Nonprofits embracing entrepreneurial mindsets for impact
It used to be that ‘business’ and ‘charity’ were antonyms – words that mean the opposite of each other. But in the ever-evolving landscape of philanthropy and social impact, many businesses are becoming more purposeful… and many charities are becoming more entrepreneurial.
In this article, we explore how nonprofits are embracing this shift to uncover new ways to deliver social benefit and to drive social change.
The evolution of nonprofits: Beyond traditional models
Of course it is easy to overstate the case. There are models of charitable action such as schools and some professional associations that date back centuries and have relied on earned income. Even so, the historic expectations have been that nonprofits rely heavily on donations and grants to fund what they do.
The modern phenomenon of a vocabulary of social entrepreneurs, social enterprise and social innovation expands this; at times as a complement, such as ‘diversifying income’, at times as a challenge, such as ‘reducing grant dependency’. This is, to mention in passing, an arena in which the UK has played an influential role worldwide. Enter the era of "charity as a business," where nonprofits are adopting entrepreneurial mindsets to try to enhance their effectiveness and ensure long-term sustainability.
Having given the upfront health warning of making our story too simplistic, let’s take a look at the positive case for charities as a business.
Entrepreneurial mindsets in nonprofits: Key pillars
1. Innovation and creativity
Nonprofits that are entrepreneurial have an emphasis on innovation and creativity in addressing social issues. Rather than adhering to conventional methods, they explore new ideas, technologies, and strategies to develop inventive solutions. The result arguably allows nonprofits to adapt to changing circumstances and find novel ways to tackle persistent problems.
2. Strategic partnerships and collaborations
Entrepreneurial nonprofits recognise the power of strategic partnerships and collaborations. By forging alliances with businesses, government entities, and other nonprofits, they expand their reach, share resources, and amplify their impact. Collaborative efforts enable nonprofits to pool expertise and create comprehensive solutions to complex challenges.
3. Data-driven decision making
In the business-orientated landscape, data-driven decision-making is a hallmark of success. There is still a way to go, but it does appear that nonprofits are increasingly leveraging data to measure their impact, assess the effectiveness of programmes, and make informed choices. This analytical approach enhances transparency, accountability, and the ability to communicate outcomes to stakeholders.
4. Revenue diversification
To reduce dependency on traditional funding sources, entrepreneurial nonprofits prioritise revenue diversification. They explore avenues such as social enterprise initiatives, fee-for-service models, and earned income strategies. By blending business principles with their social missions, nonprofits create sustainable financial models that fuel their operations.
5. Outcome measurement and impact assessment
Entrepreneurial nonprofits are committed to measuring outcomes and assessing impact with more rigour. They go beyond anecdotal evidence by employing robust evaluation methods to understand the tangible effects of their programmes and to learn from this. There is still a long way to go in terms of developing effective benchmarks to compare results, but even so, this focus on impact assessment helps charities to learn. Learning makes it easier in turn for charities to refine their approach, scale successful initiatives and adapt as the world around them evolves.
Case studies: Nonprofits leading the entrepreneurial charge
To illustrate the concept of 'charity as a business,' let's explore two nonprofit organisations that have successfully embraced entrepreneurial mindsets to drive impact.
1. BRAC
Bangladesh can claim to be a global hotspot for social enterprise, with the Grameen Bank and BRAC two early, world-class exemplars. BRAC was originally founded as a small-scale relief operation and has evolved into one of the world's largest and most impactful NGOs. What sets BRAC apart arguably is its entrepreneurial approach to addressing multifaceted challenges. BRAC operates a range of social enterprises, including Aarong, a fair-trade organization that markets handmade crafts produced by rural artisans. These enterprises not only generate income for the organisation but also contribute to sustainable development.
2. Pilotlight
Closer to home, at least for us, is our own organisation, Pilotlight. Our business model makes us a recognised social enterprise, with 84% of our revenues coming from earned income. As a charity early on, Pilotlight developed an innovation which turned the traditional model of volunteering on its head. We charged people to volunteer. Give us your time and skills, we asked, but also pay for the costs of ensuring that this creates the best impact that it can, so that we can offer support for free to the charities we partner with. It is what Alastair Wilson of the School for Social Entrepreneurs calls a classic social enterprise tactic of finding a ‘proxy market’, where someone else will pay for a service that you want to provide for free to a prime beneficiary. As such, impact is the key currency for Pilotlight and its volunteers, the ‘Pilotlighters’, and the charity has been named as among the top 5 social enterprises in the UK for its system of impact measurement.
Challenges and considerations
While being more business-like has great promise, it also comes with its own set of challenges.
1. Balancing mission and revenue generation
Nonprofits must strike a delicate balance between fulfilling their mission and generating revenue. The pursuit of financial sustainability ought not compromise the organisation's core values or shift its focus away from addressing societal needs. These can be real tensions, felt internally as much as seen externally.
2. Risk management
Entrepreneurial endeavours inherently involve risk. Nonprofits navigating this landscape must be adept at risk management, ensuring that they take the right risks, ones that align with their mission and have the potential to enhance impact without jeopardizing their stability.
3. Capacity building
Embracing an entrepreneurial mindset often requires nonprofits to build internal capacities. This includes developing skills in areas such as business strategy, marketing, and data analytics. Investing in staff training and organisational development becomes critical for success.
The future landscape: Entrepreneurial nonprofits leading social innovation
As nonprofits continue to experiment, there are some models that point to how the field might evolve.
1. Social impact bonds and innovative financing models
Entrepreneurial nonprofits are exploring innovative financing models such as social impact bonds. These mechanisms attract private investment for social programmes, with returns tied to the achievement of predefined outcomes. This is not the universal model some claim it to be, but in the right circumstances, the approach can align financial incentives with social impact, encouraging efficiency and accountability. As national and local governments increasingly recognise the benefits of ‘cost prevention’, charities could benefit from novel forms of financing such as these.
2. Technology and digital transformation
The integration of technology and digital tools is central to the entrepreneurial nonprofit landscape. From leveraging data analytics for targeted interventions to utilising online platforms for fundraising and awareness campaigns, technology plays a pivotal role in enhancing organisational efficiency and impact.
3. Global collaboration for complex challenges
Entrepreneurial nonprofits are increasingly collaborating on a global scale to address complex, interconnected challenges. The exchange of knowledge, resources, and best practices across borders allows organisations to tackle issues that transcend geographical boundaries, such as climate change, global health crises, and poverty.
Shaping a more resilient and impactful nonprofit sector
The concept of 'charity as a business' is not about prioritising profit over purpose; it's about integrating entrepreneurial thinking to strengthen nonprofits and magnify their impact. By adopting innovative strategies, fostering collaboration, and embracing a commitment to measurable outcomes, entrepreneurial nonprofits are shaping a more resilient and impactful sector.
As we navigate the complexities of the modern world, the fusion of business acumen with social missions paves the way for a nonprofit sector that is both more adaptive but also more capable.
Sharing skills to help charities thrive
Pilotlight is a charity that helps people and charities to do more for their world. We do this by bringing charities together with business and business experts who can tackle the pressing issues charities face.
