Growing commercial income seems to be back on the agenda for a lot of nonprofits.
Some of that’s because it’s seen a way to manage the pressure of surging costs and tightening traditional income streams. Though there’s also a bit of leaders looking at other organisations and worrying they’re missing out.
To be fair, both things can be true.
Either way, over recent months I’ve been asked more than usual to do introduction sessions with executives, boards, and charity groups, about how to approach the topic and what they need to consider.
For some reason, a burning question always seems to be whether they should prioritise on-mission or off-mission opportunities.
It’s actually not the most important question. But answering it does help me explain what the most important question is, so I don’t mind starting there.
In simple terms, off-mission is great if you’ve an asset to make it work. A venue, or a place with lots of footfall. A captive audience or valuable expertise or data. But most average charities tend not to have a lot of those, so typically end up prioritising on- or at least near-mission income, for two reasons.
The first is that earned income comes with its own costs. Often quite big ones. And in a lot of cases, you’d get a bigger return from spending that cash on fundraising than you would from commerce, so it’s the combination of income and impact that tends to make it attractive.
The second is that business is competitive. Brutally so. According to Experian, half of all new businesses fail within the first three years, often despite their founders pouring in cartloads of their own blood, sweat, tears, and savings.
If running a café or a shop was easy, we wouldn’t have half-empty high streets. And so, to succeed you need an advantage, and the biggest advantage most charities have is the expertise around their mission. Hence, that’s where most charities end up.
And that’s a good thing. Because a profitable business model that delivers on your mission has one huge advantage over a fundraised model – it’s scalable.
The more profitable, the faster you can afford to grow it, and the more you grow it, the more profit you can bring in to fund more growth, more innovation, and above all, more impact.
But here’s the rub. If it isn’t profitable, all that potential disappears. And if it’s impactful and unprofitable, people will find all sorts of reasons not to kill it off.
You’d be amazed by the number of charities who’ve come to me over the years to talk about earned income, who turn out to have tried things in the past, couldn’t get them to profitability, but still hadn’t stopped them months, sometimes years later.
Commercial business models can be fantastic for charities. But getting them to work isn’t easy.
It requires an entrepreneurial approach, and skills in things like sales and marketing, all of which are relatively easy to teach or recruit for – after all, if I can teach them, it can’t be that hard.
But it also requires clear aims, active management, and serious commitment to take an idea from concept, to profitability, then right through to scale, working past the inevitable challenges at every step.
Most of all though, it requires leaders to make decisions. When to give it more time, when to change direction, when double down, when to cut and run.
I’m probably going to sound like an old greybeard, but I’ve been helping charities with this stuff for a very long time now, and this is what I’ve consistently found.
There’s never a shortage of good ideas. I’m still surprised with almost every client, by how many good opportunities emerge through the process.
And there’s rarely a shortage of good people. In most organisations, there’s the talent and the acumen to either do, or to fairly quickly learn how to do this stuff with the right support.
That’s why so many charities have been, and continue to be, commercially successful.
But when they come unstuck, as many do, it’s almost always because the leadership commitment and focus are missing, and decisions that should be taken aren’t.
Which is why the big question isn’t whether it’s on or off mission, or even which idea, or where to get the skills from. It’s whether you, as the leader, will give it the commitment and focus, and make the big calls when they’re needed.
Because as it turns out, that’s the single most important question when it comes to growing commercial income.