In the charity sector, is there a dirtier word than profit?
Most of us are experiencing a shift in fundraising; funders are less interested in throwing cash into an organisational black hole. They want to know what you’re doing to make yourself financially sustainable. They want to fund the stepping-stones to your financial success.
From my experience the biggest hurdle to making a charity commercially profitable or financially sustainable is not the funds for initial set-up, space, restrictions within a heritage building or a suitable commercial strategy.
The biggest hurdle I come across is the desire to make profit.
A few years ago, I was asked to develop a new commercial venture and was told “…it doesn’t need to be profitable, just able to engage with our supporters”
I asked why it can’t be both?
I come from a background where you needed to make money, or you needed to move aside and let someone else do it. Back then, with the benefit of youth and naivety, I welcomed the weekly and monthly challenges to “smash” those budgets.
One financial director called me into his office because he couldn’t understand how I was achieving my profit margins. He knew the cost of everything I bought in, the quantity I sold, the profit margins and the stock I was holding, and could therefore calculate the profit I should have made, yet I repeatedly delivered more than his spreadsheet stated. For my own gleeful amusement, I never explained to him how I managed this (but it had a lot to do with my own commitment to the business in terms of hours worked and personal productivity)
Although I look back on those years fondly, I eventually needed a greater purpose than making an individual and their shareholders wealthier, so started working for charities. Putting my experience to use within this new environment was more exciting that I could have ever dreamed.
Here are some of the main differences between the two sectors which I’ve experienced.
Profit and shame
When an organisation is guided by values, ‘profit’ can carry a degree of shame. Possibly because of the inherent association with wealth which contrast with charitable values.
The stories of the wealthy doing good are outweighed ten-fold by those with wealth living a life of greed and over-abundance. We’re fortunate that we work in a sector where we are closer to the positive stories. Someone giving their money to your cause tells us a story which reinforces our values to make the world a better place. “People can see what we’re doing and will give their own money to help”
This is a great story, one which I sit on both sides of, but there are so many other stories which can be told too and myths which surround wealthy people and the creation of wealth (mostly not positive).
Profit as a priority
The other big area of conflict is around time. Supporter engagement, community involvement, supporting the people who benefit from a charity’s work are all areas most charity employees view as important. It’s very often the reason why individuals are there in the first place. So, bringing trustees and senior managers into the world of commercial profitability alongside these other priorities is no easy task.
They may ‘get it’, but few have the drive for it.
I believe however that commercial ventures play an important role in making charitable giving more equitable. We forget that people on low and middle incomes have a desire to support, but not always the budget. Give them the opportunity to buy a coffee or a second-hand book in the knowledge that their money is going to your cause and just watch them show up.
All you need to do is follow a few simple rules.
- Understand your options. Find and work with those who are not blinkered by that which can’t be done or has been tried, and failed, in the past. Fresh eyes and an authentic feasibility review will show you what’s available now and what you need to work towards in the future.
- Be clear on your goal. Knowing what your need is essential. Increasing income by 2% each year for the next 5 years is one conversation. Ensuring a commercial income of £200k in the next 2 years is an entirely different one.
- Make a plan. GAANT charts, vision boards, project paths are all essential here to help you know where to start and the order you’re going to do it in.
- Align your values with the experience you want customers to have. Just because you have a cause worthy of support, you can’t rely on this to offer a reduced experience for your customers.
- Start small but do it well.
- Have those on board with the skills to deliver – and then manage them well
- Teams will only run for a short period on the joy of working for a cause, they’ll get bored if you don’t know what motivates them.
- Be business minded. Watch the numbers, follow the trends and react accordingly and efficiently.
- Remember to tell your story but do it subtly and with style. Your customers want an enhanced experience, not to be preached at.
If you want a simple exercise to explore today, then try the following…
- Take a product you already sell (hot drink, books, plants, maps etc.)
- Work out how many you sold last year and multiply that by 10p.
What you’ve got here is free money. You can implement a price rise in a pain-free way if you speak to your customers first. Tell them:
- When – give them a date (I’d recommend a month)
- Why – here’s your time to remind them of your story and where the money goes. You’re also likely to be cheaper than the high-street (Costa, Starbucks etc) so tell them this too
- For how long – Tell people when the last price change was (I’m guessing it was some time back) and that there won’t be another price increase for at least another year.
Give it a try and let me know how it goes.
Thanks for reading!
Tony is LarkOwl’s Commercial Development expert. He can help you to set up new commercial enterprises or make existing income streams more profitable.
Email firstname.lastname@example.org if you’d like to discuss opportunities for your charity.