It’s not surprising that corporate philanthropy has become big business in the last decade. In 2014, corporate giving totaled $17.7 billion in the US, the highest ever recorded (even adjusted for inflation). Business ventures big and small are making efforts to promote socially responsible messages and, more importantly, to progress causes that matter. While the ethical imperative to give back to a community is a major motivation, philanthropy is also just good business. In fact, business and charity have more in common than not.
On one hand, charitable activities are shown to improve a company’s image, from defining corporate identity in positive ways to enhancing public and employee relations through shared public interests. There is also great benefit to understanding business practices in order to run a charity, because—no big surprise here—charities need money to survive. This is clear in the rise of terms like “philanthrocapitalism” and “philanthropreneur” in the media. There is a mutual understanding that big business and philanthropy are not enemies. They can (and should) work together to be effective.
Why does this matter? If you’re working to get a new nonprofit organization off the ground, think of ways to run your charity like a business. This will be important to ensure sustainability, scalability, and impact.
Sustainability is the ability for a project to run indefinitely on its own steam. In other words, much like a new business, it must be able to produce enough cash flow to support all of the activities and capital invested, plus a profit at an ideal rate of growth. Assessing the sustainability of your project will require much up-front calculation and research, as well as periodic evaluation of how you’re stacking up to your initial calculations once the project is up and running.
One way to ensure sustainability is to create a social enterprise. This is an alternative to a traditional charity organization that makes financial viability a priority and applies the principles of commercial ventures to running the organization. Two well-known examples of organizations maximizing on social enterprise ventures are Goodwill Industries and The Salvation Army. Both organizations have retail stores that sell items donated by the public. With the money made from sales, the organizations are able to fund programs and services that better the community. Over the years, I’ve seen many other nonprofit organizations take this idea and become very successful. Local to Houston, Citizens for Animal Protection runs a popular thrift shop on the west side of town. Donations come in from the public, items are cleaned and/or repaired, and put on the shelves to sell. The overhead is low because the items are donated and the prices are very fair. It’s a great way to bring in revenue for little upfront cost.
Scalability refers to how well your project can be “scaled up” or enlarged to handle continuous growth. For most nonprofits, growth is very often the ultimate goal. Determining how scalable your project is can be a relatively in-depth process of assessment based on fixed costs (e.g. startup costs) balanced with ongoing operating costs as the project grows. This article gives tips for building a scalable startup.
A great example of a scalable philanthropic venture is Rootz, a social enterprise that lets customers shop for other socially-responsible products and donates a proportion of profits to benefit a monthly cause. The initial outlay for an e-commerce site like this one could be considerable, but once the structure is in place, it can be adapted and expanded at relatively low costwhile sales increase.
Impact is the ability of a project to actually make a difference. While this seems like a no-brainer for socially conscious ventures, sometimes there is a gap between the impact founders expect to have and what they actually achieve. The first and most important aim in designing a project with impact is to do your research. Are you filling a gap currently going unfilled? Will people want or need what you are offering? Don’t assume—do market research and find out if they do.
Another major strength for any philanthropic startup will be investment in using and understanding online methods of reaching the public—it’s a way to reach many people at a low cost, thereby maximizing the impact. Social media is also a great resource for promoting and measuring the impact of your branding efforts, which will in turn have an impact on how and whether people engage with your project.
Know of any nonprofit organizations operating with successful business models? Let me know! Leave a comment below or tweet me @posforcehouston.