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Consulting and support for social enterprise in Canada

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Six Steps to become a Knowledge Brokering Social Enterprise

Does your organization identify as one of the following?

  1. A Centre of Excellence,
  2. A knowledge hub,
  3. A network of practice,
  4. A think tank.

In today’s world, managing information is one of the biggest challenges. Great ideas, proven practices, academic research and innovative social ideas come from diverse sources. When good people have their heads down and are doing good work, silos naturally develop; sharing knowledge between the brains of the most progressive from all sectors has become a job in itself.

The problem is that nobody wants to pay for it.

Actually, that is not entirely true. Any rational person wants to see great ideas being shared. Groups like Ashoka, MaRS, or those offering collective workspace all know that when you mix ideas from different actors in different sectors you often get something new, and frequently something truly remarkable. Governments, large foundations and generous philanthropists in the last 15 years appear to like to invest in starting these “convening” activities and organizations.

However, if you are in the business of knowledge brokering, you are likely facing funding challenges after an initial 3-5 years in operation. (maybe 10 if you have a generous benefactor, or if you are housed at a university) There appears to be an expectation that once the infrastructure is built with the initial funding, then the knowledge sharing organization should have a sufficiently robust history, experience and brand to be able to generate revenues to sustain its staff and operations.

The problem is that financial sustainability is actually elusive.

Invariably, at the end of the funded start-up honeymoon is when I get a call. In the last two years or so, I’ve worked with several of these organizations. They each have exceptional staff committed to convening the best ideas and practices to address vital social issues: environment, child welfare, voluntarism, the threat of invasive species, human rights. Each has approached me wanting to sell their knowledge to those who need it most…the network of practitioners in their respective fields.

The problem is that practitioners can’t pay for it.

In each case, I’ve worked with my clients to document various options to generate revenues. There is an alarming pattern emerging, outlined in the following six mission-driven “opportunities” path:

  1. Membership: We first investigate new (or audit existing) membership approaches, fees, and benefits. For those knowledge brokers who charge membership fees, most are struggling to maintain those programs in an era of the members’ limited resources and the organizations’ escalating costs. Actually, in every case I’ve scrutinized, once the cost of maintaining, renewing, servicing and recruiting members has been accurately accounted for, these program have generated negative financial returns, thus being a tax on the organization. Admittedly, membership programs offer other benefits—gravitas needed for advocacy, accountability, strategic planning direction, board membership, and often a constituency—but these benefits are “soft” and frequently only indirectly help the bottom line, if at all.
  2. Conferences: The next revenue generating option suggested is invariably conferences and/or workshops. For organizations that have never run a conference, they are a lot of work, with very little financial reward. They typically rely on sponsorship to break even (ie fundraising work) and although they certainly support the knowledge brokering mission, they burn out staff, they take resources from other programming, and they can, in worst case scenarios, lose money. In fact, my observation in the last 10 years is that governments are not only providing less money for conferences as sponsors, but they are also sending fewer delegates to conferences as paying registrants. The conference business is slowly decaying except for private sector companies that use them to market new services and products.
  3. Books and White Papers: Many knowledge broker organizations are either housed at universities, or at least affiliated with university programs. It is natural, then, to revert back to the possibility of producing books, articles, guides, handbooks, or white papers or some other form of printed materials. This effort is only a minor step in logic from the traditional form of knowledge sharing, but the increasing costs of research, production, and distribution are rarely covered by the price paid for these items. The smaller the publication, the cheaper it is to create and share, but the less anyone is willing to pay for it, especially if distribution is in a PDF format online. Oh, and printed documents (and even online documents for download) need to be continually updated, and this cost of “maintaining” the resource is difficult to recoup in the price the community will pay for it.
  4. Training: the next logical step is to consider charging for training. Community based social change staff and volunteers who work daily to address social challenges can benefit from training on great techniques, tools and approaches. The knowledge broker organization—all that I’ve worked with—want to be able to give that information to everyone for free (to improve the social outcomes), but will reluctantly admit that they can’t give it away, they need to charge. A long discussion (and often primary research) ensues, only to discover that those who most want the training are the least able to pay for it. There is a last ditch effort to develop a prorated fee scale, hoping to use this technique of price discrimination to maintain accessibility for those who most need it. Financial viability is dicey with these sliding fee schedules, however.
  5. Webinars: (actually, this is really idea 4b, but they are a different product from standard in-person training…). The logical argument made for webinars is that if the costs of training can be lowered, then the price can be low enough for practitioners to afford. The problem is that good online training actually costs a lot to produce, and in spite of its apparent easy of delivery, it is very hard to sell. A simple “shot on my cell phone” video may work for YouTube, but it is not sufficient for fee-based training products. Sound, lighting, script, and editing are all required to create training folks *might* pay for. There is an irony in our modern world; folks believe that if it is online information, it SHOULD be free. Indeed, there is a lot of free information on every subject out there, and practitioners often prefer to spend an hour (or five) using a search engine to find an array of non-curated content than to spend $100 on a hour of top notch content. This may be ironic, but it is also frustrating if you are trying to generate revenue.
  6. Consulting: Inevitably, the discussion eventually evolves to consider bespoke consulting or a fee-for-service mentoring program. After all, knowledge broker organizations know things that other people don’t fully know, and that is a logical precondition for consulting or mentorship. After a raft of market research (both primary and secondary) for each of my past clients, in many cases it appears that there may be a “niche” non-profit consulting practice that might be of value. In most social issues there are individuals, corporations and governments who may need (read: are willing to pay for) curated information to make it possible for them to do their work. Short term consulting fees can make sense, especially if they remain relatively small contracts that might allow some purchasing autonomy for a branch office or a municipal bureaucrat.

