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Charities should mean business

Updated: Feb 28

One of the biggest criticisms labelled at charities from the outside is “they are not business-like” or they lack “business savvy” Indeed some charities have actually told us at an initial meeting that “of course we are different to businesses”

Just how different are charities?


Why are they not businesses in their own right?

Let’s just look at some terminology for a minute


CHARITY BUSINESS

Surplus Profit

Deficit Loss

Reserves Reserves

Working Capital Working Capital

Beneficiaries Shareholders/Partners/Sole Traders

Employees Employees

Employers Employers

Trustees Directors

Donations/Legacies/Grants Sales


Call it what you will but without the same sort of thought processes that a business has to go through then a charity will fail. And yet surprisingly, even when the board of trustees has members who are business people it is amazing how good business principles go out of the window and this despite the fact that charities are second only to Public Companies in the amount of regulation they have to deal with. Yes, a charity cannot hoard money and yes occasionally they will make deficits but continued deficits just like continued losses in business means erosion of working capital and charity failures.


Which is why, exactly the same strategic planning is needed in charities as you need in business. To deliver help to beneficiaries is no different to delivering dividends to the business owner. When a source of income dries up in a charity such as a cut in public funding, it is no different to a change in sales patterns when one particular product of your business goes out of fashion because there is something newer and cheaper on the market.

Charities are in competition with other charities for a finite sum of money and some charities are more attractive than others. In exactly the same way that some businesses compete with others for the same customer base.


Consequently, charities just like businesses must be proactive not reactive and plan strategically for the future. Like businesses their governance must be robust with a board of trustees that works seamlessly with its executive team to constantly review the way it works and whenever necessary to re-invent itself.

Charities like businesses must constantly self-assess and when you start not liking what you see or start having doubts about the way you are working that is the time to seek help either for reassurance or to confirm your suspicions.




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