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Posted by Sarah Brown on 11 Sep '19

Seven issues to consider if you want to earn money as a charity

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In our experience of working with numerous charities large and small who want to move to a social enterprise model there are seven key issues or risks to consider:

1 Adding to the problems of the people you want to help 

This is a particular risk for counselling services. The obvious way to generate incomemay seem to be to sell your counselling to those that can afford it to help pay for the free or subsidised counselling you give to people in need. However, if there is a shortage of counselling time then you are just making the waiting list longer for the people that need it who you are set up to help. You are also likely to cause resentment (see issue 2)

2 Volunteers feeling used

If you start charging for the services that volunteers provide you need to be very careful that they don't feel taken advantage of. "I didn't get involved to do this" can be a common refrain if volunteers starting providing a commercial service instead of helping the people in need that inspired them to get involved.

3 Mission creep 

A focus on generating income can lead to the organisation chasing cash rather than keeping focused on achieving its mission and this can result in confusion and disillusion within staff and volunteers. This in  turn can result in low productivity, loss of key staff and lack of synergy with the charitable work of the organisation.

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4 Lack of clarity in governance and goals  

Often there can be a failure to identify clear goals and set clear guidelines about the resources to be used for the social enterprise. There is not a clear demarcation between what is for social impact and what is for enterprise to generate income and how the resources are allocated. In short when is something free and when charged. This can upset and confuse users and staff and volunteers, and lead to financial irregularities.

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5 Unrealistic expectations 

The grass is always greener as the saying goes. It feels like it must be easier to earn money than bid for funds but like anything it takes time. Often charities have unrealistic expectation about the speed of income generation and profitability – this can mean cash flow problems and the charity unexpectedly subsidising the social enterprise.

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6 Lack of commercial/entrepreneurial attitude 

If you are going to be successful, there is a need to constantly be looking for opportunities and adapting as the market changes. This is natural to charities but often less so in their more commercial activities where they can lack confidence in their commercial judgement. Should you stay with the original plan even when it isn’t working or cut your losses, for example.

7 Poor sales and marketing 

Most small charities don’t have a marketing department and don’t have a marketing mindset. Even larger ones don't generally have experience across all the elements of the marketing mix such as pricing and distribution.

However good the offer it will need to be marketed and sold, this is more than promotion and an area which is often a risk is pricing where small organisations lack the confidence to price highly enough and make insufficient margin. There can also be confusion on the target market which often is not the same as for the charity

Conclusion

All these risks need to be managed and the more planning and thinking you do before you act  the more likely you are to be successful because you can work out how to manage the risks before they occur. Obviously a feasibility study will manage expectations on income and the speed you can grow, and a business plan will help with clarity on vision and the operational and marketing issues. Working with a company like inspire2aspire that understands charities and the commercial world can make it easier. Give Sarah a ring on 01709 810080 if you want to chat about your ideas.

If you found this interesting look at:

Social enterprise feasibility study – would a great recycling idea really work?

Are you measuring your social impact effectively?

Who would have thought that a little blog about what is a social enterprise would cause such a stir