Australia is certainly behind America and Europe. There are very, very large pots of money for social investment overseas: hundreds and hundreds of millions of dollars of social investment capital available, whereas you can think of three or four precedents in Australia. The big one in Australia is Good Start, when the ABC Learning Centres collapsed they were bought with social investment.
When you ask our investors why they invested, most of them say they want to demonstrate what is possible and some people have to take the early risks to do that. There’s not a long history of it. Good Start has just paid its first dividends; it was expecting a 12% return on investment. There is not a lot else there to point to.
We are certainly staying open to both. Because we have done both now, we have experience and I can’t imagine a situation like we’ve just had where our organisation doubles overnight. The next acquisitions will be smaller and more manageable. But, certainly by 2015, we will be hoping to take it from 40% financial stability this year to 100% in 2015 and we essentially need to be double the size we are now.
Only beyond 2015 – for now, we are based in Melbourne. We have had requests from every state and territory, except for the Northern Territory and Tasmania, to go and build STREATs in those locations and we have just said no. It is a five-year plan, not a one-year plan.
Access to capital – other businesses can do a business plan and then go to a bank to get a loan. No charities I have heard of which are start-ups get a loan from a bank. You bankroll it yourself. But if you do that in small business you also get the profit, whereas with this there is not the financial gain but you certainly take the early financial risk yourself. That’s the challenge for a lot of social entrepreneurs, how do you fund the early couple of years when the profit is not coming back to you?
Of those who start, 70% graduate and of those graduates 40% have gone on to do apprenticeships or further study at TAFE or university. The others mainly jump straight into hospitality work.
About 98% of them come to us suffering homelessness and after they have graduated the majority are in stable accommodation now.
There are a whole bunch of subsidies that we have never had any success getting through the system. Of the support costs we give our young people with psychology, youth workers and training fees, we get 1.4% of those expenses back through the system. That is the biggest expense of our organisation. If we were able to get a whole bunch of subsidies back through the system the whole organisation would be much more financially stable. We have found it highly frustrating to make the Job Services Australia system work for us. That’s an understatement.
At the moment 5% of our money comes through government and 50% comes from philanthropic foundations. In the next couple of years that reliance tapers down, but there is no way we could have built STREAT without the support of the government and the philanthropic foundations.
The main thing for us has been focusing on the quality of the food and coffee. We knew that to make each site work we needed a really strong customer base that came back again and again. We knew we would not survive if it was just about a charity sell. We needed to be converting people to be coming every day and the only way you can do that is with really good food and coffee. Price is also a factor, for the quality we have our prices are comparable. Our coffees are $3.50, so we are about average.
I get really excited about the next couple of years, thinking of the hundreds and hundreds of young people we can pull out of homelessness. I get really excited to see things that we thought were not possible actually are possible. I’m really excited the model is working the way we want it to work. You can see young people who have been thrown on the scrap heap of society becoming integral members of society. We haven’t done well at converting the long-term unemployed into productive members of the workforce.
We need to structure businesses in a different way and think about how we structure businesses to be completely flexible. Most businesses just don’t have the flexibility to be able to do that. We have to think about ‘How do we mould our businesses around our employees?’ rather than the other way around. There are a whole bunch of extra challenges for these type of businesses as you get these huge surges in productivity, but unless we find businesses that provide real opportunities then we are nothing other than a sheltered workshop.
My firm belief is that we need an ecosystem of social enterprises that can provide flexible options for people as they take their first steps into employment. We need to make sure young people transition from us in a really supported way to other jobs. So many of our young people have gone on from us to restaurants to do full apprenticeships and I can’t think of any of them who would have got there themselves without that extra support.
Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
