If you are a social enterprise, you might think you have two options for revenue streams: sell a service or sell a product.
And yet, there are a lot more options than you think! As an organization that is focused on social impact, you are (hopefully)creating value for many stakeholders - including your local and international community, government and businesses…the listgoes on. Additionally, as a social organization, you’re hopefully measuring your impact too – and this means you’re able todemonstrate the value you’re creating for different stakeholders.
This is one of the key components of innovative financing: identifying ways to create revenue streams from assets that serve your purpose of creating social and environmental outcomes. The key question to ask is what assets do you already have andwhat activities are doing? Are you creating value, for whom and are they paying for it?
When I help social organizations understand how to access funding from third party payers, I look at a few categories.
Third Party Payers
Education and Training
Third Party Payers
In order to effectively unlock resources, it can often be important is to identify third party payers. These are entities that are notyour end user, but are willing to pay for value you are already creating.
These might be governments, corporates or investors. They might be in the form of outcome payments or subsidizing thesale of a product or service due to the desire to increase the pace of the adoption of that service. For example, if you create anddistribute renewable energy, your economics might not work in rural areas, but you could identify third party payers, like localgovernments, non-profits, development organizations or corporates that are interested in communities having access to energy.
Are you effectively utilizing yourdata?
Companies large and small across the globe are monetizing and sellingdata. Sometimes this has privacy issues and unintentional effects, which you should absolutely consider, but often the collection of data can be an excellent way for an entity to improve the quality of their offerings as well as create an excellent revenue stream.
For example, enterprises that allow customers to pay with their cell phones collect data around the frequency of payments, the timing, the regularity and other data points.On a micro scale, this data can create a credit history for an individual that may not have a bank account. On a macro scale, these points can paint pictures about how the local economy works.Both the credit history and the insightinto the local economy might be of interest to funders. Both could be beneficial to the end users of the enterprises.
Similarly to creating data, your organization might have developed a specialty that other organizations would be willing to pay you to help them develop.
For example,Mothers2Mothers, a non-profit that works with mothers with HIV/AIDs, has grown to work across the African continent and has become very successful at building systems to help it operate efficiently and cost effectively, including impact measurement. It now earns revenue from development organizations paying it to help other local non-profits build similar systems.
Are you working with local organizations or entrepreneurs that funders might be interested in funding or that corporates would be interested in putting into their supply chains?Funders generally spend large amounts of money sourcing and diligencing their deals and investments and corporates can spend a great deal finding SMEs. Both spend considerable amounts helping them to become investment or supply chain ready. If your organization is already working with potential opportunities, you should consider creating a revenue stream around due diligence, investment readiness or business development.
For example,Edge Growth, an SME funder in South Africa uses business development funding from corporates to work with dozens of SMEs and help lower its own costs around finding investment opportunities.
Education and Training
Education and training for individuals can be an excellent source of funding. If upskilling individuals is part of your program or an output you are working towards, it’s beneficial to think about other segments of a population you can work with or ways of capturing value from those further up the value chain. If you’re working with unemployed youth, you could have agreements with the employers to pay a success fee of some kind when they hire them (or even better, when they’ve been working there for a certain amount of time). Or you could look into providing training to new employees in organizations that might be at risk. This type of training could be paid for by the employer and would work towards your goal of keeping youth employed as well as creating a revenue stream for your organization.
Now selling subscriptions might sound like just another way of saying that you are selling a project, but the way you sell something can be as important as what you sell.
Off-Grid Electric and M-Kopa helped to revolutionize the PICO solar industry space by introducing solar-as-a-service, which allows people to pay for solar energy as they use it, instead of upfront. Do you have a way to give users access to your offerings through low cost subscriptions?
Have you ever thought about how you could use insurance as a revenue stream for your project?
Lumkani is doing just that with their fire detectors for shacks in informal settlements. The individuals or their employers pay for the insurance premium and if their shack burns down the insurance company pays out the policy. The insurance company is able to insure it because Lumkani has proven that their fire detectors lower the risk of the shacks burning down.
Now instead of risk sharing, have you considered revenue sharing? Azuri technologies, a pay-as-you-go solar company, partnered with TV content provider Zuku in Kenya, pay-as-you-go satellite TV package targeting households without electricity in the Kenyan market. In this partnership, Azuri, which has connected Zuku with a customer they would typically not be able to reach, shares the content TV revenue with Zuku.
Finally, what about leasing? If you could access the capital to buy a building, a piece of equipment etc. Could you lease the part of it that you weren’t using out to others? Would this help smaller organizations access opportunities they wouldn’t otherwise be able to?
Hello Tractor enables farmers in West Africa to rent out their equipment, such as tractors, to other farmers. This way, owners generate revenue from their equipment when they’re not using it, and other farmers can avoid buying expensive equipment they don’t use very often.