This week Laura Richard, EVP and Managing Partner at TACK10 continues her series “Charity 2025 Insights” as she takes a deeper dive into the second major insight.
As the Paradigm Shift evolves the way that charities both raise funds and advance their mission, earned revenue activities are becoming increasingly important to ensure organizational sustainability. While we predict the relative share and types of earned revenue activities will evolve greatly over the next decade, the concept of income generating activities for charities is not new. The last assessment of earned income in the charitable sector was done in 2013 by Imagine Canada. At that point in time the data indicated that somewhere between half and three quarters of registered charities were engaged in some form of income generating activities outside of fundraising. This report highlighted the types of income generating activities which are most common in the charitable sector:
- Membership Fees (38%)
- User & Program Fees (30%)
- Admission and Performance Fees (23%)
- Conferences & Symposia (22%)
- Event or Presentations Services (17%)
- Rental Fees (14%)
- Sale of used & donated goods (12%)
- Tuition & Training Materials (11%)
- Food & Food Services (11%)
- Other activities include newsletters and magazines, advertising sales, information products, consulting services, etc.
This is all very positive as the sustainability of charitable organizations will increasingly rely on earned revenue sources; however the major insight from this data is that charities are largely earning income from activities that are core to their mission (i.e. memberships, user fees, admission & performance fees) from which there will always be supply and demand challenges. Looking ahead, the Charity 2025 prediction related to earned revenue is a rise in Non-Traditional Revenue generation, on of the Nine Core Value Drivers of Strategic Partnership™. This emphasis on Non-Traditional Revenue will open new opportunities for the development of strategic partnership ecosystems that involve charities, government and businesses. There are three types of earned revenue opportunities that we predict will become more prevalent as we look forward:
Social Enterprise: Product Driven
Social Enterprises, organizations who apply business solutions to societal issues, have become prolific. In Ontario in 2018 there were 10,000 social enterprises and governments nationally continue to invest in growing the sector. This meteoric rise has been fueled by a number of trends which are components of The Paradigm Shift in the charitable sector:
- Millennial influence as this generation of consumers seeks to give with their wallets. 87% of millennials indicate they purchase products with a social or environmental benefit
- Investors who are interested in using their capital to achieve social or environmental good in addition to financial gain
- Companies who seek to demonstrate their purpose as an organization by aligning with and investing in social purpose businesses
One charity that was ahead of its time is WE Charity. In its early stages the charity established a separate social enterprise, ME to WE, whose mandate is to donate 50% of its profits back to the charity while reinvesting the other 50% into growth opportunities. ME to WE has developed lines of products and experiences that build from the charity’s mission work; the two organizations’ activities are mutually reinforcing: ME to WE’s work drives increased donations for WE Charity and engagement by donors with WE Charity acts as a customer acquisition channel for ME to WE. Since its inception in 2009, ME to WE has contributed over $20M in cash and cost offsetting in kind contributions to WE Charity, support that has directly been allocated to the administration needs of the organization.
Social Enterprise: Service Driven
A second category of social enterprise activity which will drive increased sustainability for charitable organizations in the next decade is the development of social enterprises which focus on the monetization of the issue expertise and service capabilities of charitable organizations. Particularly as for profit organizations are deciding to narrow their purpose focus, there are knowledge gaps around social and environmental issues in which charities have deep expertise and working knowledge. Too often we see for profit organizations developing their cause strategies alongside their creative agencies and missing the mark as a result. Charitable organizations who have deep expertise in the topic of interest should be consulted as these strategies are being developed, and compensated for their experience and knowledge.
Monetization of Data
Before I am thrown to the wolves, the concept of data monetization does not refer in any way to selling the data of people supported by charities or donors to charities. As charities invest further in their technology and data intelligence, the opportunity to extract insights which support the research needs of government, the business intelligence needs of for profit businesses and the mission intelligence needs of other social purpose organizations open up opportunities for charities to monetize anonymized data and the insights which are extracted through data analysis.
The creation and proliferation of new earned revenue streams by charities will open opportunities to create new strategic partnership ecosystems, to the benefit of society. From economic to environmental to social services there are prevalent issues in our society which require a partnership approach to solve. Charities have deep knowledge of the issues they are trying to solve; what they need now is the permission and structures to evolve the way that they seek to solve those issues. Earned revenue is paramount as it will create sustainability for these organizations and decrease reliance on government grants and corporate and individual donor trends which are too often drivers of the mechanisms through which charities seek to accomplish their mission.