social delta

Consulting and support for social enterprise in Canada

Tag: charity

Why invest in a social enterprise that doesn’t break even?

The goal of a social enterprise is to create positive social change.

To sustain its social impact it has to make enough money to pay all its expenses… in order to remain financially viable, correct?

Would you believe that a $50K investment in a financially unsustainable social enterprise (generating revenue that never exceeds 80% of its costs) can still create more than four times the social impact than making the same donation to charity, while at the same time creating more than $360K in retained earnings, keeping the business in operation over 22 years without any further investment?

There is a strong case to make a social investment in a business that doesn’t break even. If your investment goals are to create social change, then better to invest in a business that can use your money to multiply the social benefit.

Read my guest blog post at SEEChange Magazine for the full story and calculations.

Earned revenue for charities is more than private donations

In 2012, Charities earned more revenue than they were given by individual donors.

According to the recently released Blumberg’s 2012 Summary of the Canadian Charity Sector, earned revenue by charities was $17.7 billion, (up 3.8% from 2011) while receipted donations summed to only $14.3 billion.

Fundraising is also a costly business (and this I know, as I was a fundraiser for more than 17 years). Of the only 975 charities who reported to have paid fundraisers, those fundraisers generated $471 million, while getting total compensation (primarily set salaries) of $110 million. In other words, the equivalent of 23% of donated funds was used to manage the donor programs.

This impressive data collection project underlines the fact that charities are generating more revenue than they are gifts, and this is a sign of how they are investing their time, resources and efforts to sell products and services in support of their mission.

2012:

  • 75,232 active charities
  • $17,562,376,314 in non-government earned revenue
  • $182,195,300 in government revenues (up 36.5% from 2011)
  • $14,283,486,806 in donations

2011:

  • 73, 793 active charities in 2011
  • $16,953,792,416 in earned revenue in 2011
  • $133,474,682 government revenues in 2011.
  • $13,867,060,684 in donations

NOTE: To create the summary, Blumberg’s Law compiled the data from all the T3010’s submitted to the government by charities for the 2012 year end.  The T3010 does not offer sufficient detail to describe the types of business activities in which charities are involved, and there is also the possibility that each of the T3010’s is not perfectly accurate as they are prepared without audit.

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