Types of trading

Before considering the type of trading activity you want to establish, you must first consider the reasons behind your organisation wanting to trade. Will you be trading to further your mission or simply to make money? 

The best trading ideas are usually those which emerge easily from the current work of the organisation or from the skills or capacity already in house. 

Income can be generated through trading goods and services using a number of approaches: 

Mission-related trading

Selling 'core' related goods or services which are directly related to an organisation's aims and objectives. As well as furthering an organisation's mission, this form of trading can also generate valuable surpluses. 

For purposes of charity law, there are two categories of mission-related trading:

  1. Primary purpose trading - trading that contributesdirectlyto the objects of the charity.
  2. Ancillary trading - trading thatindirectlycontributes to the charity's primary purpose. 

Unrelated trading

When it is not possible for an organisation to combine its services with generating income, unrelated trading may be considered; selling goods and services which may have little relation with core aims, but generates profit which can be used to subsidise core work. 

For charities, unrelated trading is referred to asnon-primary purpose trading.Charities can only engage in such trading where no significant financial risk is involved. 

If the activity is unrelated to your charity's objects, and involves significant financial risk, then it should only be undertaken by atrading subsidiary- a separate company established for this purpose. 

Cost recovery

An element of mission-related trading which involves charging user groups and beneficiaries to cover the basic cost of a service, not to make a profit but to provide a subsidised service. 

Social firms

This model is often a route into trading, arising from the nature of an organisation's activities. Social firms aim to create real jobs and training opportunities for people marginalised from the labour market or seek to deliver high quality, affordable services beyond those of the state. www.socialfirmswales.co.uk 


Generating income through the provision of goods or services outlined via a contractual agreement with a purchaser. Income generated in this way is usually restricted, meaning that the income must be spent in line with the terms and conditions of the contract.