What’s novel about the model is that it places equal weight on business and financial planning (through the loan element) and community finance whilst recognising that making a profit in the food sector can be very challenging for small enterprises (hence the grant element).
Since launching in July 2015, the programme has learnt some valuable lessons about the issues facing small scale agro-ecological enterprises and the areas where the sector needs to build its skills to improve its prospects of being financially sustainable. Here Clare Horrell, Programme Manager of Just Growth shares some of the learning from the project
One of the things that unites our Just Growth projects is that they have all been given a leg up either by owning the land that they farm themselves, or being lucky enough to have formed a relationship with a landlord who is prepared to give them non-commercial rents and long leases. It is the access to affordable land that has been the critical starting point for these projects. Two of the landlords are intending to transfer the land into the ownership of the projects over the longer term. We need more of these innovative landlords who understand that land is not a commodity but something that we are merely the custodians of for the benefit of future generations.
Doing a share issue requires a lot of work. Yes, the documentation takes time to prepare, but the really hard work is building up your community of supporters so that you have the confidence that your share issue won’t be a flop. Before you launch you need to have ready a pool of investors that you know are definitely going to invest so that you can start your campaign on a high. All of our Just Growth projects have been around long enough to have built up very strong connections with their local community or their community of interest which has meant that to date, all the projects that have launched a share issue or a crowdfunding campaign have met their fundraising goals. Not that it hasn’t been a hair-raising process! One project was £3k under its minimum target with 3 days to go – but in the last 3 days raised £14k. A fantastic outcome, but one of the lessons learnt is people will leave it to the last minute to part with their cash, so keep plugging away right up until the last moment! Social media, press and flyers are all useful, but ultimately it’s the face to face contact that really makes the difference if your community is one that is geographically local to you. Knocking on doors, organising open days, talking to people down the pub are key ways of really making a difference to your community fundraising efforts.
Getting your business planning and financial modelling to the level of detail that is required to raise loan capital requires a lot of work and specialist support. Whilst many of our projects had already done some work in this area, few of them had plans that were sufficiently well developed or robust enough to pass a conventional loan assessment. Enterprises in the sector require more support and advice to help them improve their financial planning. There is no doubt that developing your financial model is hard work, often taking the enterprise outside its comfort zone. But our experience from Just Growth is that doing this work provides the enterprises with the confidence to move forward knowing that their planning is robust enough to be financially sustainable in the long run. It’s not an easy journey but one which is worthwhile. Infact, one of our projects commented that “the specialist advice that we have received through the Just Growth programme has been more useful than the funding itself.”
It’s really important that you consider carefully what legal structure will work best for your enterprise not only now but in the future. It’s tempting to go for the option that involves the least paperwork, but that may not give you a model that works for you in the long term. Switching structures at a later date is a headache that a busy, small enterprise can do without, so spend the time at the start to consider all the options before making a decision. Getting expert advice or support may cost but will probably save you time and money in the long term.
The Need for Specialist Advice
Just Growth has been fortunate to have had grant funding from the Esmee Fairbairn Foundation to help provide expert advice to the Just Growth projects to help them develop their business planning, raise their community finance as well as review their governance. Having a funder who not only pays for this support but finds the right specialist to provide the help is as important as the funding itself. Having access to affordable specialist support will continue to be a key need if we are to build and grow the agro-ecological sector.
The Just Growth funding programme has been a pilot project for a new way of funding agro-ecological food and farming enterprises. More funding initiatives of this sort will be needed if the sector is to really grow and for agro-ecological enterprises to move out of being niche to being mainstream. The Real Farming Trust are currently working to develop a social investment fund focussed on food and farming. The fund will prioritise social and environmental returns over financial ones. We’ll be reporting more on this as it develops.
See our Indie Farmer story of six projects Just Growth are currently working with here