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Most non-profits operate alongside earned income-generating activities. In Canada, in a survey of 7,000 plus registered charities, 42% of them were involved in some form of income-generating activities. This is not an unusual. For charities to float, they need monies to cover for their general administration costs and most of the time they employ volunteers to implement these while paid staff focused on their mandates. This is also not an aberration since half of 170,000 charities and non-profits in Canada are entirely run by volunteers.
The survey did not look at how effective these activities are in actually tipping the point towards diversified financial portfolio leading to greater financial and organizational sustainability. One thing is that majority of these charities have very modest assumptions of growth in revenue noting that these activities ended up supporting programs rather than investing in areas of strategic value.
This is definitely an underfunded, underutilized area in sector development that very few studies have been produced on this account. While non-profits are created for societal good, the benefits of having a thriving and robust income-generating activity are hugely untapped. It seems that this for-profit versus non-profit mentality is still prevailing in this sector which did not actually help organizations move from a position of greater knowledge and capacity to handle the shift from merely conduits of public money to actual running an activity much less an enterprise.
How can an organization begin to understand that this is not just a way to get money but to integrate this in their overall strategy for financial sustainability? With financial freedom comes the ability to pursue to grow, innovate and evolve in different means. Here are some pointers to follow:
1. Align the income-generation to your mission-vision-goals and values
Clarify what the purpose of these activities and ensure that it aligns with the organizational fundamentals. Most non-profits do this on the seat of their pants just because they can charge a fee for this and that. This is very counterproductive because without a purpose, the organization will end up scattered, scrambling for the next money-making adventure and the next shiny object leaving them tired, frustrated and disappointed of its results.
Figure out what is the overall business value of this enterprise in your organization. What are the short term, midterm and long term plan for these activities and what business requirements are needed to be marshaled to be successful?
2. Run it like a business
There is something to say about being professional about it. In most cases income-generation activities do not compete well with profitable business because they do not run it like so-to generate value to customers.
Charity thinking is a hindrance to creating value. Your story is as good as the value of the product or service you bring to the table. Staff it with people that understand the business aspect of this enterprise and free them from unnecessary control to be able to deal with the market place with nimbleness and adaptation.
3. Invest in developmental areas
I was sitting in a board of an organization years ago that collects surplus from their income-generating activity year after year after year. It pains me to see that this fund will become an emergency fund once the organization decides to fold up. It has no vision but to become another program in itself. We can do better than that.
Tied public money is risk-averse. This will not let the non-profit innovate or take on risky projects unless it is proven to be the way of the future. Earned income can be used to invest in important developmental areas in the organization such as organizational development, innovations in programming, and novel experiments that will not fly with traditional donors but has the potential to create an expansive effect for the organization. Use that earned income strategically.
4. Evaluate and share your experience
Surround your organization with supporters that understand the value of these activities in your organization. Yearly evaluate these activities if they are meeting your goals and expectations. Remember that there is always a leg room to make mistakes because there is no such thing as a perfect enterprise, only a learning enterprise. Learn from the non-profits that have a thriving income engine side. They have learned the art of balancing social good with a good business model.
The for-profit versus non-profit is a false dichotomy. Having income-generating activities alongside the core mandates should not be a pain. Ensuring that the value that these activities provide to the organization is internalized and articulated to all parts of the organization can make a huge difference. Learn the best business model that works for your organization and reap the benefits and advantage of being financially sustainable.
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