social delta

Consulting and support for social enterprise in Canada

Tag: earned revenue

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.

Charities are selling… more than ever!

As a follow up to an earlier post,  Social Delta is pleased to report that there has been an increase of $2 billion in annual revenue earned by charities in 2014. This represents a 12.4% increase from the 2012 returns. (which in turn was 3.8% higher than 2011)

Charities are expected to file T3010 forms at the end of each fiscal year. As part of this annual reporting, they submit financial statements in a specific format and these documents are then made public at the CRA Website.  Blumberg Segal LLP has painstakingly aggregated the data for the 2014 submissions to help define the scale and scope of the charitable sector in Canada.

Some key facts from the April 10th Blumbergs’ Snapshot of the Canadian Charity Sector 2014:

  • Total revenue from all sources in 2014: $246 billion
  • Total sales revenue (not including to government): $19.9 billion
  • Total  membership revenue: $1.6 billion
  • Total value of tax receipts issued: $15.7 billion

As was the case in the 2012 report, earned revenue by charities is greater that donated revenue for which tax receipts were issued.  Admittedly, not all of these revenue generating activities would be considered social enterprise, but the data underlines the growing importance of earned revenue in charitable activities in Canada.

For more details on the report, and the host of other resources available from Blumberg Segal LLP, visit their web page devoted to legal issues facing the charitable sector in Canada.

 

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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