If you have identified a new mutual organisation as the best way to work cooperatively, you will need to put together a business case in order to convince stakeholders, including funders, that your proposal has the potential for long-term success.
The business case must be based on a scoping out of the practical and trading relationships and it may need agreement in principle between the parent body (likely to be the council in this case) and the new emerging organisation over issues such as:
- The scope of the new arrangements
- Pricing and trading relationships
- Asset transfer or leases or access to buildings or land
- Ownership of capital assets and intellectual property
- Responsibility and timing for staffing changes or development
- Responsibility for equalities issues
- Pension and staff transfer issues
- Involvement of partners and their roles.
Broadly speaking there are three key elements to making a strong business case:
1. Taking stock: where are we now?
2. Planning for the future: what will we do and how will we go about it?
3. Securing the necessary finances: how much will we need and what income can we expect?
1. Taking stock: where are we now?
Your business case starts with a realistic assessment of the current state of your organisation. Think about:
- What are your service(s)’s strengths, weaknesses, opportunities and threats?
- What’s your service’s Unique Selling Point (USP): i.e. what commercial niche or gap will this new organisation fit into?
- Are there key events or other milestones that need to be met (e.g. linked to the end of a financial year or a particular funding stream coming to a close)?
- What are your service(s)’s key contracts, assets and liabilities?
- What skills do you have at your disposal (including key business skills), and are there any gaps?
2. What does the future look like for this business?
Show you have a clear idea of how the business will actually run.
- What is the likelihood of existing (e.g. statutory) funding streams continuing? What volume of work will this ‘core funding’ be able to support?
- What demand is there likely to be from additional customers, and how will you attract them?
- Who will the competitors be for the provision of this service, and what are their strengths and weaknesses relative to yours?
- What will it cost to provide these services in the future, and does that allow you to provide them at a competitive price?
- Will VAT and other forms of tax be chargeable, and if so how will this affect the cost of the services provided?
- Will the organisation continue to provide all of the services, or only some of them, and if the latter then which ones?
3. How will we secure the finance we need?
Any business needs capital and revenue to run – the business case has to show where this will come from.
- Does the business need to be bought by the new owners, with the public sector organisation requiring a sale price, in order to reflect its capital value? If so how will this be financed?
- Will the new service be wholly financed by a contract with the current statutory owner? If so are there cashflow issues that need to be overcome to provide sufficient start-up capital? Will a payment by results contract be in place, and if so how will you meet core costs in the meantime?
- Are there options open to negotiation with the organisation handing over ownership e.g. regarding leasing rather than purchase of key assets, deferred payment arrangements?
- Is it possible to secure finance from external sources e.g. banks, investors, through joint ventures or specialist funds? If so what security is needed and potentially available to cover such finance?
- What kind of specialist support services will be required by the leadership team to carry through the full transition process (potentially including around financial, legal or governance issues; setting up internal structures such as employee share schemes; or simply starting to create a genuinely employee-led internal culture)? What will be the additional costs attached to that support?
- If, having assessed the potential of each of the above, there is still likely to be a funding gap, are there any solutions open to the business by virtue of it being employee owned, e.g. deferring salaries, using money from voluntary redundancy, looking to specialist or community-based funders? This stage will usually end with the business case being presented to key decision makers, and agreement given for full transition planning to go ahead.
You know you’re winning when
- You are clear about the current state of your organisation, how you propose to run in the future and where the necessary finance will come from
- These are all clearly set out in your business case document
- You are ready to convince your most important stakeholders that your proposals have the potential to succeed.
For a guide to the ‘five key components’ of a good business case, see Public Sector Business Cases using the Five Case Model: a Toolkit published by HM Treasury.
For examples of how businesses have secured the necessary capital to become employee-owned, see the Employee Ownership Association’s guide “From Colleagues to Owners”.