Playing to Your Strengths
This drift towards 100% earned income has contributed to the misguided impression that socially conscious businesses can fill social need better than philanthropic institutions. This is simply not the case. Take Save the Children (Save), an NGO that promotes children’s rights and provides relief to children living in poverty and oppression. Save receives $807 million in revenue, 97 percent of which is philanthropic, and it is the global leader in protecting and supporting forgotten children. Save reports serving 155 million children in 120 countries with life-saving and life-lifting resources. There has never been a socially conscious business that can say the same.
What would happen to those children if Save decided to shift its focus from social impact to becoming a majority earned income enterprise? Their currently lean 14 percent administration and fundraising costs would dramatically increase, and their social return would suffer.
Another issue with earned income is that it doesn’t always provide the sustainability it promises. Street Business School (SBS) is an entrepreneurial education initiative that aims to lift women out of poverty. We harness private sector ideas such as entrepreneurialism, franchising and fees-for-service, but remain focused on our social impact and philanthropic aims.
SBS initially began as a BeadforLife program. BeadforLife is a social enterprise that for the better part of a decade derived nearly 92 percent of its funding from the earned income it generated from the sale of recycled paper bead products. But the program could not sustain this level of funding. Market fluctuations, imitator organizations and product saturation affected its funding and, therefore, its impact.
The issue isn’t that earned income is bad per se, but that focusing on it as a sole source of income, or preferred source of income, isn’t right for a lot of organizations. We learned from this experience and chose to diversify and combine philanthropic and earned income in the form of sales, donations, healthy savings and multi-year commitments to create a long-term vision for sustainability.
Why Not Both?
Diversifying in this way also allowed SBS to explore Dr. Lenkowsky’s “unproven or unorthodox” methods and develop funding models and growth strategies that best serve our mission, such as social franchising.
Social franchising differs from other scaling models because it allows the provider to replicate programs in a much more controlled and sustainable way, ensuring the high standards of the original program are maintained and resourced properly through partnerships.
In 2014, SBS began working with Spring Impact to develop a social franchise model to scale its impact and bring entrepreneurial education to 1 million women. For a fee, we now train other NGOs on how to implement the program in their communities in order to teach women technical business skills and self-confidence.
Since pioneering Social Franchising for women’s economic empowerment, SBS has committed to a revenue model that is primarily dependent on philanthropic income in the first three years but then moves to earned income, in the form of training fees, to meet our financial needs.
Combining philanthropy and earned income has resulted in a tripling of income for the women SBS serves, increasing earnings from on average $1.35 to $4.19 per day. Ultimately, the vision is to have a hybrid revenue model derived from both philanthropic and earned sources of income. For us, it is not a case of either or – but both.
Philanthropy Can Also Mean Sustainability
Philanthropic giving has had a record year, passing the $400 billion mark in the US alone. (USA, 2018)
What would happen if we were to champion philanthropic income as much as earned income as a means to expand and scale social enterprises?
It’s clear that for many well operated NGOs creating dynamic social change, philanthropic capital needs to remain the cornerstone of their survival. For these organizations to reach their full potential they will need to continue to harness philanthropic resources. As organizations such as SBS and Spring Impact pave the way for other social franchises, here is a call to action for funders: let’s put fair value on all the assets at play and consider building something for the long-term with organizations that have the potential to have the greatest impact.
Tifany R. Boyles
Director, Global Philanthropy
This blog is part of a collaborative series with Street Business School (SBS) a former Spring Impact client. Together, we will examine Street Business School’s approach to scale and explore the experiences and issues that organizations may face when embarking on their own scale journey.