Commercial acumen is, for my money, one of the most valuable capabilities a charity can develop. And not just for the income it can create.
A profitable business model has the potential to scale to a far greater extent, and have consequently far greater social impact than most people realise.
That’s not hyperbole. I once filled a whole book with the rationale that explains it, the examples that show it, and the transferrable lessons they provide.
Which is probably the reason I’ve spoken so much this year about how to go about developing earned income.
But of course, development is just the start of the journey. The bigger question is how you scale it to become something genuinely worthwhile.
The trick is to create something that you’re not having to constantly invest in to make it grow; something that actually has a “growth engine” built in, and you do that by considering the three S’s: Is it stressless? Is it seamless? And is it sticky?
If it has all three, it should grow. If not, it will be an uphill battle. I’ll give an example.
BuyCharity is an online retail platform from a community interest company in the Lake District. It has just come through its pilot phase and is about to launch.
Barely two per cent of charity retail happens online, and the majority of that goes through the big commercial channels such as eBay, where the charitable ethos of any one retailer is buried under the avalanche of alternatives with which customers are presented.
In that context, BuyCharity could just be a glimmer of sunlight.
Right now, its traffic will be a fraction of eBay’s, but what makes it one to watch is how well it has incorporated the three S’s. At the risk of sounding like an advert, here’s what I mean.
It looks to be a stress-free option for its target market, the charity retail manager, because everything seems to be designed to make that person’s life easier.
Add to that it’s virtually cost-free to set up, and a lower commission than eBay, and it has removed the key risks from signing up. So, stressless looks like it’s ticked.
It also claims to enable managers to easily upload all the product information they’ve put into BuyCharity directly to eBay, so they only have to enter details once to get goods on both.
That suggests it will fit seamlessly into the process for getting goods online, but it also gives shops two platforms for the work of one. Seamless: tick.
And finally, it looks like it will be pretty sticky, by which I mean, once you’re on it, you’ll probably stick with it. Partly because of the charity-centric functionality – it manages Gift Aid and takes donations – but also because of the positioning.
As a pure-play charity platform, assuming it can build its portfolio of charity retailers it should get some serious traction with the charity-minded shopping audience, and will only grow stickier for shoppers and retailers alike.
There’s a long way to go, but I’m rooting for it because that stress-free, seamless and sticky design is something we need to see more of in the sector, for good reason.
With any earned income stream, there will be a cost for acquiring a customer. In online retail, that might be quite low.
In physical retail, it will be higher. In commissioned services, tender processes and the like, it will be much higher – sometimes cripplingly so.
Thus, the key to making decent money from any commercial income is to make sure that, having spent the time and money to win that customer, you keep them – for a long time.
This is basic economics, but it’s so often overlooked.
For example, do you know how much it costs you to win a customer? Do you know how long you retain them for, and how much they typically spend over that time?
Because those are the numbers that will limit or unlock the whole potential of your enterprise – and what’s more, they will be directly related to how stressless, seamless and sticky your proposition is.
And those three S’s, I can tell you now, will be directly related to the level of commercial acumen in your team.
Hence it is, quite literally, one of the most valuable capabilities a charity can develop.
Martyn Drake is founder of the management consultancy firm Binley Drake Consulting