Why non-profits should consider selling their services instead of giving them away for free

Photo: Supplied

Give a person a fish and you feed them for a day; teach them to fish and you feed them for a lifetime. Or so we’re told.

This all supposes that whether you’re giving this person a fish, or teaching them to fish, you’re doing it for free.

But the question we’re asking is: can you sell the person the fishing rod?

Welcome to the world of social enterprise.

Clary Castrission. Photo: Supplied

The perennial challenge for many non-profits always seems to be how to raise more and more donations to keep their programs running.

I’ve heard all too often about good social impact programs being shut down because donations didn’t meet targets one year. However, it doesn’t seem good enough to say to a child who needs education, or someone else in need of help, “Sorry mate. We didn’t raise the funds this year.” Instead of constantly looking to raise more donations, one thought that may be missing from the conversation is whether the beneficiaries themselves could pay for the service.

Social enterprise is certainly at odds with how I learnt about social impact through my younger days: if you want to do good, you should do it for free. You should give your time away for free. You give your money away for free. And in turn, non-profits should then give their service away to someone, also for free. The very thought of charging the poor or marginalised appears exploitative.

It’s uncomfortable.

But, stay with me for a minute while we play out how it looks if you do charge the fisherman for the fishing rod. If you start charging for the service, two things might start to happen. Firstly, it might make the non-profit delivering the service ultra-responsive to the need of the beneficiary. After all, if we presuppose that the fisherman doesn’t have a lot of money, he’s only going to buy the fishing rod if it’s really valuable to him.

Secondly, if social impact is at the heart of the non-profit’s mission, then it will set a price point that they know their fisherman will be able to afford. Again, if the fisherman can only afford to pay $1 for the fishing rod, then the non-profit better invest in producing a very decent fishing rod for $1 or else no fishermen will find it valuable.

Difficult? Sure. But humans have proven very capable at driving incredible innovation when we need to. Here’s how I discovered this truth.

Photo: Supplied

A decade ago, when I backpacked through India as a spritely 21-year old I met a community of granite quarry workers outside Bangalore. After a number of discussions, I thought that the only way I could help educate their children was through setting up a charity and building a school. Even though these quarry workers earned up to $5 a day, I’d grown up to pity their living conditions, and responded to this pity by thinking that we should provide their kids’ education for free.

The thought of charging them did not even cross my mind.

I co-founded the 40K Foundation thinking it would cost $40,000 to build them a school. When the school opened five years later (for $500,000) rather than being stoked about the 400 students who were now enrolled in the school, I remember being haunted by the prospects of how much money we’d have to raise to keep them enrolled for free, let alone to build more schools over time.

For a country where there are 275,000 villages, many of which are in need for better education, this prospect was debilitating.

The lightbulb moment came when my team and I went out to one of the villages and asked a pretty obvious question we’d never actually asked: would the villager actually pay for their children’s education? What we discovered, which drastically altered our approach moving forward, was that these folks would have been happy to pay for it all along.

So we changed from a school-building charity to an education technology social enterprise. We set up an entity called 40K PLUS, which sells an education solution to people in villages for up to $4 a month, a price affordable to all. Building a model to achieve this has taken our team over 5 years, but we’ve created technology designed for restrictive village environments that engages the children, and we have proven learning outcomes.

We discovered that selling the service was more valuable to the villagers than giving it away ever was. Firstly, as soon as we started charging for education services, I noted that our relationship with the villagers changed in favour of the villager: they went from beneficiary to customer. This completely changed the power dynamic.

When we were giving away services for free, we always held the power. We could walk away. When we started charging for it, the villagers assumed control. If we did not offer them something that they considered valuable, they would not pay for it.

The villager became the more powerful one in the transaction, which is the way it should be.

Photo: Supplied

Secondly, selling the service made us much more responsive to their needs. If villagers are not happy with the education service we provide, they withdraw their kids, and they do not hold back in telling us why. We’ve had to innovate by creating better quality at lower price to keep our customer engaged. Central to our learning was that these folks are not ‘have-nots’; they are ‘have-littles’, and that makes all the difference.

Social enterprise doesn’t remove the need for philanthropy. Donors are incredibly generous, and their funding is absolutely critical to build a fair and just society. However, through social enterprise we see a new role for philanthropic dollars whereby it can drive growth and capacity, while the revenue generated by a functioning social enterprise ensures its sustainability.

The Atlassian Foundation, for instance, granted us $300,000 via a competitive pitch process to build a next generation technology solution, and to expand our work into Cambodia, while fees collected from the parents ensure that our education centers continue to operate.

Around the world, social enterprises are figuring out innovative new models where they charge for serving those in need. I’ve noted that over the past few years there has been a healthy emergence of social enterprises, and social entrepreneurs, here in Australia. Social enterprises are popping up as cafes, consumer brands, laundries, and even law firms.

What makes them different is that they combine the heart and mission of a non-profit with the business thinking of a for-profit organisation.

Whilst social enterprises are still the new kid on the block, their champions are asking and responding to the hard questions about how to ensure sustainable social impact.

Working alongside the traditional non-profit approach of a “hand up, not a handout”, the social enterprise approach to selling a person the fishing rod at an affordable price, may well be a critical next step in that evolution.

* Clary Castrission OAM is the co-founder and CEO of 40K PLUS and 40K Globe, a lecturer in social impact, and won the Medal of the Order of Australia for his education works in India.

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