In our first article, we explored lessons learned from our work to build sustainable revenue models in grassroots legal empowerment organizations. Just as with other organizations that pursue social justice and the protection of human rights, legal empowerment organizations have struggled with the limitations of relying primarily on charitable and philanthropic models of financial support. Here we share six social enterprise models and offer examples of organizations that have experimented with each.
Earned income and social enterprise models will look different for every organization depending on its particular strengths, size, mission, and operating environment. However, we discovered a number of models that may be useful in other fields and align with the values and work of many frontline civil society organizations.
1. Membership
Organizations employing a membership model create a network of dues-paying members to access their services. For example, Make the Road New York uses a membership model to collect modest dues from immigrants who join their organization, which provides access to legal and other support services. While this makes up a small percentage of their overall operating budget, they have found that the model provides much-needed flexible funds, as well as reinforces their innovative organizing model.
2. Cross-Subsidization
Organizations that cross-subsidize provide the same (or similar) services at different prices based on ability to pay. The most common example of this in the legal aid and legal empowerment fields is the “sliding scale” model, where fees for legal advice and representation depend on the clients’ income and assets. In the U.S. this model has given rise to an “affordable legal services” movement, which specifically targets clients of modest means that can afford to pay something, but not market rates for legal services. An example is the Los Angeles Eviction Defense Network, which charges nominal fees for moderate-income clients who aren’t otherwise eligible for free legal services, using these fees to subsidize education and services for those who cannot afford them.
3. Consulting and Research
Organizations with consulting and research models offer their expertise or access to paying clients. They may be able to offer particular insights or a way to conduct responsible research with a particular community. For example, among other earned income streams, the Centre for Community Justice and Development (CCJD) in South Africa has a consulting and research arm, which has helped other organizations develop social investment portfolios. CCJD also maintains a partnership with local researchers at the University of KwaZulu-Natal to augment their access and expertise with academic resources.
4. Goods & Services
Some organizations are able to sell goods or services. In some cases, this means employing members of a community that an organization serves. For example, the Health Education and Research Association (HERA) in North Macedonia seeks to empower Roma women, advising them of their health and legal rights. Their social enterprise, Nega Plus, trains Roma women to be eldercare workers, meeting an emerging need for skilled in-home care for the elderly, increasing the social and economic inclusion of Roma women, and generating revenue for the organization. HERA also provides legal and other social services to the Roma community.
An organization’s role in the community, the knowledge and needs of the people it serves, and the social enterprise environment in its local context are all important factors in its consideration of possible earned income models.
In some cases, an organization may license products or build expertise in providing a largely unrelated product or service. For example, Healthy Options Project Skopje (HOPS), another North Macedonian organization participating in our mentorship program, recognized a market for installing ‘living’ walls or dividers covered with growing plants. As more people began to work and study from home during the COVID-19 pandemic, they developed a modular green home workspace using this approach. With worsening air pollution in the country’s capital of Skopje, there is strong unmet demand from local businesses and consumers – a gap which HOPS is building the capacity to fill.
Finally, the paying customer might be a member of the community that an organization serves. In South Africa, for example, the Dobsonville Human Rights Advice Office began to make several products that were inexpensive and easy to produce, and for whom a clear demand existed in their local community. They now make fleece blankets, scarves, and bath salts, which help to offset losses in donor funding.
5. Technology Tools
Some organizations with particular expertise have been able to develop software applications or other technology-enabled services that generate revenue. For example, LawPadi, a Nigerian legal advice website, has experimented with chatbots to help its visitors access information about relatively simple legal issues like small claims, divorce, and trademark registration. They used very simple third-party tools like WordPress, MotionAI, and ChatFuel to build their chatbots, which then provide commission-based referrals to lawyers who are able to assist.
6. Space & Real Estate
Finally, some organizations rent their office space or make real estate investments to generate income. For example, the Organization for Legal Education and Transparency (LET Station) in North Macedonia is developing a model to rent their office out to other organizations and individuals as an event space. They discovered that a local hotel was the only other comparable space in their city and charged a significant premium, which was outside the budget of most non-commercial clients. In another example, CCJD in South Africa invested in student dormitories, which they then rented to students coming to the city from rural areas to study. Their close partnership with the university and connection with rural communities through their community advice office network helped them understand the needs of students and provide conducive and affordable accommodation that also serves as a stream of revenue for the organization.
As we discussed in our previous article, an organization’s role in the community, the knowledge and needs of the people it serves, and the social enterprise environment in its local context are all important factors in its consideration of possible earned income models. Additionally, the COVID-19 pandemic has presented both unique challenges and opportunities for this work. Some organizations in our network that were already engaged in textile production, for example, were able to quickly pivot to creating face masks, offered for free to those in need and for sale to those who could afford them. Other projects have recognized the precariousness of relying on existing food systems during the pandemic, and have invested in local food production to support basic needs.
For funders looking to help community-based organizations develop an earned income stream, it is important to recognize that the organizations’ existing expertise and proximity are crucial ingredients for innovation. Nevertheless, funders can play an important role in clearing space for experimentation, making connections, and attracting possible sources for investment capital. While it is unclear what the “new normal” looks like for nonprofit earned income models, it is clear that the very same creative, problem-solving skills that drive effective civil society organizations will be a key ingredient for future success.