Organizations of all kinds have been no stranger to hardship since the pandemic began The world of non-profits and charity is no exception:
- 80% of non-profits have seen reduced donations from their previous donors.
- 40% of Albertans are donating less than pre-COVID-19.
- Demand for non-profit services has grown 73% since the start of the pandemic.
- Over 50% of non-profits have reduced staff hours due to financial constraints.
The staggering reduction in donations and funding, combined with increased demand for their services, is negatively impacting non-profits and those they serve, resulting in both humanitarian and financial stress.
But as we move into a new year and we’ve adjusted (somewhat) to the “new normal,” we also see opportunities for non-profits to develop resilience like never before. The good news is that it starts with a mindset shift. There is still hope for non-profits as we pivot funding and operating models to thrive now and in the future. That’s where social enterprise and social finance investments are viable solutions. But what do those terms actually mean?
ATB joined the Calgary Chamber of Voluntary Organizations (CCVO) for a virtual discussion with several leading voices in the industry to look at social finance and social entrepreneurism, and how non-profit organizations can use these principles to build resilience and sustainability in uncertain times and beyond. The conversation was moderated by Neetu Sidhu, director of everyday advice at ATB with the following panelists:
- Jordana Armstrong, senior innovation manager at Innovate Calgary
- Jane Bisbee, executive director at Social Enterprise Fund
- Sean Fraser, executive director at Evergreen Theatre & Community Spaces
- Dan Overall, executive director at Trico Charitable Foundation
Definitions (and why they don’t matter)
Social finance, as Bisbee puts it, is “just financing!” All of our experts agree that finance is a tool, whether it’s a loan, venture capital, or otherwise. What makes social finance different is intent—how can money be used to do good in the community?
As Overall put it, social finance is “a financial instrument that seeks both financial return and social impact.”
Overall also had a succinct definition of social entrepreneurship—“Using a business model to sell a social solution.” He cautioned, however, from getting caught up in defining social concepts, and encourages an emphasis rather on the importance of action.
“It’s really about an individual driving social change with a specific mindset,” Overall says. “The most powerful aspect of an idea isn’t what it is, but what you want to do with it.”
Overall hopes that we can get out of a “definition rut” and turn the conversation around social entrepreneurship into potential.
Why non-profits shouldn’t be called non-profits
Another interesting point from the discussion is that non-profits should consider changing their names.
As Fraser explains, the name “non-profit” is hindering non-profits, as profit can be seen as “evil.”
“How many industries are named ‘not’ something?” Armstrong questioned passionately. “We add value to society! We add social value!”
“The name is detrimental enough,” added Overall. He went on to explain how non-profits aren’t allowed to earn profit, which may seem obvious, but brings about a whole other set of hurdles to overcome. “Governments are questioning why non-profits aren’t resilient when they aren’t allowed to have savings,” says Overall.
Non-profits account for 8% of Canada’s GDP, but they often aren’t recognized for their value. This not only limits the perspective of prospective financers, but can also limit the thinking of non-profits themselves.
The term “social profit” is being used in Fort McMurray to replace “nonprofit,” and that could be the language shift the industry needs.
“To stop naming something what it’s not is a huge step forward,” affirmed Overall.
How can non-profits participate in social finance?
Simply put, as long as you’re able to pay back any loan you receive, you can participate in social finance.
Bisbee explains that every non-profit is a business that sells services or products, and has customers and stakeholders. The key difference is that for many non-profits, their revenue stream may not be normal.
"It’s a systemic mind change [to think of a nonprofit as a business], and we need to think differently! All of the experts agree that non-profits need to think of funding as revenue streams from customers. "
executive director at Social Enterprise Fund
Non-profits need the same tools that a business needs and that’s what social finance can offer you. And maybe someday, Bisbee says, you’ll be able to show a bank a consistent cash flow so you can access more traditional business funding.
Bisbee clarifies that social finance isn’t a way to replace earned revenue streams, but rather to improve them, and help you get to the next level.
Three strategies for non-profits to thrive
Think like a business owner.
Shifting your mindset to think like a business owner can be what saves your nonprofit now and makes it thrive in the long run.
“If you can start thinking about your business by stealing every trick that every MBA student and small business owners have, and applying them to your social enterprise, you’ll be set up for success,” Bisbee says.
She emphasized that it’s all about looking at your revenue streams and where your customers are. Shifting the language non-profits use to understand their operation like a business can make all the difference.
“Put value on everything you do—what you do, how you offer it, where you offer it,” Fraser recommends. The operations of his art-based nonprofit are run like a business. Instead of their creative director’s preferences being the driving force, Fraser challenges his team to ask, “What’s the value we’re bringing to our customer? Who is our customer? What do they want?” He recommends that all non-profits prioritize the customer, just like any business.
