Bootstrapping the non-profit organisation Rule 7 (part 2)

This is the seventh-and-a-half post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Rule 7: Charge a lot (but be worth more than you charge)

The point here is that your organisation’s selling point – we’re still looking at things from the perspective of donors and supporters – should never be how cheap you are (your price), but how much value you create for your clients.

It doesn’t matter what your price is, as long as you’re worth it – or Seth would say, worth as long as you’re worth more.

This might be about how many people you serve and how many things you do.

Or it might just as well be about how you do what you do – the values that you bring to the table that make you special. The things that would:

Make peoplemiss youif you were gone.

Bootstrapping the non-profit organisation Rule 7 (part 1)

This is the seventh post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Rule 7: Charge a lot (but be worth more than you charge)

This is a counter-intuitive but powerful lens for thinking about non-profit work. For now, let’s understand what you ‘charge’ as being how much your program costs.

All other things being equal, being low cost – getting things done for as little as possible – is a virtue.

All other things being equal, using resources well (efficiency) is a Good Thing.

But the thing is, all other things aren’t equal. It doesn’t matter if you run a tight ship (are efficient), serve a huge number of people for little money (are low-cost) if you don’t make an impact – the biggest impact that you can make.

This is definitively not to say that you need to ‘go big or go home’ – scale is only one way to measure impact, and as we saw in Rule 6, it isn’t a reward in itself.

It is to say that you should be aiming to make the biggest impact you can for the people you seek to serve, and according to what’s important to you.

Effective is different from efficient, and definitely not the same as cheap. Doing the wrong thing efficiently and at low cost is still the wrong thing.

If charging a lot, if being expensive, helps you to make a bigger impact, find a way to make it work, and be expensive.

Bootstrapping the non-profit organisation Rule 6: Scale is not a Reward (3)

This is the sixth-and-third post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

So what do finding the right size for your organisation and the Free Prize Inside approach to scale look like in practice?

Here are two examples from the charity I work for.

Scale and the right size

At the charity I work for, we produce graded reading books to support our literacy curriculum. These aren’t available elsewhere in Indonesia – especially not ones that can be tightly integrated with the curriculum – so we need to make them ourselves.

The catch is, that there’s an economy of scale to printing books. The cost-per-book of printing small runs of books costs more than three times as much as if you bulk print a thousand copies. In fact, a bulk-printed colour copy of a book costs less to print than a black and white photocopied version.

If we want to bring price down and quality up, we clearly need to print in bulk. The catch is, this takes a significant investment, and the only way to make it worth it is if we have thousands of teachers using our books – at which point they pay for themselves.

So a few years ago it became clear that if we wanted to serve more groups at a lower cost (which is a key factor in more groups being able to afford our program in the first place), we need to be big enough to make bulk-printing and storing thousands of reading books a realistic proposition.

Scale and the free prize

The best example of this that I’ve come across is how Amazon moved into web services and cloud computing with Amazon Web Services. In short, they built a huge amount of electronic infrastructure for their own use, then realise that they could share it with others.

Amazon gained a new revenue stream, and companies could run their online infrastructure on Amazon’s servers for a fraction of the cost of making their own. This created huge value for everyone (prizes all round!) – Amazon got richer, and a whole generation of companies (netflix, godaddy, airtable, hubspot, airbnb, coinbase,wetransfer, dropbox*) was able to offer services as if they were already big companies, and grow with their customer base, rather than needing a huge capital investment up front.

And look what it’s done for them:

(source: geekwire) – supposed to be an embed

*This is not to say that AWS is the most efficient way to do this – apparently dropbox is saving a fortune by migrating off AWS. But AWS allowed them to test and validate their business model before they spent huge amounts on hardware.

Scale, the free prize and the non-profit (1)

The free prize here came when at the same time as we were working out the above, we used the Business Model Canvas to study our (charitable) business model. It became clear that the books were an asset not just to us and our users, but to many other groups doing education work across Indonesia. They wanted books. We sorely needed an income stream.

By selling our books, our partners gained a useful resource to add value to their work, and we gained extra income for little additional effort. Prizes all round!


Scale, the free prize and the non-profit (2)

The other example of this is a work in process – we’re looking at sharing our curriculum and training materials online under a creative commons (open source) license.

This supports our core activity – equipping teachers to teach reading effectively – by allowing our users to review training sessions and check their technique. It might also come in handy for training future partners.

But it will also be a resource for anyone working in the same field as us – something that helps others that we can make available at no cost to ourselves. Free prize!

And of course, the free resources also help potential clients to hear about what we do, and perhaps makes them more likely to use or recommend our other services too.

