Internal revenue and asset analyses and strategic external fundraising and financing analyses are important tools for helping impact organizations raise the type of funding they need to achieve both their social and financial goals.

It is often true that early-stage impact organizations are looking for ways to build out their overall long-term financial sustainability while also managing their day-to-day operations, stakeholder relationships, cost pressures and debt burdens. It is also often true that impact organizations create value in ways that they are not fully monetizing and have the potential to unlock net new complimentary revenue streams.

For example, when conducting a revenue and asset analysis on a for-profit social enterprise fashion design college in Addis Ababa, Ethiopia, it became clear that the school had developed valuable assets and expertise around effective education and training. And that this expertise could, relatively easily and cost-effectively, be expanded into another related and high demand sector, which could substantially increase the school’s revenues. This opportunity would simultaneously open new sector-specific funding streams, reinforce the school’s mission to equip underprivileged women with marketable skills and further develop organizational core competencies. 

While an internal revenue and asset analysis can unlock net new social and economic value for impact organizations, they may still need to secure external funding to support their goals, in which case a fundraising and financial analysis would be required. The key to an effective fundraising and financial strategy for an impact organization is securing aligned funding, which will support both the organization’s social and business goals.

The first step in this process is determining what type of funding is needed. What is the funding for? How much will it cost (i.e., how much will the organization ultimately need to repay?) and how affordable is it (i.e., when and how will the organization need to repay)? And how well does it fit within the organization’s existing capital structure and future financing plans? 

Once the type of capital required is understood, the right kind of funding and funder can be secured. The good news is there is a growing number of innovative finance and strategic philanthropy models emerging from the impact investing sector that are specifically designed to help impact organizations achieve both their social and financial goals. As well as funders who are committed to affecting positive change for the causes that are important to them, alongside high-quality investment or philanthropy opportunities.

In the case of the Ethiopian for-profit social enterprise, it needed low-cost, flexible capital to help finance its expansion in advance of revenues coming in. Raising equity was not favoured by the owners and given its existing debt burden and reliance on established donors, it was determined that the organization should seek traditional or innovative (recoverable grant or forgivable loan) grant funding from a new, mission-aligned funder. Several funder options were researched and recommended.

Impact organizations play a key role in our transitioning economy and, unfortunately, current dominant systems aren’t always enabling to them – and I want to help change that. Internal revenue and asset analyses and strategic external fundraising and financing analyses are important tools for helping impact organizations raise the type of funding they need to achieve both their social and financial goals and, ultimately, deliver more impact.

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