Rethink who your customers are.
You might be thinking, “hold on, but our customers don’t pay us for our services. That’s the problem! How can I create revenue streams if non one is paying for them?”
The key here is to rethink who your customers are. For many non-profits, the people they’re serving aren’t their customers, since they’re not the ones paying.
In many cases, whoever you’re getting funding from is your customer. That means your customer could be a government, if your funding comes from grants. It could be an angel investor. It could be your family and friends who are giving you “love money.”
The point is, a shift in language and understanding who your customer is can radically change your perspective on your revenue streams, how you can create new ones and diversify current ones.
Demonstrate value to your customers.
Now that you may be more clear on who your customers are, it’s crucial that you understand how you add value for them.
For example, if a government is your customer, you can ask yourself, “what’s in it for them? How do they benefit from what my nonprofit has to offer?” It could be a reduction in homelessness or drug overdoses, or an increase in high school graduation rate, all of which can positively impact a government.
To help you articulate how you’ll communicate this to your customer, think about these questions:
- What’s the cost to your customer if you don’t serve your community?
- What’s the cost to the government if you don’t get them to fund you?
When you can articulate how your customer (or funder) will benefit from funding you, you’ll significantly increase your potential for funding and revenue streams, which will allow you to run your nonprofit sustainably.
The role of technology and innovation for non-profits
Armstrong emphasizes the importance of non-profits distinguishing between using technology for innovation and using it to improve operations. Sometimes, innovation isn’t (or shouldn’t be) your goal.
She recommends that non-profits approaching technology ask, “How can we adapt and maximize our current team and resources to make our desired change?”
Like social finance, technology is a tool for non-profits to use to enable a specific outcome. Don’t just jump on new tech trends because you feel you need to—let your business strategy inform how you use technology and what technology to use.
Like Fraser mentioned above, your nonprofit should be focused on serving your customers. Ask yourself who you’re serving, who’s your customer, who’s paying you, and how tech can enable these things.
Armstrong encourages social entrepreneurs to explore the tools and methodologies that can integrate tech into your nonprofit. You don’t have to navigate this area alone.
Advice for non-profits to get investment ready
Bisbee has two key pieces of advice for non-profits to get investment ready.
Take the time to look deeply inside yourself and organization. What do you already have, know and are good at that you can invest in just a little bit more to move it (and your nonprofit) to the next level? Adapt this approach instead of starting something from scratch that you know nothing about and have zero resources for.
Be careful who you partner with in social finance. Bisbee explains that “it’s kind of like a marriage.” You need to like them and their mindset. “Make sure they’re the right fit, or you’ll be miserable.”
When is social financing not applicable?
You have to know what your organization can handle when it comes to good debt, Fraser emphasizes. He recommends that non-profits ask themselves if it’s a smart decision to take on social financing, or if it’s purely passion-based.
“You need to be sure that what you’re offering is unique and that people want it. If it’s not both of these things, then social finance isn’t the way to go,” says Fraser.
If there’s no hope that you’ll have a revenue stream to support the borrowing, then you’ll dig yourself into a hole, says Bisbee. But, she adds, more often than not social financers will figure out a way to make it work. She encourages non-profits to meet with organizations like Social Enterprise Fund to see what solutions they can create together.
Key takeaways on social financing and social entrepreneurship
“I propose a call to action for self reflection. As individuals in nonprofit organizations, are we inhibiting the thinking we want to see around us?” says Armstrong.
“Think of things differently. A different lens might give you new opportunities as you gain a whole new view of your organization and the world,” says Bisbee.
“Dream big and look into those opportunities. It doesn’t hurt to investigate, get expert opinions and various perspectives, look at alternative ways of doing things—you should be doing that all the time. Get out of trying to protect yourself by doing things the way you’ve always done them,” says Fraser.
“Move away from a definition-focused perspective of social entrepreneurship and ask yourself, ‘what do I want to do with social entrepreneurship?’ If you could use business models to solve the problems you’re wanting to solve to the fullest extent, what would you do?” says Overall.
Looking for tools, links and coaching to help you navigate social entrepreneurship in Alberta? Check out this resource created by Trico Charitable Foundation.
CCVO’s Nonprofits at 2:00 series, presented by ATB, brings nonprofit professionals and other community leaders together in conversation about relevant issues. These gatherings provide attendees with timely information, meaningful discussions, and actionable insights. Join CCVO and ATB at a future conversation to discuss important issues in our communities. Learn more on the CCVO website.