After following this logical path, you may also consider the possibility of transforming your (currently funded) knowledge hub into a consulting business. However, be aware that consulting is a difficult way to make a living. Cash flow can be irregular, and balancing client timelines can be challenging. Many knowledge broker organizations realize that one way to minimize overhead costs is to create a roster of Associates; these Associates are experts, often drawn from the network of members or contributors, who can be called upon when needed, and then left off the payroll during slack consulting times.

If you are interested in learning more about how to structure a consulting social enterprise, please feel free to contact us for a free initial consultation.

Cultural Social Enterprises: Admission fees or “entrance by donation”?

Many social enterprises with cultural missions (museums, galleries, recreational facilities, or ongoing or travelling events) struggle with how to set admission prices, and many revert to a “jar at the door” asking for donations.

Spoiler alert: charge admission.

I firmly recommend to any social enterprise that they set prices (including admission fees) based upon a sound understanding of their cost structure, and how much they need to charge their guests they expect to visit their location to attempt to cover these costs. This recommendation is borne out of experience and logic for any business. For cultural social enterprises, they may not cover all of their costs, but charging an admission fee—over an admission-by-donation strategy—has many benefits described below:  

Admission fees are professional

In 1st century BC, Publilius Syrus wrote: “Something is only worth what someone is willing to pay for it”. This is perhaps a bit simplistic, as the truth is that a sustainable price represents the point where both the customer and the business both are getting a good deal (or at least neither is  getting a raw deal). Charging visitors for admission simply states to your customer that you have spent money to create an experience for them, and they need to spend money to enjoy the experience. All agree that good experiences cost money. Now there is nothing left to do other than haggle over price.

Free, however, suggest that the museum doesn’t pay for, or doesn’t care about, or perhaps doesn’t even know the costs of their service. The assumption by the consumer, paradoxically, is that the experience is likely not going to be very good. In the bizarre world of consumer expectations, free stuff is low quality and useless, and expensive stuff is better quality or valuable. (just think of drinking water or wrapping paper)  Charging admission says that you are professional and that your business value proposition is important and valuable.

Admission fees do not decrease attendance

If you lose 5% of your customers due to the application of an admission fee, that would be a shame, but studies show that admission prices don’t actually decrease attendance. Some even argue that museums and cultural attractions actually get more customers by charging a “professional” amount (see above). A study in 2015 of 98000 adults in the US actually concluded that in most instances, audiences indicate greater intentions to visit organizations that charge more than $20 for an adult admission than those that are free.”