Bootstrapping the non-profit organisation Rule 6: Scale is not a Reward (2)

This is the sixth-and-half post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Scale and the Free Prize Inside

We left Rule 6 a little watered down: “Scale carefully and find the size that works for your organisation”.

There’s a type of scaling, though, that is a reward: when scaling in a particular way means that you make a free prize for someone (see also here).

There might be a scale at which you are able to give something to your customers (or to people who are not yet your customers – maybe even people who never will be your customers) at no real cost to you. Is there something you own that you can sell cheaply and easily – or give away – that adds tremendous value to them? Could you:

  • Share a resource or planning tool?
  • Grow big enough that you can offer a useful physical space to the community?
  • Thicken the network by connecting different groups of your users so that they can create value for each other – or for someone else entirely? How big does your network need to be to be useful?

If you’re working more in service of a vision (that is, in service of people) than profit, there is more than likely an asset of some kind that you already own that you can share with others.

You might also create a free-prize for your organisation by selling the asset in some way. This isn’t free, but if it allows you to serve more people in a way that creates value for everyone and pays for itself then it’s prizes all round. 

Or you might charge a litlte more, covering some of your overheads at no cost to yourself (prize for you) and allow you to serve more effectively and sustainably elsewhere (prize for the community).

The Business Model Canvas is a great tool for identifying assets that you could turn into prizes…

Business Model Canvas

This is one of the most useful tools I’ve come across for understanding how your business works (or might works).

It designed for lean-startup style customer discovery and validation, but I found it a fantastic lens for actually seeing different parts of our organisation for the first time, as well as how they fit together to make a whole.

I’ll do a series on this before long. For now, here’s a set of links to a video series from Strategyzer to give you the main ideas (youtube playlist here):

Check at Alex Osterwalder‘s excellent book Business Model Generation for a lot more detail.

Bootstrapping the non-profit organisation Rule 6: Scale is not a Reward

This is the sixth post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Seth says:

Scale is not its own reward. Grow when it helps you serve the people you seek to serve. That’s the only time you should grow.

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This is another rule that follows from Rule 1: Real Work for Clients First.

Work out who you seek to serve, and serve them as well as you can in an impactful and sustainable way. In any business or non-profit, the word “sustainable” here carries a lot of baggage.

Depending on your business model, there is likely to be a sweet spot that allows you to serve enough clients (decide early how many is enough, and always start small) and to generate the income you need to be around and keep on having an impact for the long haul.

In a small business this might simply mean having enough clients to earn what you need to earn once you’ve paid yourself and covered all your costs (see, for example Profit First – this episode of Read to Lead is a good introduction – or if you’re a freelancer, this excellent podcast on the bare minimum you should be charging clients).

In a non-profit, finding the right scale can be more complicated. All other things being equal, you probably want to serve as many clients as possible, but you’ll need to grow carefully to make sure that you continue to serve your clients well.

Another complication is that your clients may pay for themselves in the same way that they should in a business. You likely depend on other income streams, and particularly donation income, and finding the right size for your organisation with respect to your donors (two-sided markets again) will depend on your particular circumstances.

If your charity implements for a particular trust or company, they may largely dictate your budget and the scale of operations.

But if you’re funded by general donations, you need to demonstrate sufficient impact in terms of both quality and quantity for people to think you’re worth supporting. You might need to reach a certain size to justify overheads and capital investment – that is, you need to spread your overheads over enough clients to be seen as good value for money. Or it might be that you need to serve clients nation-wide in order to access particular funding opportunities.

Rule 6 of bootstrapping the non-profit

Scale carefully and find the right size for you.

Bootstrapping the non-profit organisation Rule 5: Own your Assets

This is the fifth post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Build and own an asset that’s difficult for other people to reproduce

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This is an interesting one in the non-profit world, because an attitude of generosity – of wanting to see problems solved more than we want to build empires – suggests that we should welcome others working in our ‘market’ as allies rather than competitors.

But there’s an important point about attitude here – we should always be building assets, and the most valuable ones we can build will always be those that are difficult for others to reproduce.

These assets might be products – in our case, curriculum and reading books. They might be services – delivering teacher training.
They might be processes – the ways that the pieces of what you do fit together to create value.
They might be things like reputation, trust, and relationships.

Investing in building any of these assets – from building a physical product to making a spec or howto for a process, to training your team – is always worth the time – a gift to your future self.

Here’s a thought experiment that links back to this post from a few weeks ago. Imagine that each central piece of your (charitable) business model was widely available at low cost (what if you open sourced it?). In the absence of each piece, what about your organisation means that people would still want to work with you? How would your clients answer this? How about your donors?

