Martyn Drake: Making a case for scale

There are three things charities need to do to persuade their boards to back additional investment in services, our columnist says

Martyn Drake
Martyn Drake

Increasing the scale of what you do brings enormous benefits if it’s done in the right way. It dramatically increases the reach and potential impact you can have in the world. It raises your profile and your influence, and attracts investors, supporters and talent to your organisation. And it makes your operation financially more efficient, which for commercial ideas means improved profitability and more surplus for you to reinvest.

Intuitively we all understand this, but it’s incredibly rare that charities put in the time, effort and money to bring it about. Risk-averse boards usually get the blame for it, but the real reason is that few people in charities understand what it takes to scale up an innovation, especially a commercial one, so they’re unable to put together a compelling case that will convince their boards to push the button on investment and resource. Scaling up a service that works is a huge opportunity for charities, so it’s worth putting in some effort to get the three things you need to make the case.

The most obvious thing to prove in a business case is the idea itself: an intervention, product or service with a real, measurable impact that you can evidence. This is the bit charities understand best and focus on most, but it’s only one piece of the proof you’ll need in the case for scaling up.

The second thing you need to prove is the value received by the person who’s paying. Much of the time, a charity’s commercial services are delivered to one party but paid for by another: a public or third-sector body, an employer or a family member. And more often than not, that third party is expecting a benefit themselves: compliance with legislation, a cost or time saving, a reduction in workload, stress, risk or anxiety. If you want to take something to scale, you need to be able to show that the person paying is getting their benefit, every bit as much as the person they’re paying for – and, more than that, is willing to repeat, endorse and refer other people to you.

The third thing you need to have proven is your model for scaling, specifically that you can quickly and efficiently reach the people who might pay and stimulate their interest; that you have a fast, frictionless way to convert a big portion of that interest into income; and that you have a delivery mechanism that ensures they’ll get what they’re paying for and they’ll see the value from it.

I’ve lost count of the number of business cases that can be summarised in one phrase: we broke even last year without any marketing, so once we have some investment we’ll grow really quickly. Most of them quite rightly get turned down, and the ones that get money invariably grow far slower than expected. Marketing and sales can be far more expensive and resource-intensive, and they yield far less income, far more slowly than you’d expect.

You can’t leave it until you get investment to work out how long it will take and what it will cost you to acquire and serve each customer. It’s an essential part of the business case, because it underpins the most important information any board or investor needs to know: how long it will take to earn the money back, and what’s at risk if you don’t. They need to see forecasts for cost and income that are based on experience, not assumption; they need to see how you will back out if customers don’t respond in the numbers you expect; and they need to see what their maximum financial exposure would be if it all went wrong.

The risk-averse nature of charity boards is legendary. But when you consider the gaps in the information they’re typically given, it’s not entirely surprising. The next time you set out to validate the impact of a product or service, remember that’s just one of the three things you need to prove if you really want to take it to scale, and that it’s only by nailing the other two pieces as well that you’ll be able to unlock the true impact and value of your ideas.

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