Transcript
In general though, whether you register your company or your business as a commercial or charity will have an impact mainly on the legal and the financial size of your company. It impacts your ownership structure. It impacts whether you’re allowed to have revenue or profits. It impacts from which sources you can get money from. It impacts how you’re allowed to spend that money or whether and how much taxes you need to pay.
Activities of your business do not really have to differ. You still need to offer a product or service, you still need to get it into the markets. You still need to do operations and marketing. You have to lead and manage your team. You have to talk to investors or your beneficiaries. So it takes as many skills to run a charity as it does a commercial business. You want to increase the impact that you’re having. You want to have better solutions, you want to reach more people. You may be wanting to go to another country and for all of that you need money. CSR funding or grants are great to get started, but they are always temporary money sources and even if you are lucky to get repeated grants, which is extremely hard, most funders ask that you have a sustainable business model, which means that in a couple of years you have to be able to prove that you can sustain yourself and even grow your impact.
And that’s why it’s extremely important that even if you’re a social business, you start thinking about your business model and your revenue model from the early days on. It’s all about focus and choices. And as we discussed before, whether you are a social business or commercial business, it is defined by value proposition and your target market and these are things that you usually decide upfront. Moreover, it has a great amount of impact on your organization and the legal structure, what kind of investors you can reach out to and how you can earn money and where you can spend that. So it’s definitely important to think about these decisions before you start your business or when you’re business modelling the next few years. This does not mean that this cannot change though. As with any startup, you go through lots of changes and you find out that maybe your product wasn’t as genius as you thought it would be or that maybe your target market is different or maybe that you are better set out to solve a completely different set of problems at all. It is really possible to later change the legal structure of your organization or, for example, add a legal structure or entity that will allow you to earn money or actually start a foundation.
