When NGOs look for Revenue Streams: What NOT to do (& what to do instead)
#SocialEntrepreneurship, #ImpactInvesting, #SustainableBusiness — these buzzwords are flooding the airways and are making charitable organizations reconsider their approach and business model, be it to access more capital or to better serve their end user.
If your organization is considering monetization by joining the double-bottom-line club — here is a list of 3 common mistakes and what to do instead.
- ‘IF I BUILD IT ‘THEY’ WILL COME’
The number one mistake we see in impact investing are businesses that exist because of the product or service they offer (or want to offer) and NOT because of the person or client they serve. If today you offer a service for free, like eye exams to people living in poverty, and tomorrow you want to offer low-cost glasses to those very same people— think about your customer first, then think about the glasses. Where do your customers currently buy glasses? Who makes the glasses? How will the community view the sale of glasses by your organization, be it positively or negatively? Don’t hang your hat on one specific solution, hang your hat on continuing to positively transform the lives or the people and communities you aim to serve (regardless of what it takes to get there).
2. PERFECTION FIRST
Forget perfection, iteration is your best friend. Don’t hire a group of experts to come up with a product or service in a vacuum based on x number of academic publications. Employ the very easy principles of design thinking (or iterative design). What does that even mean? If you are making low-cost glasses, test them all the way through the process. Iterate quickly and don’t be afraid to test an incomplete product or one that was glued together by hand in a small workshop in a distant rural location. Your end consumer will give you a lot more feedback than a controlled stress test in a lab. Design thinking saves time and money and keeps you closer to your desired outcome (and by extension, closer to the people you want to serve and positively impact)
3. OVERESTIMATE YOUR VALUE
Because of the grant-receiving and donation-receiving nature of charitable organizations, it is not uncommon to find organizations that believe they create more positive impact than they actually do (the very same can be said about for-profit organizations). However, when you are moving away from offering a product or service for free to charging for it — you need to be clear on what the exact value perceived by your end user is. Many times, it is easier to continue offering your current product and service for free while adding a secondary paid product, than it is to charge for something that has always been free. Instead of starting to charge for the eye exams, consider extending your offering by adding glasses and charging for them.
There is no magical formula to turn a non-profit into a for-profit social enterprise. Don’t forget, the shift is not just happening within your organization — it will also happen among and within the people and communities you serve. Keep them at the center of any discussion and the compass will inevitably always point true north.
