Can Charity be a “For Profit” Business Model?
With the launch of MyBigGive I have been asked quite frequently about why I decided to go with a for profit organizational structure with such an altruistic ideology. The problem with most consumers is that we have all been trained to think that only registered non-profits can create value for good causes without some hidden advantage. That being said however, it should be clarified that even if an organization is labeled as a true “non-profit” this does not exempt these organizations from having ridiculously high salaries for their executive that deduct from the total value the organization can offer their intended cause.
So back to the primary question, why choose a for profit business model when your ultimate goal is create impact for well known charities and causes? Can a business actually thrive under these circumstances? I believe that the answer yes it can thrive, however there is some work to be done in the area of consumer interpretation for your business model. If the business is able to convey that they profit based on performance and percentages, thus only when the causes earn more money does the firm earn more money. This model of performance puts the core functionality of the business first in line, and in this case that core functionality and desire is to create profits and impact for the charities/causes in order to develop a small profit for the firm itself.
Another item to note with a for profit business is that when it’s primary goal is to drive additional revenues so that it can execute on generating funds for causes it is allowed to build up a cash reserve to strategically grow the business and help float the firm through down times when it would otherwise have to let employees go. This built up cash reserve would not be possible with a non-profit leaving it more vulnerable to volatile markets as well diminishing the promotional leverage that the entity would have when opportunities present themselves. With a for profit business model, the firm is able to truly maximize it’s returns when specialized opportunities arise and holistically drive more dollars and value long run into a cause than a simple non-profit would be able to on its own.
My belief that for profit businesses can drive the next wave of socially responsible consumerism, and allow for value without inflated cost is why we chose not to be a non-profit with MyBigGive. We still feel that we have a streamlined process that will allow for a huge portion (70% of all commissions) to be drive back to causes that the users/community vote on and create a profit. We want to strategically make the biggest impact possible, and we don’t see any other way to accomplish such an ambitious task without building ourselves in this fashion.
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I totally agree, charity can be for-profit. The Morman Church comes to mind. In almost any non-profit organization, someone is profiting. Be it the president of the organization, the secretary receiving a minimum wage salary, or the paid celebrity doing the commercials, not all the money is being distributed to the needy. I really do appreciate a company like MyBigGive.com that calls it for what it is. It is not a bad thing to make money. The fact that a company donates a percentage of it’s profits to a charity, just gives the company more incentive to do a better job and make more money, and in turn, donate more money.