James Caan, entrepreneur and ex-Dragon's Den investor, says ego and emotion get in the way of achieving scale in the charity sector, and has urged more charities to merge, saying the sector is ripe for consolidation. 

Caan was speaking at the Acevo annual conference yesterday, where he said the cost of delivery in the charity sector was very expensive, because people were creating “little fiefdoms” instead of creating synergies and merging.

“There is no economies of scale,” he said. “The charity sector is so fragmented, but the opportunities for scale are massive. Ego and emotion lead people to build their own organisations, when the sector is ripe for consolidation.”

Caan, who chairs the Big Issue, also said charities were rightly cause-driven, but often not business-driven. To illustrate the point, he relayed a story from when he started at the Big Issue:

“All the boardroom meetings were about the cause, homelessness. But we also have a business model which is publishing,” he said. “When I arrived I looked at it from a business perspective and suggested raising the price of the Big Issue, something which had never been discussed – it raised an extra £1m a year for the organisation.”

He suggested that boards break their talks into two parts – the cause itself and how to deliver the cause cost-effectively. 

To merge or not to merge?

Later in the day, chair of NCVO Martyn Lewis also spoke about charity mergers, starting his speech with the question "to merge or not to merge?"

Lewis, who described his invite to speak at the Acevo conference as “unprecedented” for an NCVO chair, spoke on the new developing partnership relationship between umbrella bodies NCVO and Acevo:

“NCVO and Acevo are moving forward together,” he said. “We’ve even considered setting up a dating agency for the sector.

“I don’t know if we’ll merge. But our members want collaboration, and NCVO and Acevo have open minds about the developing partnership.”