By Roxana Ignat
After focusing both my studies and career on finance, I decided I wanted to experience working in a non-profit environment. Hence, I interned with Lifeline Energy, a non-profit organization that provides access to education and information to the most vulnerable populations. This is achieved by providing solar and wind-up powered media players and radios to be used in educational programmes in developing countries.
I always imagined working for a charity would be different than for a for-profit company. I was wrong. Nowadays more and more non-profits are adopting
market-oriented operation models. More and more charities, including Lifeline Energy, have set up for-profit trading arms, called social enterprises. A new hybrid business model has been created at the border of non-profit and for-profit sectors. These organizations are socially-driven businesses that either donate their profits to their charity-owner or reinvest it for the community’s good.
This hybrid business model is bound to improve the financials of the charity. The social enterprise generates revenues from commercial activities, through fees for services and products, reducing the charity’s dependence on donors and government funds. According to a 2009 study by the National Council for Voluntary Organizations 71% of the revenue to the UK third sector is generated by social enterprise activity.
A good example is Bemfam, a family planning non-profit from Brazil that saw an annual cut in funding of $2m from USAID. Instead of looking for alternative donors, they set up a condom business, Protex. The venture was so successful that it became the fifth biggest in the Brazilian market. Protex donates its profits to Bemfam, providing $4 million in funds every year, double what they previously received from USAID.
In the US, Goodwill Industries International collects donated goods to be sold in the 1,900 stores it owns. Another example of successful charity retail operations is Salvation Army’s Texas-based chain stores that bring $8 million per year in revenues.
One could argue that the non-profit Action for Children also conducts its activities as a social enterprise. Between 80 and 90% of the organization’s revenues are generated by contracting services focused on children and families from governments around the world.
This business model should be more sustainable than depending on donations. First of all, charities have control over their revenues. Their exposure to external factors, such as trusts’ income volatility or donors’ willingness to donate, is minimised. This approach also encourages non-profit’s responsible behavior in terms of an efficient allocation of funds to projects and decreases unnecessary administrative expenses.
Apart from all the benefits, the downside of the hybrid model is that profit chasing might gain ground at the expense of social purposes. Lifeline Energy prevented this by ensuring that its CEO had a seat on the board of the trading arm. Hence, the continuity and alignment of values and strategies is ensured. The business cannot dictate to the charity, it has to be the other way around.
If it wasn’t for my internship, maybe I would have never seen the similarities between the non-profit and the for-profit sectors. Now I can say that I have a better idea of how it is like to work for a non-profit organization. Honestly, working at Lifeline energy is not so different than working for a business.