GET FUNDING FOR YOUR SOCIAL PROJECT
We often receive requests from social projects asking for our help with funding. When I inquire about the figures, I receive an extensive excel sheet with all expected expenses and costs. But I rarely find anything about the expected income. Yet it’s simple, you don’t have a sustainable project if there is no money coming in. You need to create a social business. Here are some income and funding strategies that can provide a solution.
YOU NEED AN INCOME STRATEGY
Just this week I talked to someone who wants to start a new regional school. The vision, mission and values had been worked out in great detail. So were the didactic approach, the team and the materials needed. What was missing was the income strategy. When I asked about that, I got the resentful reply, ‘But, we are non-profit’. As if a nonprofit should not plan actions to bring in revenue. No project can exist sustainably on occasional donations. Not even an internationally rooted humanitarian venture like the Red Cross. Every year they plan an annual sticker campaign, now it’s band-aids, to generate extra income for the regional chapters.
If you want your social project to succeed, you too have to take actions to generate income. You need a strategy that ensures you have the funding for major purchases and investments on the one hand. You need a strategy for recurring income so you can pay for your operational costs, on the other. Here are some possible income and funding strategies that you too can implement for your social project, aka social business.
Connect with Impact Investors
Impact investors like to support social and humanitarian projects but also like to see profits. By no means does this have to be contradictory, quite the contrary. This way Impact Investors support those projects that are more viable in the longer term. So, if you want to convince Impact Investors, you will have to demonstrate the potential of your project for both social impact and financial return. In fact, the QP Canvas was developed for this purpose. Impact Investing is fairly new and trendy. Apparently, it looks good to position yourself as an Impact Investor on certain social platforms. Be sure you do your research and connect with serious impact investors that align with your project’s goals and values.
Pre-sell your service
Turn your social project into a social business. Develop a product or service that delivers value. Offer this to a large party in pre-sales. Ideally, you offer your product to the end customer because this is ultimately the one who will benefit. If you have a social project in line with the (local) government, you can possibly offer this service to the government as well. To win government contracts, you need a clear vision, mission, and plan. The reputation and credibility of partners will also be decisive in this process.
Run a crowdfunding campaign
Crowdfunding is a way to raise money from a wide audience through an online platform. It often involves smaller amounts of money borrowed for several years. This is a very low-threshold way to start but therefore not always successful. You need a large network of followers and fans who know you and want to support you. This requires a serious effort in marketing and communication. Therefore, I prefer to use Crowdfunding as a marketing and branding tool in the scale-up phase of the QP Quest. It is less effective and less suitable as a funding tool in the start-up phase.
Offer Impact Lending
Often family and friends are first approached to lend money or even put money into a new project. This is a delicate matter. If things go wrong and you can’t repay then it affects your private relationships. Especially if larger amounts are involved. Also, when borrowing money from third parties, it is always safer to work with an intermediary that supports Impact Projects. With Impact Lending, your social project gets the funding you need. At the same time, lenders are assured that they will be paid their returns and principal as agreed, even when your social business is not yet generating the revenue to do so itself.
Sell shares
Investors pay a sum of money and in return they become co-owners of your social venture. This can be very interesting for you. Sometimes it is better to own a small part of a large social business, than a large part of a smaller social business. Ownership of shares does not automatically mean control in the company. You can sell shares without control. Often, however, a large shareholder will make it a condition to also have a say. When this is an experienced party, this can even be an advantage. The investor can then also be a mentor and tap into his network and resources. Of course, this only works when you are aligned and share the same vision, mission, strategy, and values.
Get grant or non-recurring loan
There are opportunities to apply for grants or non-recurring loans, through various governments and foundations. If you apply, tailor your proposal to the specific interests and requirements. Make sure you demonstrate the potential impact of your social, humanitarian or environmental project. When it comes to relatively small amounts, the procedures and administrative workload are often manageable. But when it comes to larger amounts, my experience is that it takes a lot of work to set up all kinds of documents while the chance of success is rather low. Grants often cover only a small part of the total cost. Therefore, I see this as an extra, but certainly not as the most important stream of income for social projects.
Negotiate supplier credit
If you are temporarily unable to pay for certain services, you can also partner with the providers of those services. If you serve the same target market, I’m sure there are ways to create a win-win-win where each party receives what they need. I am not in favor of pure barter deals. These are often not sustainable in the long run. Moreover, those negotiations are often time intensive and you don’t always reach an agreement. It is more sustainable, and often faster, to negotiate payment terms and a partner price. That way, you may pay later, or less, but you pay correctly for the services and products you need.
Issue Social Impact Bonds (SIBs)
Social Impact Bonds (SIBs) are a type of public-private partnership to finance social projects. A private investor provides working capital for a social project. The social business in charge provides a service to the public sector. In return, the public sector pays for the service provided. If the social business is not successful, the investor receives no return and no refund of the principal. SIBs are designed to transfer risk from government and service providers to investors. These are complex financial instruments and this is certainly not appropriate for every project.
Get sponsors
This is for you when you have built a powerful brand that stands for a clear message. In that case, it may be of interest to certain high-capital parties to be associated with your brand. Note. This works in 2 directions. If your sponsors also have a strong brand, then your brand will be associated with this brand too. So it is important to be selective and choose your sponsors wisely. It is not enough that they have the same goal, they must also subscribe to the same values. More so the perception of the outside world must be that your sponsors endorse the same values. A market survey on this is always recommended before committing to a potential sponsor.
YOU NEED AN INVESTMENT STRATEGY
The above strategies can help you generate independant income streams. But this is only part of the story. Next question is how will you manage this income in the best possible way. The Red Cross, for example, has 3 major income streams: sales of goods and services, donations and return on investment! Yes, a healthy humanitarian organization not only makes profits but also manages those profits smartly so that income is generated from those investments. Therefor, an investment strategy is an indispensable part of any sustainable income and funding strategy.
LET’S CONNECT
Are you looking for new opportunities to optimize your income, funding or investment strategy? You are most welcome to contact us by mail or join us in the free Connection Call.
