The challenges of growth in the non-profit world

19 January 2010

A friend of mine runs a small company called Better Generation that sells energy-saving products such as wind turbines and efficient light bulbs over the internet. After several years of operating on a small scale, it has recently secured significant financial backing and has grown quickly.

As I have followed the company’s expansion, it occurs to me that the challenges of growth felt by start-up businesses are different to those felt by charities.

For charities, provided you have the contacts and a good idea, it is often relatively easy to get your first grant. There is nothing foundations like better than funding the Next Big Thing, and one funder often acts as a magnet for others.

However there is only so long that charities so rely on a diet of grants. This is partly because sources are limited and partly because of the preferences of grant-makers. As all charities know, trusts and foundations love ‘innovation’ – something that is often more important to them than demonstrating results – and so their attention spans are short.

But when seeking to move beyond the first phase of their development, often charities find that they haven’t thought hard enough about their business model. The initial frenzy of enthusiasm can blind them to the prosaic matters of running a business.

To achieve growth usually requires moving away from grants to more diverse sources of income – which means getting people to pay for services. In my work in education, I have seen the same problem many, many times – namely small charities reaching the tricky situation where they need to get schools to pay for services that previously they gave them for free. It seems this lesson is rarely learnt.

Over the years NPC analysts have come across many excellent charities, many of who do not lack ambition but that find it impossible to grow. Those who do succeed are those that negotiate the transition for grants and find sustainable and diverse sources of income. From those organisations we can all learn.