The decision to visit a museum, gallery or event is affected by many factors and price plays a smaller role than most believe. Family history, geographic proximity (especially for travelers), hobbies and interests, marketing and promotions, available time, or availability of alternatives all play a pivotal role in attendance numbers for cultural social enterprises. After all, if you travel to Paris, do you really care what the price of admission is to the Louvre? You are already committed: once you’ve paid for the flight, hotel, meals, and your time…the admission could be 50 Euros before you would even blink.

Admission fees will generate more total revenue than donations

If 100 people come to your attraction and you charge them $10 to get in, you’ll earn $1000 in gross revenue. If 100 people come and are asked to make a suggested donation, you’ll be lucky to get $500 in revenue. It varies by event, attraction, demographics, region, and product, of course, but in every study I’ve read where a “suggested donation amount” is posted, the actual donation is 25-50 percent of the posted amount, even when the posted amount is significantly less than what the market would bear. This is lost revenue and lost opportunity for your cultural business.

There are tricks to try to increase donation amounts. Some have tried offering a choice of recommended amounts (and the results show that most people choose the median recommendation or less). Some have considered a sign saying that other patrons have historically given a certain amount (and this helps to bump up the average donation slightly).

One particularly creative example is from the The Contemporary Arts Museum of Houston (CAMH), which doesn’t charge admission and prefers to accept donations. They put out a donation box old-school style with a sign on it that reads: “Average cost per visit $22. Your admission charge $0. Suggested donation $5” This approach increased their average donation slightly, because it listed a factual cost (calculated from the previous year’s financials) as a benchmark allowing visitors to confer value upon the experience they are about to have. This is a clever approach, but still an approach that generated less revenue than a straight $10 admission fee.

Your gift shop benefits

Most cultural social enterprises have an opportunity for a secondary spend. What this means is that your visitors to the main attraction will (of course) be encouraged to visit the gift shop, the ice-cream stand, the café, or the special exhibit. It turns out that visitors who don’t pay for admission are also far less likely to spend money in other parts of your establishment. A good example comes from Cedar Rapids, which offers free admission for about two months a year to their Museum of Art. Their attendance during those promotions (contrary to most data) does increase, but as noted by the business owner “the average donation in the donation box remains in the range of 25-35 cents per person and the average amount spent by those who enter the gift shop plummets from about $13 to about $3.”

You can track and plan marketing and promotions

If your customers have to pay to get in, you can get more information from them that can help document your marketing success or guide your future promotions efforts. Where do they live? How many people are in their party? Did they question the price? Did they request a family rate? Did they use VISA, MC or AMEX? How did they hear about you? Did they use a coupon or a promotion through their hotel?

The act of collecting a fee allows for an interaction (either automatically by the point of sale software, or through conversation). Every time a business can interact with a client, it is an opportunity for improving customer service, retention, and renewal and another way to inform future marketing efforts. A donation box is normally anonymous (to protect the dignity of the donor), and thus represents a lost opportunity for business development.  

Increased social outcomes

Although my data on length of visit of paying vs non-paying customers is largely apocryphal, visitors who have paid to get in to your exhibit are likely to “savour the experience” just a bit more, in order to get their money’s worth. In an art gallery this is often the experience for special exhibits; visitors will pay to see the Monet exhibit, for example, and even if their fee allows them free entrance to the regular collection, many will either forego the gallery’s resident collection, or they will rush through these works of art after hours of peering at the “valuable” art in the special exhibit.

Most cultural social enterprises want people to learn, enjoy, and engage in the mission of the business. Knowing that your customers will read every plaque, pause at every display, and ruminate on how this affects them is certainly a goal equal to or more valuable than the mere volume of visitors.

Admission fees force good business practices

It is true that if you charge a fee, your customers will expect more from your business. Many museums and cultural exhibits are struggling to maintain visitation levels in a world of virtual reality, internet museums, and so many fantastic blogs and websites devoted to capturing and curating history and culture. It is important for all cultural businesses to strive to find new ways to capture the attention of new audiences. Not only will admission fees generate revenue to help run the business, it will also force your board, staff, volunteers and content curators to work diligently to create excellent experiences for customers. There is little incentive to update, change, review, digitize or improve your collection or experience if the customer is not demanding it. 

