A new study has revealed more not-for-profit groups are embracing commercial business structures due to growing costs and rising demand.
UTS Business School researcher Dr Danielle Logue and her co-author Dr Gianni Zappala sampled 132 applications for funding received by the Westpac Foundation’s Catalyst Grant Program, a program established in 2011/12 aiming to help enterprises generating 20 per cent of their revenue from trading activity.
The study found that 70 per cent of enterprises had a plan to become more commercial in the next three to five years.
Dr Logue says that the not-for-profit sector is in ‘a state of transition’ and that the lack of funds and donations may be pushing the new trend.
“Not for profits are looking at more effective and sustained methods of operation. With changes in government support and rising need, this change is necessary,” she says.
The study found that almost 60 per cent of organisations sampled reported financial challenges, including the rising cost of operations. While 25 per cent of organisations reported hardships due to decreased government funding and support.
Though the study clearly pointed to a new trend in the not-for-profit business model, it placed a spotlight on certain challenges that could arise with groups going commercial.
The integration of “customers” and “beneficiaries” plays an important factor in this new structure, something that Dr Logue says few are capable of managing.
“CEOs of social enterprises need to be comfortable in this hybrid environment, and few candidates have this kind of experience,” she says.
The study points to a business structure known as a ‘social enterprise,’ a model of not-for-profits and charities that Dr Logue says “focuses on ways to generate revenue while the organisational mission remains focused on social benefit.”
“Australia needs to move away from the thinking that the social enterprise only includes the not-for-profit legal structure,” Dr Logue says. “Once this happens, more social enterprises will be discovered and, in turn, more will receive funding from intermediaries and investors.”