In the world of social impact, the terms ‘profit’ and ‘business’ are often eclipsed by social impact mandates that organisations are committed to. But what happens when generating profit as a nonprofit organisation is key to its sustainability?
Last month, the UK-South Africa Tech Hub Launch League initiated the Hub Leaders Forum, a monthly gathering that will take place until March, for a small group of change agents (directors, CEOs and other leaders of entrepreneur support organisations) across the country. The aim of these roundtable discussions is to facilitate collaborations, and offer support for South Africa’s hub community. Hub leaders who have signed up to join these discussions also receive free coaching services from Factor10 Consulting.
The topic that launched the series was, “Income Strategies for Sustainability” and was led by nonprofit organisation consultant Marcus Coetzee.
Having worked in the sector for the past 20 years, Marcus has consulted with many of South Africa’s prominent non-profit organisations, as well as governments, universities, foundations and startups to build innovative legal structures and strategic fundraising plans that build sustainability and scale impact.
So, whether your non-profit is facing challenges due to the pandemic or if you are looking for a more sustainable approach to earning income, we have put together some key takeaways from Marcus’s presentation that can help you face the hurdle of generating income, while achieving your hub’s mandate as a nonprofit organisation.
1. Sustainability is your ultimate goal
Sustainability should be at the forefront of an organisation’s path to diversifying income streams. Marcus defines sustainability as “the reduction of organisational risk that increases the likelihood that organisations will survive in the future”. Sustainability is about having clear pathways that can mitigate risk and put an organisation in good stead for success. Some of these sustainable characteristics include:
2. Develop an income strategy that works for you
“Getting income into an organisation is a distraction for every single nonprofit in South Africa. [This is] because we actually want to get on and do the work and we’re focused on our beneficiaries and our impact. Having said that, unfortunately we need to invest a considerable amount of time in marketing and bringing in money,” highlights Marcus.
What’s the best way, then, to develop an income strategy that works best for your organisation? “It’s about carefully judging the probability that investing time and effort will result in the money coming in. So for example, it’s not worth investing 20% of your organisation’s resources to get 5% of your income. A lot of this comes down to judging the probability of success by choosing one or two sources of income that you believe have a good probability of succeeding, versus spending time on other income streams that won’t yield considerable returns,” says Marcus.
Moreover, Marcus shares that it’s important to look at the income source options you already have as an organisation, and put those against income types you can tap into. Are there grants you can apply for with other organisations doing similar work? Or is there an investor strategy you can build out to attract potential income from investors? What about donations? The key here is looking at creating an income strategy that is diverse yet concrete enough to keep your organisation’s key activities a priority.
3. Branding matters; show and tell
“I can categorically and confidently say that an organisation that has a bad project and a good marketing strategy is more likely to get funded than an organisation that has a good product and a bad strategy. In other words, fundraising happens in the context of marketing and branding,” says Marcus.
Therefore, it’s important to build trust through strong communications and marketing strategies that showcase your organisation’s capabilities and success stories to enter more profitable agreements with donors.
To conclude; while nonprofits are mission-driven, earning an income is a necessity. Earning profit as a non-profit is not a bad thing; it’s part of how organisations can survive any volatile environment.
“We’ve been talking about a lot of income strategies here and for a lot of organisations it boils down to this: improve your website, improve your social media, write better proposals, do your budgets better, team up with others, measure your impact – these are all the fundamentals that can help you yield more income.”
Lastly, as Marcus concludes,“profits earned in a non-profit organisation are not distributed, they are kept within the organisation to further its mission.”
A special thank you to Marcus Coetzee for spearheading the conversation on diversifying incomes for non-profits with our hub leaders.
Download Marcus Coetzee’s guide on How to Become a Sustainable Non-Profit Organisation here.
**Speaker quotes have been edited and paraphrased for length and clarity.