You can still be accessible

In my experience, the key rationale made to solicit voluntary contributions is to allow everyone to enjoy the museum, installation or activity. “Maximize accessibility” is the mantra. After all, if the mission of the business is to promote culture, then it may seem logical to not create any financial barrier to entry. For fully funded organizations, I accept that “admission by donation” will be fine, as the business costs will be covered by grants or sponsorships. However, the fully funded cultural social enterprise is a unicorn; people claim they exist, but I’ve never seen one.

It is possible to offer bursaries, school programming, or discounted days for those who are unable to pay. There are many creative examples of dignified programs and promotions that can help those for whom a small admission fee still is a concern.

Fees are guaranteed. Donations are fickle.

The other argument I often hear is that donations do not have a ceiling; that is to say, a donation request might yield a $1000 contribution, and surely that possibility makes an “entrance by donation” strategy worth considering.  When faced with this assertion, I normally ask how many large gifts has the business ever received in this manner, and were they able to properly receipt, track and cultivate that donor? More often than not, there is no evidence that such a gift had ever been received, nor is it truly likely to be expected through that mechanism.

The truth is that even if there were to be a “huge gift” in the donation jar, perhaps once in a year, by fluke (every fundraiser knows that “people give to people,” after all), it is likely that the lost opportunity for all those who chose not to donate would exceed the value of the larger one-off gift.

To conclude, it is overwhelmingly clear to me that charging a fee is the right approach for all cultural social enterprises.

The downside risks (fear of decreased attendance or restrictions for those in poverty) are easily managed with creative pricing approaches if it is even necessary, while the benefits of an admission fee are significant. Under set admission fees, revenue is more stable, predictable and lucrative, and the organization is more professional and effective. Fees don’t need to be exorbitant, but they should at least reflect the costs of the business that have not been covered by donations, endowments, or sponsorships.

Regardless of the size of your business, charging an admission will help your social enterprise remain in business, impress and engage your customers, and most effectively promote your cultural or social mission.

IMPACT ACADEMY: A free program to support your social change idea

Deadline to apply: August 17th

Join Impact Academy: CityMaker Edition

HUB Ottawa offers a new cohort of its flagship program, Impact Academy. They are partnering with Synapcity for this special Impact Academy: CityMaker Edition. Here is what you need to know!

What it is: A free, three-month learning program running between September 5th and December 5th, 2018. (Yes, it is a free program for participants this year…so don’t delay)

Who it’s for: Creative and entrepreneurial changemakers working to make our communities more sustainable, inclusive, and equitable and who want to take their projects, ventures and initiatives to the next level.

Topic areas: Transportation & Mobility, Environment & Sustainability, and Healthy & Caring Communities.

Deadline to apply, August 17th, 2018.

Since 2012 Impact Hub’s Impact Academy has supported over 150 social changemakers in their entrepreneurial journey. Social Delta has been an active partner in both the design of the program from its inception, and Jonathan Wade of Social Delta continues to deliver elements of the program.  This year, you can get Social Delta’s insights and recommendations on business modeling on October 31st, but each session will bring expert community resources to the classroom, and spectacular living examples to the program.

Book Launch: June 18

Monday June 18, 2018
6:30-8pm
6th floor, 123 Slater Street, Ottawa

Register for this free event here.

Author Elisa Birnbaum is the editor and chief wordsmith on the active, informative and longstanding blog on social enterprise and the tools of social change in Canada: See Change Magazine. At the launch, Elisa will offer perspectives on what she has researched, stories about successes and challenges in the sector, and will bring to life some of the many significant changes that have been made by social enterprises in Canada, the US and across the world.  She brings a warmth, honesty and tremendous perspective on this changing sector.

Please register in advance.

Note that street parking downtown is also free in the evenings.

