Due diligence is good for you, says social entrepreneur

Don't be afraid of due diligence. Getting through the process helps you to clarify your aims and, ultimately, get the funding you need.

This was the message from Sebastian Parsons, CEO of Stockwood Community Benefit Society, at Good Deals 2016.

Parsons was speaking in the Social Investment in Action workshop at the first day of the event which is being held at the University of Birmingham.

He said: "How do you become ready for social investment? I learned two key words – due diligence."

Parsons had been seeking backing for Rush Farm in Worcester, a family farm which inspired BBC Radio 4's The Archers, and which is now owned by the community via Stockwood Community Benefit Society. The land is farmed organically and sustainably and there is also a rural business park on the site.

That conversation is nothing to be scared of because every one of those conversations moves you forward

He explained that he went through several cycles of due diligence with potential investors, including not only the social investment company Resonance, Ethex and CAF Bank, but also the members of the public who invested via a community share issue.

"They will stop you in the middle of a field and look you in the eye and say, 'What's in it for you?' I say, 'I want to make the world a better place, mate.' That conversation is not something to be scared of because every one of those conversations moves you forward and helps other people understand what you want to do."

Parsons said: "I thought I was clear at the beginning but I wasn't, I was fuzzy, but luckily people were prepared to work with me to help me."

He told the delegates at the workshop that the other key thing to remember was that bankers had to feel comfortable. "If they aren't feeling comfortable they won't say yes. They have to believe they will get the money back."

Eric Munro, director of Community Finance and Social Enterprise at RBS, echoed Parsons' message. He said the due diligence was to discover whether "we believe they can deliver on their business plan".

Munro emphasised that the relationship between investor and investee should be based on trust and respect. 

"Sometimes there is a parent-child relationship, but we try to treat people as equals," he said.