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Black-led organisations aiming to serve their communities often face the problem of providing impactful services on a very tight budget. In our research, having engaged with over 500 Black-led social enterprises and charities, we found the primary sources of funding are personal savings and personal income from employment with almost 60% of their stated income coming from these places. Including the racial wage disparity, Black-led organisations are doubly burdened by systemic inequities, as they work towards resolving social issues affecting their communities. With minimal resources to operate vital services, Black-led organisations often shut down due to financial pressures.
In advance of our report on the state of Black-led impact organisations, we spoke with 10 founders of who anonymously confided in us as we sought a deeper understanding of how they’re funding their work and what financial strategies they employ to operate their organisations.
The need for funding
Many of the organisations we spoke with expressed a need for funding to hire knowledgeable and experienced staff to perform important functions within the organisation. On average, Black-led impact organisations have an annual income under £33,000 with 60% of that income coming from the personal savings and salaries of the Directors. The interviewees said they relied on volunteer support or freelance staff to fill skill gaps. Some impact organisations had ambitions to fulfil broader service delivery goals, such as digitisation, impact measurement, increased personalisation of their offering, but could not afford to hire the right person for the role.
As most Black-led organisations are self-funded, access to other sources of income would help offset those costs from their personal income.
The challenges of funding
Some of the organisations we spoke with found the process of applying for funding challenging because their internal structures and capacity were not prepared to face the scrutiny of the assessment criteria. One interviewee expressed frustrations about a lack of understanding of the process, meaning funding was a barrier and not a tangible opportunity for them.
Others spoke about the convoluted steps in applying for funding, investing additional time and effort with funders, only to be denied funding at the very end. Positive referrals and the halo effect from past successful funding applications also made the funding process simpler for some organisations further down the line. However, the positive recommendations can be challenging for organisations to attain in the first place if they cannot succeed in the initial application process.
Financial strategy 1: Consulting
In our discussions with Black-led organisations, some explained how they partner with organisations requesting their services and insights through the form of workshops or talks. By providing expertise and valuable services to soliciting firms, these impact organisations can generate revenue to fund their work. Doubly, through those connections they have the opportunity to function as ambassadors and thought leaders in a particular space (whether that’s a social issue, healthcare, education, etc.). This gives the organisation leverage as a renowned voice, and opens the possibility of future engagements with that firm or other similar firms later down the line.
Financial strategy 2: Grant funding
Several organisations we spoke with had attained grant funding in the past or were in the process of applying for grants. In our survey of 500 Black-led organisations we found that only 40% of them had ever received grants to fund their work. The types of grants and reasons for applying all varied, but the common thread was the expressed need for the grant to support vital operations, or core costs, within each organisation. Though grant funding is available, the process can be especially protracted and challenging for Black-led organisations seeking much-needed funding to continue or include basic functions within their organisations.
Financial strategy 3: Branded merchandise
An entrepreneurial route these impact organisations explored is the creation and sale of branded clothes and products to fund their mission. The items sold are tied to the organisation’s values, with the proceeds going towards the organisation’s operational budget. The motivation behind entering into this area was found to be based on the hope of galvanising their community to purchase products to support the work. However the low profit margins and the increasingly at-risk income streams of the immediate community means that the success of this method is much more work than the income it provides would warrant.
Funding for the future
As Black-led organisations grapple with the challenges of running their organisations, funding their work is a persistent concern, with many organisations facing financial pressures to meet their goals and serve their community.
There is a catch 22 when it comes to funding Black-led organisations in the UK; the corporatisation that funders seek from an organisation, or as one interviewee termed it, the “halo effect”, requires a significant amount of core operational funding for investment into strong hires, branding and marketing, website development and much more. However, there are very few opportunities across the social investment sector to gain core funding and those opportunities are typically reserved for organisations that have already achieved “the halo effect” to begin with.
We believe people with lived experience are best suited to deliver the solutions to their community, but they can’t resolve those issues without suitable access to finances. This is one of the key reasons our grant is entire core funding focused. We prioritise the continued activity and future sustainability of Black-led organisations because we recognise the impact their support has on the health, wealth and future of the communities they work in.
In our upcoming report, we discuss the state of Black-led organisations and what civil society can do to help Black-led charities and social enterprises succeed as they stabilise and seek to scale to meet the growing demand for their services.
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