For many social entrepreneurs looking to put their talents to work for the greater good, setting up a charity may seem an obvious route. Passion and dedication are essential. However, so too is a thorough understanding of how charities work. Novices to the area should be clear on what they want to achieve, and how they want to achieve it. Then, they can decide whether a charity is the best way to reach these goals. So here is all the essential information you might need to find out.
Identify your cause
Charity Commission figures show that there are more than 164,000 charities in the UK. Most of us are familiar with huge organisations such as Save the Children and the British Red Cross. However, a vast majority of charities are much smaller-scale. Around 41% of charities annual income falls below £10,000, and a further 34% between £10,000 and £100,000.
A competitive market
The sheer number of practicing charities shows that starting your own from scratch is both achievable and profitable. However, the charitable organisation scene is also highly competitive. Many different organisations are vying for public attention. This means being clear on what your charity’s cause is should be one of your first tasks. You could end up in competition for the same supports if another organisation is doing exactly the same type of work as your charity.
For instance, if you’d like to raise money for cancer research, you may well find that there are plenty of other charities fighting the same noble cause. Here, your talents might be put to better use by offering to partner with them, or even by working for them directly.
Alternatively, think about how your proposed new charity could tailor its objectives to complement the existing work of similar organisations. Is there is a specific local need connected with your chosen cause? Speak to the individuals concerned (the people who ultimately, you’re aiming to help) to find out precisely what’s needed, and how you can help them to achieve this.
Does your charity ticks all the boxes?
To be categorised as a charity, the organisation must have a charitable purpose, as defined by the Charities Act. There are 13 types of purposes under the act. These cover a wide range of areas, from the prevention or relief of poverty, to the advancement of the arts or science. Read the Charity Commission’s guidance note, on what makes a charity, to check that your aims fall within the criteria.
You must also show that the work you’ll be doing is for ‘public benefit’. This can include the public as a whole, or sections of it. The Charity Commission can ask to see evidence of your charity’s work and the positive effect it has. For instance, if you are raising money to fund a new type of treatment, you may be asked to give evidence on how the treatment might be effective.
A charity cannot be set up for a political purpose. However, it can carry out political activity. This is provided that the activity supports the delivery of the charitable purpose.
Let’s say you want your organisation to focus solely on changing the laws regarding domestic violence. This organisation wouldn’t qualify as a charity. However, if it exists to support the victims of domestic violence and raise public policy issues connected with that purpose, your organization can be categorized as charitable. Read the official guidelines from Speaking Out to find out more about political charities.
Decide how you will achieve your goals
One of the most important considerations is how your charity will raise its funds. For most, this will mostly involve appealing for donations from individuals and/or businesses. Some charities, such as National Children’s Homes and Mencap, receive large portions of their funds from government grants. However, such grants are usually reserved for charities who have a proven track record of success under their belts. Other possible sources of funding include charitable foundations and trusts.
The charity shop model can be a great way of putting your business skills to work. It will develop your skills and knowledge of the retail trade with less risk. But it must, of course, give its profits to a cause to be considered charitable. As such, if you’re attracted to the idea of creating a commercial business but with a social or environmental purpose behind it (such as Jamie Oliver’s Fifteen or TOMS shoes), community interest companies or other forms of social enterprise are worth exploring. Visit Social Enterprise UK to find out more.
Choose your structure
A charity is a status rather than a distinct type of body. This means that you have several possible options in your charity’s structure. An unincorporated association, for instance, is essentially a group of individuals who come together and agree on a set of rules (a ‘constitution’). They also agree on how the association is going to operate and how funds raised are going to be held. Since they came into existence in 2013, Charitable Incorporated Organisations (CIOs) have proven to be a popular choice of structure for new charities. Just like commercial companies, the CIO is a distinct legal body: it can take on legal obligations, enter into contracts, employ staff, and buy property in its own right.
In the initial phases, you may decide that an unincorporated association is the most appropriate form for your charity to take, but this may change as your charity grows. Structuring your charity need not be difficult, and the Charity Commission has a knowledge hub dedicated to charity structures to help you find the right model.
Register your charity
Charities based in England or Wales with an income of over £5,000 per year must register with the Charity Commission. Once you’ve decided on the purpose of the organisation, its structure, and how it’s going to achieve its aims, you’re well on the way to meeting the criteria for registration.
A governing document
You’ll also need to have a governing document. This rulebook sets out how the charity is going to be run and the way decisions are going to be made. Charities are also required to appoint trustees. These are the decision makers who sit on the charity’s board. It’s good practice to appoint at least three (a chair, secretary, and treasurer) trustees, and choose them based on their skillset. Having the right trustees on board could be the difference between your charity being a success, or failing under the pressure of competition.
The official guide How to register a charity, provides a comprehensive walk-through of everything you need for the application process.
After setting up your charity comes the challenge of marketing it and promoting your cause. Charity trustees can pick up valuable insights by looking at other successful campaigns, and gain inspiration from their strategies. If you want any more information on marketing or business strategy, browse our help centre to find out more.