 

 

While many in the social enterprise space often qualify themselves as ‘non-profit,’ these organizations should instead treat themselves as ‘for-purpose.’ These organizations should focus on their mission to create social good, while still treating themselves with the same commitment to rigor and discipline as the best for-profits.

Adam Braun

Jonathan Wade: Social Enterprise Expert in Residence at HUB Ottawa

I am pleased to offer Impact HUB Ottawa members free consultations on social enterprise once a week during the fall of 2017.  I will be at HUB Ottawa, 123 Slater Street, 6th Floor on Tuesday mornings from 9:30 to 10:30. Check the events page each week in case there is a last minute change in timing.

Not a member of the HUB yet?

Consider the Experts in Residence program as one of the many benefits of being a member, and drop by the space to chat with the host to ask about their very reasonable co-working rates.

If you are at the HUB when I am there, and are interested in a chat about social enterprise, please feel free to come and find me if I’m not busy.

Jonathan

 

NEW: RECIPE FOR IMPACT

  • Is your social enterprise engine sputtering?
  • Are you and your team frustrated or overwhelmed?
  • Is revenue stagnant? Is financial sustainability in jeopardy?
  • Are you maximizing your social impact?
  • Is your founder looking for other work?

Social enterprises can have troublesome adolescent years as well, and Social Delta knows how to help  you overcome the challenge through a practical, effective one-day strategy session.

We offer a full day facilitated strategy workshop to help you and your social enterprise stakeholders identify strengths and challenges, and refine your objectives. This is a co-working session which draws upon Social Delta’s decade of experience working with and studying social enterprises, and your intimate knowledge of your own business.

This is not just any business strategy session. It is specifically designed for social enterprises, whether run as a co-operative, a non profit corporation, or a private company. We don’t just look at the numbers, we review the whole business proposition and identify how to maximize your social impact through improved business practices.

This unique service starts with an online survey completed by your team of stakeholders (clients, managers, employees, volunteers, board members and owners). This survey sets the foundation for an objective group evaluation of the financial and social health of your business in 12 different thematic areas.  The survey results form the foundation of a day of in-person discussions allowing your team to make concrete decisions about what areas need to have more focus, and what aspects of the business can be relaxed in the short term. The whole process is designed to “round the wheel” by reallocating scarce resources–time, physical assets, operating capital, and human resources–to create a stable, robust and effective social enterprise.

Together, we will write your business Recipe for Impact

In only one day:  Concrete, realistic, measurable  next steps to maximize the social impact and the financial health of your business.

Contact us for more information on pricing or to learn about this unique service for social enterprises.

Summary: Canadian Conference on Social Enterprise

Did you miss attending the Canadian Conference on Social Enterprise in London Ontario in April?

Jonathan Wade of Social Delta offered a short presentation to members of the Ottawa Social Enterprise Meetup Group and has made this short presentation available as a free download.

Be sure to keep an eye on www.secouncil.ca for announcements about the next Canadian Conference,  scheduled for the Spring of 2017 in Winnipeg.

In the meantime, if you are a social enterprise, or a supporter of social enterprise, consider becoming a member of the Social Enterprise Council of Canada, so that you can add your voice to the movement to create a positive legal, social, and financial environment for social enterprises in Canada.

If you are a social enterprise or if you purchase products or services from social enterprises, consider becoming BUY SOCIAL certified. Visit www.buysocialcanada.ca or contact Social Delta for more information.

BUY SOCIAL Summit Canada

  • Are you a social enterprise looking to increase sales?
  • Are you a commercial procurement officer wanting to buy from suppliers who support social value creation?
  • Are you a shopper looking for great products that help build a stronger social fabric in Canada?

Please download and share this PDF announcement.

BUY SOCIAL is a UK-founded program to promote purchasing from social enterprises, and now it is coming to Canada. The program will be launched in Vancouver June 16/17, 2014. Visit the  BUY SOCIAL CANADA Website for more information, or to learn about this national effort to connect purchasers with vendors in the social economy.

Better yet, join Social Delta  and other social economy support organizations in Vancouver in June for the inaugural Canadian Buy Social Summit. Peter Holbrook, of Social Enterprise UK will be the keynote speaker, and if you are a social enterprise with products or services to sell you may also want to book an exhibitor table.

