Social Enterprise: Let’s Talk About Profit
Profit in a not-for-profit organisation?
For many in the traditional not-for-profit sector, talking and even thinking about making money is considered a conflict of organisational mission and spirit. Many firmly believe that making money in the not-for-profit sector is utterly unethical (it’s in the name!). However, the time to step down from our moral righteousness has passed and the time to be savvy, smart and intentional is here. The traditional charity, grant-dependant model is increasingly outdated and criticised. And rightfully so. But why?
Current Economy Offers No Security
Relying on the donations of an external group, local or international, is just not sustainable. Funding opportunities are highly competitive, and they shift with impact ‘worthy’ trends from cycle to cycle. Consider how much of your human resources, energy and efforts go into fundraising, with no guaranteed outcome. It’s disheartening.
From Fundraising to Business Development
What we need is a change in mindset. Imagine and create a business development team rather than a fundraising team by shifting focus, objectives and goals. Upskill your team and empower them.
“It’s time we make our own money rather than waste time and energy convincing others that the work we do is valuable and necessary enough to receive capital.”
We should not be in a position where the value of our work is determined by the corporate sector or government. We determine our value and therefore, we should determine our future and sustainability which (like it or not) is in money.
With the shift from fundraising to business development, comes a shift in language. Rather than ‘grants’ we should be seeking ‘investments’. Investments into impact.
But Am I Allowed to Make Profit as an NPO?
The answer is simply YES. NPOs have no legal restriction to generating income. It’s what happens to the profit where technicality comes in. NPOs that generate money invest profit (or surplus) back into the organisation and into their impact initiatives, rather than into any pocket of any individual. NPOs (or social enterprises) will enhance their impact by growing their team, upgrading existing facilities and opening new offices/programmes – all in the pursuit of increased impact. Not personal gain.
But let’s not get too excited. Many existing NPOs, even with a business development strategy and team, are years away from making any profit or even from breaking even. Building a business into an existing charity is not an easy task and it is a long-term mission.
How can it be done?
1. Select a board
You need a board that will support your shift to financial freedom and sustainability. They will need to share your vision. A diverse board helps with this shift. Ensure you have a progressive business(wo)man – someone who will bring financial and business insight and guidance.
2. Set attainable financial goals per annum
It’s not going to happen overnight. For an NPO to become 50% self-sustainable is a huge success and can take years. What can you realistically start with? Start with that. No matter how small. Just start.
3. Communication is key
Communicate intentions and new visions with your team and partners from top to bottom. You’ll need your team on board with you.
4. Be prepared for resistance
This is often from members of your own team and partners. We naturally fear change and the unknown.
5. Revisit your organisations values and objectives
We should be doing this annually anyway, but a common concern is that any NPO shifting into business activities may lose sight of their ethical, humanitarian, civil and/or environmental focus. With strong leadership, this shouldn’t be the case. Organisational values should be clearly articulated and displayed repetitively on various media platforms and in your team’s work environment. And to be fair, NPOs often lose themselves in races for funding and survival as it is.
6. Seek and invest in assistance if you need it
There are some great groups and people who specialise in guiding NPOs through a shift to a more sustainable enterprise. Seek these out and get the support you need.
There is plenty to navigate when considering the future of your organisation’s financial sustainability. Follow and engage in conversations and sessions on social enterprise development and do your homework. Read, listen to podcasts and look at what other groups are doing in South Africa and in other parts of the world.
To learn more about generating profit for purpose, join our workshop happening in Cape Town on 3 July.