality Revenue Streams <ul><li>Security and Servicing Debt </li></ul><ul><li>Tenure </li></ul><ul><li>Clawback </li></ul><ul><li>Quality of Revenue Streams - Pig on Pork, multiple risk </li></ul>
  14. 14. Social Returns on Investment <ul><li>Know your neighbourhood and business baseline statistics </li></ul><ul><li>Quantify the cost of doing nothing </li></ul><ul><li>Methods of Measurement </li></ul><ul><ul><li>Social accounting </li></ul></ul><ul><ul><li>SROI—Prove it </li></ul></ul><ul><ul><li>Change Check </li></ul></ul><ul><ul><li>Tell your story </li></ul></ul>
  15. 15. ABL <ul><li>Managed workspace </li></ul><ul><li>Conference space </li></ul><ul><li>Community Facilities </li></ul>
  16. 16. ABL Bradford <ul><li>ABL </li></ul><ul><li>Rent £190,000 </li></ul><ul><li>Service Charges £250,000 (in and out) </li></ul><ul><li>Sessional rental £140,000 </li></ul><ul><li>Total (Turnover) c£600,000 </li></ul><ul><li>Asset Value:190k + 140K = 330K x 10YP = 3.3m </li></ul><ul><li>Debt: £800k (£300k ACF (PRI element), £250k Barclays, £250k BMDC) </li></ul>
  17. 17. Where from ? <ul><li>Borrowing </li></ul><ul><li>Own Bank </li></ul><ul><li>Sector Specialists-Triodos/Unity/CharityBank/SELF/CDFI/ Co-op/Futurebuilders/Adventure Capital Fund/Community Builders/Department of Health Fund </li></ul><ul><li>Regional Development Funds </li></ul><ul><li>Equity </li></ul><ul><li>Share Issues </li></ul><ul><li>Venture capital funds </li></ul>
  18. 18. Share and Bond Issues <ul><li>Shares and Bonds are different </li></ul><ul><li>Legal Structures – not all organisations can do it </li></ul><ul><li>Raising money in campaign mode – can help build support for projects </li></ul>
  19. 19. Growth in community investment Community investment practices date back to the nineteenth century. There has been a revival of interest in the last ten years.
  20. 20. Trade activities 3 Other 1 Fair trade 2 Football 2 Utilities 2 Farming 2 Transport (heritage railway preservation) 5 Regeneration, land, buildings 7 Community finance 8 Community retail store 9 Renewable energy Number of organisations Trade activities of organisations issuing community shares or bonds since 1999
  21. 21. Basic facts and figures <ul><li>At least 84 cases of enterprises with more than £10,000 of community investment </li></ul><ul><li>Total community investment is £298m </li></ul><ul><li>Combined membership over 6 million </li></ul><ul><li>41 new cases in last 10 years, raising over £45m from 63,4000 members </li></ul><ul><li>Median amount raised is £135,000 </li></ul>
  22. 22. Headingley Development Trust <ul><li>IPS community benefit society registered 2005 </li></ul><ul><li>790 members: min. shareholding £5 </li></ul><ul><li>Withdrawal notice six months </li></ul><ul><li>Campaign to raise capital for enterprise and arts centre raised £105,000 in member share capital </li></ul>
  23. 23. Westmill Wind Farm Co-operative <ul><li>IPS co-operative registered in 2004 </li></ul><ul><li>Raised £4.4m from 2,382 members buying transferable share capital through a fully authorised share launch </li></ul><ul><li>Projected interest on capital of 5% pa rising to average of 12% pa over 25 years </li></ul><ul><li>Investors qualified for Enterprise Investment Scheme tax relief </li></ul><ul><li>Cost of share offer £150,000 </li></ul>
  24. 24. Contact <ul><li>Hugh Rolo [email_address] </li></ul><ul><li> </li></ul><ul><li> </li></ul>