Business models for non-profit services

In order to ensure most ‘social by social’ projects are sustainable, we will need to evolve ‘business’ models appropriate to projects that involve advocacy, service delivery, development work or organising for change.

You may find some inspiration from the models identified above. However, it is difficult to translate enterprise models directly into social change models: the aims may be more diverse, the beneficiaries less able to use online systems, the reward systems different, the institutions (non-profit) different in their values and structures. That makes it all the more important to work through the design of a project from first principles, not adopt something off-the-shelf.

Some projects (like Wikipedia) survive on donations from their large community, others from funding from trusts or public sources. If your community is large enough, donations can actually be a viable way to sustain a business – albeit not a completely reliable one. Some commercial web start-ups and software projects have survived on donations and shareware licenses that allow people who value the service to make a contribution to its upkeep. Large sites like Last.fm and Livejournal survived in their early stages on selling very basic ‘pro accounts’, simply to allow people who liked the site to contribute to its upkeep. Make sure you give your community an easy way to help the project stay financially viable, and talk to them about what you need.

How to build a sustainable income stream for a social enterprise

by Paul Hodgkin FRCGP; Patient Opinion

  1. Income. Identify your real and possible products or services, and decide which ones to focus on. Ask yourself who is going to pay for this service in the long term. It’s easy to create something that will make the world a better place but which meets no specific customer’s needs. So ask yourself realistically whether you would buy the service at the likely price. If the answer is no put it on the back burner.
  2. Costs. When pricing always factor in core costs and ‘profit’. These don’t have to be accurate – as a rule of thumb use 20-25% for each on top of the direct costs of materials, wages etc.
  3. Cash flow. Monitor cash flow like a hawk. Don’t get too bothered about accountants and accountants till you really need them but do have an accurate simple spreadsheet that projects all your costs and realistic income and monitor this every week.
  4. Sell early, sell often. There is nothing like going out to talk to potential customers to find out what they want and whether they are interested.
  5. Market development. Customers often don’t know what they want – so you’ve got to find their itch and then make sure your service really will scratch it. The more innovative your product the more time you will have to spend doing this.
  6. Fail early, fail often. When you’re doing something new, failing is much the best way to learn – so learn quickly.