In response to a budget challenge that requires the Economic Regeneration (ER) service to become budget neutral to the authority, officers have worked with external consultants to identify options to commence and deliver commercial services. This process involved a series of meetings and workshops conducted over a 6-9 month period. This case study forms part of our productivity experts resource.
An outline Business Case has been created, supported by a Marketing Plan. Chief Officers have been briefed and a decision is awaited about the next steps they wish the service to take. A decision is expected by September 2018.
The challenge:
The service is non-statutory and 5-6 years of consecutive budget cuts had reduced the headcount (now circa 20 Full Time Equivalents) and gross budget by half (£1.2m to £600k). The service had maximised external funding to create a net budget of circa £300k.
Finding new sources of income had become of paramount importance. Before the support of the LGA, officers had identified a range of sold services they could begin to promote. These included economic development consultancy functions (research, policy development, project management), bid writing and fund management functions.
Through the course of several workshops officers were assisted to identify customers, services to customers that could have a commercial value, goals (including income targets) and potential routes to market / targeting of the market and critical success criteria.
The solution:
With the guidance of LGA recommended experts, officers identified the potential to extend their existing well-regarded services to local Small and Medium Enterprises into a suite of paid-for functions that would add value to them. These include: assistance with sourcing and generating their own external funding; due diligence functions; cash-flow management, credit control and marketing advice.
Around £120k new income was derived in 2017/18. However, to generate a profit of circa £300k (the base budget of the service) would require a turnover of £2m. This could only be achieved over three to five years with a consistent and relentless focus on developing the commercial business. This would include:
1. Productise Skills
2. Systemise Sales & Marketing
3. High Value Rather than Volume
4. In-source Specialist Resources from Fulfilment Partners
Implementing this commercial model will have an impact on the core functions that the existing service provides to the Council, our stakeholders and local residents. The crux of the decision that Chief Officers and Members will now have to make is whether to invest staff time and Council resources into establishing a commercial venture that could eventually provide a sustainable resource base for the ER service.
Lessons learned:
- Involve all your staff in realising the problem and deriving the solution.
- There is no gain without pain – commercial income is only derived by diverting existing staff into new functions or by investing in additional staff (or a combination).
- Build your commercial model from your USPs and recognised existing strengths that have a commercial value – think laterally as “value” is not always in obvious places.
Contact: Alan Smith, [email protected]
LGA contact: Grace Abel, [email protected]
Links to relevant documents: