Commercial Maturity: Theme 5 - Income Generation

The majority of organisations globally say that commercial awareness is needed to achieve main business outcomes.

• 9/10 councils and public sector organisations are raising tax and cutting services
• 95% of councils have recently budgeted for the maximum council tax increases available this year

Commercialism is one of the most prominent and urgent topics in the public sector!

But for many organisations, it can be difficult to know where to start. Others may struggle to reconcile the idea of being commercial with the core purpose and values of public service. The Commercial Maturity Model from Human Engine sets out six key themes that we think organisations will find helpful when adopting a commercially minded approach to solving the complex problems of today’s world.

Income Generation

The difference between a business and a public body was once described as being that, in business, nobody deposits a wedge of money into your account at the start of every year. But with many councils continuing to report the recent Local Government Finance Settlement “does not provide enough funding to meet the severe cost and demand pressures”, this is increasingly true for local government also. In business, you have to earn every penny you get by demonstrating that what you do has value. For public bodies reluctant to embrace the word 'commercial', think of it instead as the ultimate vote of public confidence: providing services so good that people are willing to pay for them. And, with 72% of senior officers?expecting to see an increase in commercial activities over the next few years, the importance can't be overstated.

Here are our tips for where to start:

Start with your costs.?If you remember anything, make it this: you have to understand your costs to know if what you’re doing is worthwhile. For new businesses, this should be straightforward, but for large, established public bodies with complex financial legacies, this can be difficult to unravel. As daunting as it may seem, it’s worth expending the time and brainpower at the beginning to put a cost on everything you do.??

…but don’t stop there.?The mistake of conflating cost and price is still surprisingly common. When setting prices, calculate the value customers place on something, not what it costs you to make it. Do look at what other organisations charge for the same or similar product.

Revenue is vanity, profit is sanity. In business, you don’t do something that doesn’t make money. If something is losing you money, you shut it down or you consider re-development and transformation – sounds familiar in the public sector these days.

If you can’t do it, don’t do it.?Recognise your strengths and play to them. Don’t do something if you’re not confident you can pull it off and it will add value both to your bottom line and your brand. Anyone remember Virgin Cola?

Diversify risk.?The temptation may be to focus on one or two star services that are delivering good returns in the present. But this creates vulnerability; all it will take is digital disruption in the industry, a new entrant to the market or losing a key team member to a competitor to bring the house down. Look across your entire portfolio of assets – including people, property and processes – to spread your risks and opportunities.

If you’re a public sector organisation on a journey of commercialisation and would like to learn more about how we can help you, get in touch via www.human-engine.co.uk