Charity has a business model

Charity has a business model. Each time I make the claim, service providers and business executives alike cringe, at least initially. Charities exist to create public benefit, and a business model is ultimately about understanding how and for whom our work creates value. In order to thrive, we must have a solid understanding of our operating environment and the evolving needs of our clients and customers. It also means knowing your key partners, core activities, resources needed, value proposition, essential relationships, ways to deliver services (distribution channels), cost structures and revenue streams. These are the fundamentals of a business model and are fundamental to a high-functioning nonprofit. I’m not proposing we extract the passion that fuels our work; rather, we should infuse the pragmatism and discipline that will help us endure long-term as the world and needs around us evolve.

Take for example higher education. Traditional universities are in no danger of going out of business, but their business model has been disrupted. Colleges that a decade ago offered some online classes now offer entire degree programs online. A local leader working on her PhD through an exclusively online program recently reinforced this new reality. The distribution channels for education have expanded, and they are adapting. Higher education also faces an increasingly diverse student population. More women are in college than men and the number of minorities enrolled continues to grow. Universities are shifting to attract key faculty and staff that reflect their changing student population. The customers have changed, and they are adapting.

In my world, there are at least ten trends challenging how we think about our business model. I’ll share one. I think about GoFundMe more than the average person. GoFundMe allows anyone with internet access to raise money for a cause. Ten years ago online giving existed but was primarily driven by organizations. Today, personal online fundraising platforms have placed the power in most people’s pockets. In 2015, online giving grew by 9.2 percent while overall charitable giving grew by an average of only 1.6 percent. This steady increase in online giving is only one example of how flexible giving options are multiplying. This innovation is a fundamental challenge to United Way’s business model. Much like higher education, we are not at risk of being overcome in the very near term, but it would be foolish to ignore our new reality.

We must and will work to develop new capabilities now so that we remain relevant. Nonprofits have a mission and a business model, and nonprofit leadership must stay attentive to both.

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