An excellent social business model for nonprofits combines a mission-driven approach with sustainable revenue-generating activities. It should align with the nonprofit’s core purpose while providing value to the community and financial support to sustain the organization’s impact.
Here are some effective social business models that nonprofits can consider:
1. Fee-for-Service Model (Goodwill Industries International)
Description: The nonprofit offers services or products for a fee. This could include training workshops, consulting services, therapy sessions, or educational programs.
Example: A nonprofit focused on mental health might offer paid counseling sessions on a sliding scale, making services accessible while generating revenue.
2. Social Enterprise Model (Greyston Bakery)
Description: The nonprofit runs a business whose revenue supports its programs. This can be a retail business, online store, or production unit with a social cause.
Example: A job training nonprofit could operate a bakery where trainees learn skills and sell products, using profits to fund training programs.
3. Membership Model (National Audubon Society)
Description: The organization charges individuals or businesses a membership fee to access specific benefits. Memberships can include exclusive content, events, or training.
Example: An environmental nonprofit may offer a membership program that provides educational resources, invitations to exclusive eco-workshops, and discounts on related products.
4. Cross-Subsidization Model (Aravind Eye Care System)
Description: This model involves offering a product or service at a high price to one customer group to subsidize the cost for another group in need.
Example: A nonprofit offering career development services might charge companies for professional development workshops, using that revenue to provide free training to underprivileged youth.
5. Collaborative Model (Habitat for Humanity)
Description: Partner with for-profit businesses or nonprofits to create shared value. This could include co-developing products or services, sharing costs, or jointly executing projects.
Example: A nonprofit promoting local artisans could partner with a retail store to sell their handmade goods, creating visibility for the artisans while sharing profits with the store.
6. Asset Leveraging Model (YMCA)
Description: Leveraging assets owned by the nonprofit to generate revenue, such as renting out space, equipment, or intellectual property.
Example: A community nonprofit owning a building could rent meeting rooms or event space to generate income, using those funds to maintain community programs.
7. Subscription Model (Patreon – Nonprofit Artists)
Description: The nonprofit provides a recurring product or service in exchange for a recurring fee. This creates a steady income stream and builds loyalty among supporters.
Example: An arts nonprofit might offer a subscription for monthly art kits or exclusive access to digital art classes.
8. Cause-Related Product Sales (Girl Scouts of the USA)
Description: The organization sells products with a social impact message, often aligned with the nonprofit’s mission, and reinvests the profits into its cause.
Example: A nonprofit can sell cookies to fund its programs. Revenue from cookie sales supports activities and local community projects.
9. Pay-What-You-Can Model (One World Everybody Eats)
Description: Providing services or products where customers pay what they can afford, allowing access for a broader audience while inviting those who can contribute more to do so.
Example: A nonprofit café where patrons can choose how much to pay, ensuring everyone can eat, while donations and higher payments help cover operational costs.
10. Crowdsourcing and Peer Fundraising (charity: water)
Description: Engaging the community and beneficiaries in fundraising activities involving multiple small contributions creates a sustainable funding channel.
Example: A nonprofit focusing on clean water initiatives might engage local schools in peer-to-peer fundraising campaigns, in which each class raises a small portion to fund a well.
Key Considerations for Choosing a Social Business Model
- Mission Alignment: Ensure the model enhances and aligns with your mission. The core activities should contribute to achieving the social impact you aim for.
- Market Demand: There must be a demand for your product or service. Understanding your audience is crucial in designing a business model that is both impactful and viable.
- Community Needs: Analyze the needs of the community you serve. Social business models work best when they directly respond to a real need or gap in the community.
- Sustainability: The model should create a steady revenue stream to support your activities without relying solely on grants or donations. Sustainability is key to long-term success.
- Risk Assessment: Identify potential risks (financial, operational, reputational) and determine if the model suits your organizational capacity and risk tolerance.
Conclusion
A well-thought-out social business model funds your mission sustainably and deepens your impact on the community. The right choice will depend on your organization’s strengths, the community’s needs, and your capacity to manage business-like operations while staying true to your nonprofit values.
Resource Links: Goodwill Industries International, Greyston Bakery, National Audubon Society, Aravind Eye Care System, Habitat for Humanity, YMCA, Patreon – Nonprofit Artists, Girl Scouts of the USA, One World Everybody Eats, charity: water
