3 possible business models and sources of income, Cash management

Organizations aiming for impact first face particular challenges in making their solutions sustainable. The complexity of social innovation is that the recipient may not always be the customer. Once a for-profit business has found a way to create value for a customer, it has usually found its source of revenue: the customer pays for the value created.

This is not always the case in the “impact” sector. Very often, when a social enterprise or association has found a way to create value for a recipient (for example, to combat discrimination or to save an endangered species), it has not yet identified its model. This is a separate step, simply because the recipient does not always have the means to pay the cost of the proposed solution … which often makes the management of an “influence” organization more complicated, and the question of economic model is particularly complex. . You need to consider two different value propositions – that of the recipient / user and the client / donor – and manage both the operation to create an effect and the one that makes it possible to finance these activities.

Articulate economic model and mission

How to adapt economic goals and societal goals? How to avoid the risk of “mission operation” by seeking to develop a solid economic model that should serve the mission better? Here is a typology * with three main options for thinking about this question.

– The customized business model : economic activities and impact activities are the same, they are also the organization’s only activities. Influence activities generate revenue, and income-generating activities generate impact. In other words, the more impact the organization has, the more revenue it has; the more income it has, the more effect it has.

– The integrated business model : economic activities and impact activities have some coherence, although they are not confused.

– The external economic model : economic activities finance impact activities. The former has no influence as such. Their calling is to generate money to donate them to the social mission. Economic activities and effect activities are thus separate, and effect activities do not generate income.

Three sources of income

Here are the three most important ways to fund an impact project.

– By turnover : revenue corresponds to the sale of products or services to customers, which may be public or private, individuals or organizations. The activity itself generates its own income: this is called self-financing. The challenge for impact organizations is to find business activities that serve the desired societal impact.

– Through sponsorship : Protection corresponds to donations from individuals, foundations, scholarship funds or companies. Its main purpose is to support a project of general interest, which is why it is carried out free of charge. In practice, the donor can be taken into account with a “significant mismatch” (ie of a value limited to 25% of the gift amount).

– By subsidy : a grant is a financial support provided by a public actor for an activity of general interest (or in special cases to companies to promote the creation of companies in particular). These are becoming more rare and allow for new types of intervention by public authorities: public subsidies have fallen by 17% in six yearswhile public procurement increased in the same period by 73%.

* according to the typology suggested by Sutia Kim Alter.

Matthieu Dardaillon is a specialist in impact entrepreneurship.

The author:

Matthieu Dardaillon is the initiator and co-founder of Ticket for Change. This text is taken from his book “Activate your talents, they can change the world!” », Published by Alisio Editions, 2019, 480 pages, 25 euros.

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