Why charities must be more commercially minded

Negative perceptions of the charity sector combined with general financial insecurities have kept charity incomes variable for a number of years, with income from fundraising activities particularly vulnerable.

It’s no surprise therefore that charities are increasingly looking to diversify their income streams and branch out into other areas.

In some cases this involves an element of commercial activity, from small charities making a little extra through selling gifts to international charities bringing in larger amounts through major commercial partnerships.

But some charities are reluctant to adopt business practices or partner with businesses to boost their income, fearing that their values, mission and purpose might be compromised.

This is understandable, especially after recent negative media attention around some of the business arrangements charities have had in place.

Last year the Charity Commission issued a regulatory alert on the subject of commercial partnerships and agreements.

The regulator reminded trustees of their legal duties and responsibilities and urged them to review their charities’ commercial relationships, including checking for conflicts of interest.

In a statement, the Commission said: “Working with a company may bring many benefits for a charity including raising funds and increasing awareness of the cause.

“However a charity’s name and reputation are valuable assets which trustees must protect. Trustees must have effective oversight of any partnership or agreement with commercial organisations and be able to show their decisions are made in the best interests of the charity and they have acted responsibly.”

We agree with the regulator and would encourage all charity trustees to read the guidance.

But rather than be off-putting, we think the guidance should be encouraging for charities in helping them to build successful commercial endeavours legally and morally.

We think more charities should be commercially minded, especially with incomes from fundraising continuing to be squeezed.

Learning the right lessons from the business world will only help charities improve their work, by streamlining their processes, cutting their costs and increasing their income.

Additionally, partnering with businesses will help charities reach a wider audience and boost their brand recognition.

Ultimately commercial operations bring in vital revenue and fund valuable work, allowing charities to be more effective and do more good.

The key consideration is working with the right business, one that either shares or complements a charity’s values.

Honesty and transparency is also vital in any commercial relationship, both with charity trustees and donors.

As long as charities stay true to their values and remember their ultimate purpose in everything they do, there should be no reason to be scared of developing commercial relationships.

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