Many for-profit businesses make use of “business models”, which are shorthand for how companies earn profit and manage their business, sustain and improve, and well… just stay in business. Now, I certainly and emphatically am not one who thinks that non-profits should be more like businesses, and they couldn’t even if they wanted to. But when it comes to raising money, perhaps there is a thing or two non-profits could learn.
Forget about business models. …Enter “lending models”. These models help answer questions like: How much money do we, as a non-profit, need? Where do we get it? Why isn’t there more of it? How do we mangage, sustain, and improve? Luckily, William Landes Foster, Peter Kim, and Barbara Christiansen summarized some of their research in their article for the Standford Social Innovation Review: “Ten Non-Profit Funding Models”. There goal is not a one-size-fits-all approach, but rather to support non-profits think clearly about how to organize themselves.
Here’s a run-down of the ten lending models they developed:
The Model: Focus on a cause that resonates with a wide variety of people, and create a structured way for these people to connect with the cause and contribute. Fund primarily through small donations spread across many people, but don’t forget to also put together events and teams, and foster a community.
The Pitch: A compelling story about a problem and a solution that people can take part.
The Ingredients: Compelling communication, large group of interested people, ability to do large amounts of outreach
The Model: Provide an important benefit to people for which they pay for at the time, but also follow up with previous people who received this benefit and solicit additional donations.
The Pitch: An important experience and the opportunity to “pay it forward” so that additional people can also have this experience.
The Ingredients: an individual benefit that is perceived as also a social good, loyalty of those who benefitted, infrastructure to track and reach out to beneficiaries
The Model: Provide services that supplement the pre-existing goals of a group, connecting members by offering support for a goal they already seek.
The Pitch: This organization seeks to protect the fishing spots your fishing group frequently goes to
The Ingredients: an affected population that can mobilize collectively, the ability to involve members in fundraising activities, knowledge of the member’s needs and goals
The Model: Launch with the support from a few very big donors, or quickly attract a few very big donors to contribute large sums to the organization, with the knowledge that their money will help solve a problem close to their interests.
The Pitch: Here is a unique/innovative/effective solution to a compelling problem that can only be implemented with a large sum of money.
The Ingredients: tangible and compelling solution, ability to connect and communicate solution with big donors, wealthy donors or institutions interested in the problem
The Model: Work with government agencies to help provide vital social services, such as housing or education, and get funded primarily by government grants
The Pitch: We have the knowledge and resources to implement the program effectively, and can prove it on an RFP.
The Ingredients: natural match for a pre-existing government program, ability to demonstrate that an effective job can be done, knowledge of how government agencies choose partners, willingness to go through government selection process
The Model: Have a solution to address a social problem the government is focused on that works better than current solutions, yet doesn’t fit with an existing government program. Convince government agencies to provide a grant for you to implement this new solution.
The Pitch: This new solution is less expensive and/or more cost-effective than other solutions, and we can prove it in a presentation.
The Ingredients: solution that is demonstrably compelling enough to upset status quo, evidence of success, relationships with government decision makers, sufficient pressure on decision makers to change status quo
The Model: Government-funded non-profits which compete among each other for the support of beneficiaries, typically in housing, healthcare, and student loans.
The Pitch: We’re a reliable provider of services for those in need.
The Ingredients: Can demonstrate to government a superior ability to connect beneficiaries with benefits, develop services to maximize the value of the benefit, understand government requirements/regulations to provide such services
The Model: Many organizations and individuals will donate items that would have otherwise gone to waste, and which can be put to better use helping someone in need — such as food, blankets, used clothing, etc.
The Pitch: We can effectively take items that would have gone to waste and redistribute them to people who can make use of them.
The Ingredients: products to distribute are donated on a regular and reliable basis, can anticipate and prepare for fluctuations in donations, can attract funding needed to manage collection and redistribution
The Model: While there is often money available to pay for a certain service, it wouldn’t be profitable or legal to do so, so instead for-profit and non-profit angles are combined to create a service that is paid for by those who benefit from the service in the form of donations. For example, there is a high demand for organs, but it is illegal to sell them.
The Pitch: We can help navigate this issue and connect those in need with those who are willing to provide
The Ingredients: funders with financial interest in the issue, ability to navigate legal issues, understanding of ethical implications, ability to create a trusted program
The Model: Take an issue that is important to a wide variety of local communities on the local-level, and connect support for them nationally, raising money locally and using national economies of scale to help balance out the resources and support.
The Pitch: All of these communities are facing the same problem individually, so why not connect these communities to solutions that have been working elsewhere?
The Ingredients: handle an issue that is important to local communities, have a rationale for national connection, ability to replicate local solution in other communities, resources to expand and manage additional initiatives
Title image from http://www.moneywalks.com/2007/01/22/mutual-funds-101/.