Match Trading: how grants are unlocking commercial opportunities for social enterprises

In the face of persistent social problems and limits on government budgets, policymakers in the UK have looked to social enterprises and community businesses as innovative and resilient alternatives to state provision and to traditional grant-funded charity. Commercial income offers the promise not just of financial sustainability, but also of organisational independence as organisations depend less on grants and more on the vigour of their own trading activity.

But how can charities make that transition? And how can existing social enterprises enhance their commercial models? A recent development has been philanthropic ‘enterprise grants’ that explicitly aim to support the commercial development of social organisations. The Match Trading programme, created by the School for Social Entrepreneurs (SSE), is an example. Its premise is elegantly simple. Over a year organisations receive £1 of grant for every extra pound of commercial income they create (up to a cap, typically between £4,000 and £7,000): earn more from your commercial activities, and the grant grows to match it. At the same time organisational leaders attend a training programme to develop their commercial and business skills.

Quantitative evaluations suggest that the programme has been successful in enabling organisations to build commercial income streams and reduce use of government and philanthropic grants. Our research team at the LSE Marshall Institute set out to explore how the programme worked — its effects on participants and organisations, and whether this process of commercialisation was consistent with social mission.

What the programme stimulated was something closer to a new cognitive habit…a different way of seeing the world, one in which the habits of mind of commerce sit alongside the habits of mind of social mission

The research, a qualitative study drawing on in-depth interviews with 14 leaders of community businesses and social enterprises who participated in Match Trading programmes between 2018 and 2020, paints a rich picture of the effects of the programme. The participants came from diverse fields — youth services, work integration, community hubs, health and education — and from different regions and organisational structures across the UK. Their experiences were varied, but a number of themes emerged.

An incentive to action – and more 

• ‘Skin in the game’ — the conditional grant as incentive. The conditional nature of the grant acted as an incentive to action. In some cases, an organisation’s commercial activities and trading income had plateaued; the grant created an incentive to develop additional income streams. For organisations that had not engaged in commercial activities before, the grant incentivised leaders to identify commercial opportunities not previously imagined. Several leaders described how the programme prompted them not merely to grow existing activities, but to test innovations: entering new markets, rethinking their business model, or adopting mechanisms for generating fee income.

A grant doesn’t encourage any innovation or greater efficiency or kind of development…With the Match Funding, I think it encourages you. You have to think very differently about what you’re about to go into and how that's going to impact what you're going to do – Interviewee for the research

There was also a change in leaders’ mindset. It was not primarily an ethical change – this specific group of leaders did not need to be persuaded that commercial activity was morally acceptable in a social context. What the programme stimulated was something closer to a new cognitive habit: an introduction to a different way of seeing the world, one in which the habits of mind of commerce sit alongside, rather than displace, the habits of mind of social mission. 

• Training. The programme’s training was unsurprisingly valuable for the commercial and business skills it provided, and in some cases led to professionalisation of management structures beyond commercial activities. Participants reported increased confidence and validation of themselves as leaders. A repeated finding was the value of peer networks. The isolation experienced by leaders of social ventures is rarely discussed openly, but it runs deep. Participants described the creation of a community of practice that outlasted the programme itself.

• Grant capital. A third element is simply the grant funding and how it could be used. For some it functioned as genuinely catalytic funding — a small injection of resource that unlocked a commercial opportunity. There was a psychological dimension too: leaders described how the grant gave them permission to take time out from daily operations and have breathing space from the pressure of leading a social venture.

• More than the sum of the parts. A core strength of the programme is how its three elements reinforce each other. The conditional grant creates an immediate incentive to apply the training in a real context with real consequences — the leader’s own organisation. The link between learning and organisational outcome is clear and formal. It is experiential learning at its most salient.

Is there a risk of ‘mission drift’? 

It is important, though, not to approach these achievements uncritically. Is it necessarily a good thing to encourage commercial activities in social ventures? And are grants really such a bad thing?

• Mission and commerce alignment. One question hangs over any discussion of commercialisation in the social sector: is there a risk of ‘mission drift’? For this group of leaders, tensions between the commercial and the social were typically not seen as a significant concern. For many, the growth of commercial activities was seen to be explicitly beneficial to social mission, beyond the simple advantage of extra income — in work-integration social enterprises, for instance, an expansion of trading was an expansion of reach to vulnerable people, a ‘virtuous circle’ of social mission and income. In conditions where users might be charged a fee, tensions were more likely, but these could be carefully managed — for instance, by offering free services to the most vulnerable.

• A continued role for grants. Policy, and to some extent the Match Trading programme itself, seeks a reduction in grant dependency, with an implicit suggestion that grants are harmful to organisational or community autonomy. Participants affirmed the advantage of enhanced commercial income — extra resources, protection against the arbitrariness of grants and greater organisational control.  Yet all participants affirmed the ongoing importance of grant funding. Many services to disadvantaged groups could not be fully viable in markets and would always require subsidy. Grants could also enable innovation, and allow organisations to go further in the depth and quality of their services than commercial logic alone would permit.

Match Trading is a simple idea that recognises many voluntary organisations and social enterprises choose to trade in broken markets, so need a helping hand with grants designed to build viability, and sustainability. This research shows that they can do that, without compromising the mission at the heart of their enterprise – Alastair Wilson, CEO, the School of Social Entrepreneurs

• Read more: Wholly sustainable social enterprises are a myth, by Alastair Wilson 

Looking to the future 

There is much more research to be done: studies over time to assess whether changes in commercial behaviours remain embedded; explorations of optimal funding balances between grants and commercial income across different contexts. But the findings make a persuasive case for why the Match Trading programme, through its interaction of contingent grant, training and funding, can support the development of commercial capacity in social organisations. 

So far the programme has only been open to organisations with a constitutional limitation on profit-taking, such as charities and community interest companies. There are good grounds for expanding it to a wider range of organisations — worker and consumer cooperatives or small community-based businesses — that can be central to a more substantive social economy, especially in geographies experiencing poor economic conditions and poorly functioning markets.

Professor Jonathan  Roberts is professor of civil society and public policy at the Marshall Institute; Dr Kerryn Krige is senior lecturer in practice at the Marshall Institute; Professor Sir Julian Le Grand is professor of social policy at the Marshall Institute

Header photo: Unsplash, published under a Creative Commons licence