The Value of Ideation

“What business should we operate?”

Is your organization thinking about launching an enterprise?  Jonathan Wade explains the importance of ideation in pursuing that goal – and shares some of the challenges and benefits every enterprising non-profit can expect.

For non-profit organizations, there is a growing sense of urgency in seeking necessary resources to deliver on their social mission. Funding is diminishing, or is becoming increasingly focused on specific areas of funder interest. Donors seek lean organizations and relatively rapid results, yet social service provision is labour intensive, and change takes time.

It is not surprising that Ottawa’s Centre for Innovative Social Enterprise Development (www.cised.ca) receives regular calls from non-profit professionals asking for help starting a business to offset lost funding. The problem is that successful businesses rarely succeed because the entrepreneur needs money. In fact, as anyone who had started a business can tell you, launching a business typically requires more money (investment) than it initially makes…often generating one to three years of operational losses.

This reality is understandably disappointing for cash-strapped organizations.

Let the ideation begin

However, starting a social enterprise from within a non-profit is an excellent way to diversify revenue, provided that expectations are managed. In fact, the process of conceiving of a business idea—referred to asideation—is itself a very beneficial endeavor for most non-profits (and charities) as it allows them to look critically at what they do and how they do it while considering market demand for products and services they might create.

There are several ways to determine what sort of social enterprise your non-profit might consider:

1. What are you good at, and can it be commercialized?
2. What does the market need, and do you have (or can you assemble) the knowledge, skills, and inputs required to meet that demand?
3. Can you take over an existing business that is in keeping with your mission?
The second approach to ideation is pure entrepreneurship. If you understand the market, and you can fill a consumer need, that becomes your business. However, non-profits typically need to commission suitable market research and then divert limited resources to create the required product or service. This has a high opportunity cost, and many say that you can’t “learn” entrepreneurship.

Similarly, taking over an existing business requires a strong knowledge of business operations and business valuation, as well as access to financing to acquire an existing business.

Building a social enterprise on existing strengths within a non-profit corporation, in my experience, is the most effective ideation approach; it guarantees an alignment between the organization’s social mission and its business activities and it doesn’t require learning a whole new skill-set or investing in new resources.
For example, if your organization offers computer training to women in crisis, then you can offer fee-for-service computer training to a broader audience to generate revenues to underwrite your social mission. Similarly, if your social service programming generates artworks, then selling those artworks—indeed a by-product of the programming—is relatively easy and does not immediately raise concerns about mission drift.

The challenges of commercializing

Commercializing existing assets—intellectual, social, financial, or human capital—can be a challenge for non-profits. For one, the organization may lack the skill and resources to bring these assets to market. Second, there may be no buyer for the skill, product or services in which your non-profit excels. Third, an organization must ensure that selling of skills, networks, intellectual property, or programs doesn’t adversely affect the current programming goals. Fourth, the very concept that people, networks, programs and buildings are “assets” that can be “used” to generate revenue can rub non-profit professionals the wrong way.

Each of these challenges can be addressed, of course, and the process of addressing them is what brings new value to a non-profit board, staff, volunteer and beneficiary community. Acquiring new skill-sets is possible but one needs to be carefully budgeted and planned. A well-done feasibility study will identify not only if there is a buyer for your product/service, but also whether that business idea will enhance social outcomes.

A good business plan ensures that the launch of any revenue generating activity will support, not compete with, social value creation. Similarly, if the “assets” of the organization are understood as being investments in a better social outcome, then the language becomes less inflammatory.

Many believe that what makes an entrepreneur is the ability to see challenges as opportunities. Perhaps loss of funding offers the opportunity to rethink how best to maximize a social mission. The ideation process for non-profit staff and governors is a concrete way of categorizing challenges in the market and in the organization and building a sustainable, revenue generating, social value-creating solution to those challenges. Indeed, the process of ideation actually strengthens the capacity and resolve of an organization with a social mission.


This article originally appeared February 24, 2014 in See Change Magazine online.

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