In a recent article in The New Zealand Herald, “Why Does Social Enterprise Matter?”, The Akina Foundation explores why now is a better time than ever for nonprofit social organizations to shift to self-sustaining (or even profitable) business models. We couldn’t agree more.
Our organization, The Global Good Fund, accelerates the development of young social entrepreneurs through a 15-month Fellowship. We pair Fellows with esteemed executives who serve in a coaching capacity, provide leadership assessment resources and offer a network of peer leaders, sector expertise and targeted financial capital. Until now, we have relied on donor funding to support these young leaders. But given the immense amount of time and resources invested in each Fellow, we realized that it would be impossible to scale our program and invest in more leaders each year without making fundamental changes to how we operate.
As a result, we are creating revenue-producing services that shift us from a donor-driven organization to a financially sustainable enterprise. With this critical shift, our objective is to scale and further accelerate the development of young social entrepreneurs tackling the world’s greatest challenges. For us, iterating to develop revenue streams is imperative to our long-term growth and ability to deliver global social impact.
And we are not the only organization that faces the crossroads of donor-driven versus revenue-generating operations. The reality is that it doesn’t need to be an either/or situation.
In response to The Akina Foundation’s article, we identified 10 reasons why shifting from a donor-driven organization to a revenue-producing social enterprise is more beneficial in terms of global impact.
- Organizations may increase their chance of success. Donor retention is a major challenge for nonprofits. The majority of donors leave after their first gift. In an interview with Seth Godin, he reported that the average first year donor retention rate is a mere 29.3 percent. A financially sustainable social enterprise that is not reliant on donor funding has the ability to focus less on fundraising and more on building supportive business models to implement in the long term.
- Organizations can become more nimble and responsive to change. In today’s world, technology, global trends and competition are ever changing while new methodologies and organizations emerge constantly. By having financial stability, and ideally some wiggle room, enterprises are positioned to leverage resources and stay relevant in the marketplace.
- Revenue generation allows enterprises to attract employees who seek growth. The Akina Foundation mentions that it is important to accelerate the number of changemakers. To achieve this goal, social good organizations must first have the financial means to support and hire new changemakers to help scale their business and their impact.
- Revenue generation provides the platform that encourages Millennials to start up social good organizations and become leaders in the space. With the hope of financial sustainability on the horizon, emerging young leaders will be more incentivized to go out on a limb and create their own, or grow existing, social organizations that support their vision for change.
- It opens more doors for industry collaboration. When an enterprise demonstrates that it has a built-in model for financial growth and long-term viability, potential partners, investors, stakeholders and customers will gain more confidence in supporting its initiatives.
- Enterprises will be able to afford the best technologies to help them succeed. There are a variety of technology solutions that make it easier for social good organizations to operate and scale. Examples include MailChimp, Optimizely, Hubspot, Basecamp, etc. However, many of these solutions cost money. By becoming financially sustainable, organizations can leave behind their clunky legacy systems and upgrade to software services that better support current and future business needs.
- Enterprises can better support their teams. By becoming a revenue generating enterprise, organizations can afford to give their internal teams the proper career support through enhanced leadership development opportunities.
- Enterprises have the means to support other organizations and initiatives. Not only will stakeholders have more confidence in partnering with financially sustainable organizations, but these revenue-producing enterprises will also be in a position that allows them to pay it forward. Revenue producing enterprises open wider networks than their donor-driven counterparts to collaborate and lend a hand to other enterprises that align with their social initiatives. With partnerships formed that involve a meaningful give/get, substantial social and shared value is achieved.
- Creativity can be enhanced within enterprises. By generating revenue and turning a profit, organizations have more flexibility to add programs and services to their enterprises. As a result, teams are inspired to think outside the box and generate new ways to expand their impact in their communities and in the world.
- Growth and impact become accelerated and exponential. As The Akina Foundation concludes, when social enterprises are financially sustainable and mature, they’re able to use their investments in ways that traditional charity models cannot. As a result, social enterprises have the potential to deliver long-term, scalable and sustainable impact on a global scale.
Do we have you convinced yet? If not, what is holding your organization back from making the shift? We would love to learn about the benefits you’ve witnessed that stem from transitioning to a revenue-generating model. Please share your thoughts below in the comments.
Carrie Rich is the co-founder and CEO of The Global Good Fund. She’s also an adjunct faculty member at the George Washington University School of Nursing and the author of Sustainability for Healthcare Management.
The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.