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Part 4 -How to turn an NGO into a social enterprise?

The initial question of the table discussion was:
What can the concept of social enterprise offer to NGOs to help them evolve. This question shows in itself that nowadays more and more impact makers realize the pitfalls of NGO-s and want to take steps towards a more sustainable form of organization. We can state that indeed social enterprises from many aspects are more suitable to achieve real, long lasting impact.

The NGOs most of the times have to deal with the following difficulties:

  • Most of the NGOs' finance are based on funds in their core and when the funding is cut, the NGOs and the whole cause will fall apart.
  • In many cases a lot of enthusiastic people organize all kind of activities on a voluntary basis but their enthusiasm reaches a limit and the spirit goes down.
  • There are a lot of initiatives that are doing good for the community, but they are not profitable in general and their existence can be short-term.
  • Governmental organizations do not fund as many initiatives as they used to do.
  • There is a fight among NGOs for charity money and the rest of the governmental fund.
  • NGOs often tied because of the donors’ strict requirements

This list above is far from being able to show all the aspects that can be disadvantageous while running an NGO. However as an organizational form it can be a viable way to start with. But that does not necessarily mean that we have to stick to this form when we do not see it working smoothly anymore.

Of course, just like in any other parts of life we need to have courage to go for the change. We need to move towards the unknown and definitely outside our current comfort zone as an organization.

When an NGO is not running well and we are also lacking the courage to change it is really time to evaluate and think about our WHY on an organizational and also on a personal level.
The book: Start with Why by the author, trainer and motivational speaker Simon Sinek explains more in detail why our WHY is so important. By watching this video you can briefly to tap into the thought process of WHY.

Lot of organizations do not know their WHY. Why they actually exist, what is their bigger goal (also on a philosophical level). It is not clear what it is that they are trying to achieve. It results that the operations are lacking deeper vision and strategy. It would be beneficial to have at least a yearly session dedicated to rethink the WHY in every organization.

After we clarified our why; we get a more clear picture what we are up to, and we can take concrete steps to find the most viable way to achieve our mission. During the table discussion it has been suggested to make a SWOT analysis to be able to see our real strengths, weaknesses, opportunities and threats. However as this article is about how to turn our NGO into an (social) enterprise we need to be more focused on the business perspective of our activity and social goal.

At this part we have an overlap with Part 3 -How to get the money?

Therefore this next short paragraph is borrowed from Part 3 and it helps us to see clearly where to put our focus if we want transformation.

“We have to clarify the value that we provide first. After that we can see more clearly what kind of organizations or individuals benefit on various ways (directly or indirectly) from our product or service. That is right, in the end it has to be boiled down to a product or service. I know it sounds much less romantic than GIVING and HELPING others but in the end a product and/or service are the universally understandable ways to describe our mission, the value that we want to bring into this world. It can be understood by investors, partners, costumers, authorities. The best tool is to map out our business idea visually is the Business model canvas (watch a short film) and after some brainstorm sessions when all the fields are filled we can zoom in and analyse more specifically the value proposition canvas that can really help us find the product-market fit

Some might start an argument: there is still no legal entity for social enterprises in the Netherlands yet. However the paragraph above still applies. And honestly if we think about how the world is changing we cannot rely on highly centralized governmental bodies to decide about and divide the funds among NGOs or to come up with legal forms. If we still contemplate about the question: How can we make money while doing something for the greater good? It means that our perception of value creation is not validated. More specifically we are still in a dreaming phase. Reaching the public and gain validation costs effort that mainly commercial companies are able to do. However it is also possible in small scale first, just think about how start ups begin their business.

Ideally a social enterprise is aiming for something good, usually focuses on a local community while it uses a viable business model that makes it sustainable and more independent than NGOs.

Firstly the social enterprise should be at least as profitable to be able to support the core group of people who are enthusiastic, and putting their time and energy into a vision that benefits a greater community. Sometimes the part of the financial profit goes to the community too.

Of course, it is not easy, it is hard to find the financial and human resources. But if our WHY is powerful enough to let as follow this path we have to be resourceful and try to operate as lean as possible. We should stick to what we really need similarly like the basic needs for survival, water, food, energy, clothes, shelter (but now on an organizational level).

If more organizations will collaborate with limited resources there is a possibility to make all kind of exchanges which is an already existing model called: Local exchange and trade systems.
However there are certain skills which are very demanded and others are less demanded. It can be hard to find the balance and do the matchmaking but if our operations are based on a business model with various revenue streams it is possible to pay for every skills that are needed.
I cannot stress enough that without a proper business model with a value proposition and a product market fit the often volunteer based systems are only chasing vague ideas about doing good, because they think they do.

The bottom line is as follows:

Any organization has to be able to clarify its WHY and value proposition while also identifying the paying “costumers”. In case these latter listed requirements are not fulfilled; no matter what the NGO thinks about itself regarding how much good it does. Its existence and activity is highly questionable and it is not smart to continue neither as an NGO nor a social enterprise.

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