Delivering Profits for Not-for-Profits
Many people hold the view that not-for-profits organisations cannot and should not operate like a for-profit business. Yet it is often our experience that this school of thought oversimplifies the complexities of running a successful organisation in the long-term.
At Interface, we hold the view that all not-for-profits should be seeking to make a surplus. They should do so, not only to provide the greatest impact in advancing the organisation’s purpose, but to also ensure they are financially self-sufficient in the long-term. Often, rather than adopting a ‘hat in hand’ approach to other businesses or funding bodies, undertaking commercial activities and/or cultivating win-win collaborations with potential funders yields far more favourable outcomes.
The Australian Charities and Not-for-Profits Commission (ACNC) considers the generation of a surplus as being good practice for charities as it contributes to the financial viability and can help account for expected and unexpected expenses in the future.
However, generating a surplus is not always easy. Among many other considerations, it requires a commitment to the following:
A focus on strong revenue generation;
Focussing on returns on investments.
Keeping costs low and eliminating some expenses.
Weighing up costs and benefits.
Making prudent investments to diversify income streams.
Clarity on how commercial activities advance the organisation’s charitable purposes.
Consideration to the most appropriate legal structures.
Here at Interface we have developed a commercial advisory package to assist non-profit organisations to derive sustainable income sources to underpin their charitable functions. Some of our engagements involve providing ongoing services to oversee and advise on a not-for-profit’s current and emerging commercial interests.
In practice, we work closely with the Board of these organisations to ensure that all opportunities and commercial ventures align with their mission, values and purpose. In some instances, Interface is engaged at an early stage to explore and incubate commercial opportunities, whilst in other instances Interface will provide guidance on various value creation measures for the organisation.