Innovation

Charities: Big profits in non-profits

Written by Eleanor Beaton

We seldom think of charities as a growth sector, but they are. Donations are booming: Statistics Canada reports they reached $8.6 billion in 2007, up 33% over five years. True, the economic slump is eating into charitable giving. But the longer-term outlook remains bullish because the drivers of donations, especially wealth accumulation in the top income brackets and an aging population, aren’t set to change anytime soon. With soaring incomes, the wealthiest Canadians can afford to give more — and they are. And the ranks of the top donors, people 60 to 69, are burgeoning: StatsCan predicts their numbers will grow by 50% from 2006 to 2016, versus 8% for Canada as a whole.

Yet, this rising tide is still flowing from donors to charities by horse and buggy. According to research collected by Toronto-based Artez Interactive, an online fundraising and technology company, donations from individuals hit US$500 billion worldwide last year. But just 3% of these donations were made digitally, estimates Philip King, Artez’s president and CEO: “There are huge opportunities in helping charities move to digital systems.”

What’s more, the global outpouring of support to charities after the 2004 tsunami in the Indian Ocean highlighted another trouble spot: how to get money fast to the organizations that need it most. Finding simple technological solutions to distribute cash securely and efficiently — say, via cellphone — would be welcome. This is in the works in the U.K., says Alex Gill, principal of Toronto-based charity consultancy Mendicant Group, but hasn’t yet made its way to North America.

King says that although Canada’s biggest charities have budgets of several million dollars, most have underinvested in IT. He says they’d welcome cost-effective and Web-based CRM-type or database programs to help them manage volunteers, one of their biggest challenges. And while there are already plenty of mom-and-pop programming shops catering to a handful of charity clients, says King, there are still opportunities for mid-sized firms to stand out: “Few sophisticated, modern businesses have turned their attention to the charitable sector.”

Of course, not all charities have equal means. Maggie Leithead, Vancouver-based president of CharityVillage.com, a resource website for Canada’s non-profit sector, estimates the top 1% of charities (those with budgets of $10 million or more) account for 59% of total revenue. Meanwhile, 42% of non-profits manage budgets of $30,000 or less. These micro-charities are often entirely volunteer-driven, with no cash to spare, while the largest are already swamped with consultants. But Gill says mid-sized charities are often overlooked, underserved and hungry for cost-effective ways to operate better.

One key need? Staffing or project-management services to give charities access to experienced professionals for days or weeks at a time, especially in finance, HR or fundraising. “They need people who offer a high impact at a low budget,” says Gill.

Charities also need help standing out from their direct competitors by developing a clear brand identity. Although many advertising agencies work for charities for free, says Leithead, there’s still room for charity-focused agencies that can charge for their help because they know how to work with the sector and build brands on a tight budget.

But entrepreneur beware. While this sector is growing, it’s no place to make a quick buck. Very often, a charity’s first instinct is not to trust a for-profit business. “It takes a long time to build up working relationships,” says King. And whether you’re dealing with a big-box or boutique charity, all keep a tight rein on their money. That said, the benefits of doing business with charities extend deeper than the bottom line, says King: “For smart, patient people, it’s a good business — and a rewarding business.”

Originally appeared on PROFITguide.com