Bootstrapping the non-profit organisation Rule 4: Resist the urge to do average work for average people

This is the fourth post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Be a “meaningful specific” rather than a “wandering generality” – it’s the principle of concentration of force and energy to get work done.

Rule 4 ties into Rules 1 and 3 – “real work for real clients” who are “eager to pay” – and if you work at a non-profit organisation it has implications for how you work with both clients and donors.

Rule 4 and clients

For your clients, it means your service is for them. Not for people in general, and it might help your clients… but a specific product or service for their specific needs.

Take education in Indonesia as an example. There’s a huge need for teacher training and resourcing. This is true across the age-range (from pre-school to university level), across different types of school (private and government-run schools), across the whole archipelago, and in any subject area. Within each of these ranges are groups of people with different needs, and trying to serve them all will get you no-where. Trying to produce something for the “average” teacher will dilute your energy and make it impossible to make something meaningful for any individual – and your clients are individuals.

Far, far better to concentrate on the needs of a specific group (helping pre-school teachers at small charity schools to teach reading more effectively) and do it well. If you’re good, you might end up with something that grows and can be made more widely applicable.

Rule 4 and donors

The same principle applies to your donors. It’s hard to go to the world and persuade them that your cause is important, and that they should give you money. It’s much easier to find people who already think what you do is important, and convince them that you do it well enough to be worth supporting.

Again, be specific – who are you helping? Why those people? Why this service? What difference is it making? Tell stories of change in the lives of specific people to explain the work that you do.


Bootstrapping the non-profit organisation Rule 3: Serve Clients Eager to Pay for what you do (part 4 of 4)

This is the third-and-three-quarters post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Rule 3: Serve Clients Eager to Pay for what you do (part 4)

In a nutshell, Seth says that if someone isn’t eager to pay, they’re not your client. You get to pick. So work for people eager to pay.

Seth Godin on non-profits and two-sided markets… part 1

While it’s tempting to believe that non-profits are generally funded by large numbers of philanthropists giving small amounts of money, in general it’s not the case… A non-profit is almost always bootstrapped because the founder goes to two or three or four passionate individuals and says, “If we could work to solve problem X, is that the sort of thing that you’d like to support?”

And so it begins with one side of the market, which is the donor and the founder deciding to take on a problem.

Seth Godin,  Akimbo“Thrash Now (and ship early)” Q&A@22mins

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Seth’s Q&A answer offers a different way to look at Rule 3. I’d been thinking of the non-profit organisation as the link in a two sided market, with clients on one side, donor on the other, and the organisation in the middle, which is more or less accurate…

But you have to start by looking for those donors who are eager to pay for what you do – so eager to pay, in fact, that they’re prepared to join you, so that whatever you’re doing becomes a problem that you take on together.

Bootstrapping the non-profit organisation Rule 3: Serve Clients Eager to Pay for what you do (part 3 of 4)

This is the third-and-two-thirds post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Rule 3: Serve Clients Eager to Pay for what you do (part 3)

In a nutshell, Seth says that if someone isn’t eager to pay, they’re not your client. You get to pick. So work for people eager to pay.

Eager to pay, donors, and two-sided markets

It’s often the case for non-profits that the people who pay for what you do aren’t the people who benefit directly from it. The client always pays, of course (see part 1), but someone else is also providing some of the cash you need to operate.

There are two risks here – the first is that you make an excellent product that your donors love, but that your clients aren’t willing to ‘buy’. This happens when you allow yourself to become accountable to donors wishes (and possibly whims) first, rather than being faithful to your clients’ needs, and what works for them. It’s easy to slip into this when you’re short of cash and start serving donors who are not-quite-eager to pay for what you do, but happy enough to pay for something different but similar – so you drift, and compromise, and end up being pulled in all directions, wasting time and money and pleasing no-one.  See also Rule 1: Real Work for Clients First.

The second risk is when donors are eager to pay for part of what you do – usually the last-mile, bit that happens on the ground part – the impact – but refuse to pay for overheads or administration – the delivery.

Yes, you are ‘selling’ your impact, and you want to be efficient – but you must sell your real work as it is, which probably involves an office. Educate potential donors about what it takes to do your work well, and to work for the long term towards significant and lasting change. Explain to donors who want cool-sounding statements about their impact (‘100% of my donation went towards food that appeared magically and for free in front of hungry children’) that of course you have administrative costs – including your crappy office – and that without them, there would be no program.

Be as clear and as real as you can about everything you do, and why, and find those donors who like you, and like your work, and trust you, and are eager to pay to be a part of it.