You must associate the idea of charity with an organization that seeks no profit. However, an organization can still have a charitable purpose and make profit. This is called a for profit charity, and falls into the corporation category. If you are interested in this type of business, here are a few tips on how to start a for profit charity.
What is a for profit charity?
This type of organization is actually a for profit corporation, but its main purpose is to serve to charity. Of course, this means it can produce profit. However, this is not the only thing it’s driven by. The motivation of such an organization is social, and it seeks to fulfill a charitable purpose. If this activity proves successful, then it gets to make some profit as well.
Even if it is a charity, such an organization is subjected to the rules that apply to for-profit corporations. Such charities are quite new, as the first ones to emerge and become popular did so around 2006. Since then, they have been under a lot of public debate.
Types of for profit charities
There is not only one single type of for profit charity, as more types of corporations can easily fit this category. A low-profit limited liability company, also known as L3C, is also a for profit charity, as well as a benefit corporation.
A benefit corporation falls under corporate regulations, so the laws that apply to it are slightly different than those for a non profit charity organization. However, its purpose is not solely to obtain profit. Such an association has set some strict social goals, and it constantly seeks to fulfill them. Also, it has the law on its side, as it can help them protect these social goals.
A low-profit limited liability company is more similar to a non profit organization. It is more driven by social purposes than by a profit, but there’s still a significant difference between the two. The L3C is still driven towards the capital both from for profit and non profit organizations. It can even cooperate with other foundations to get the wanted capital.
How to Start a For Profit Charity
A for profit charity is quite similar to any kind of business, meaning that you first need to solve some issues that apply to businesses as well. Although you are driven by a social construct, it’s still important to obtain some profit as well. Here are a few things that are worth considering when starting a for profit charity.
1. Find an idea for the organization
Since a for profit charity works like a corporation, it has to deal with something. Therefore, the first thing you should do is find the nature of your corporation. Decide upon the activities you will perform to bring the profit.
Gather all the people you are going to collaborate with and do some brainstorming to settle upon the type of activity you are going to perform. If you already know what you want to do, you can move to the next step.
2. Find the social motivation behind your organization
The mandatory thing for a for profit charity is, of course, the charity part. You need a social goal that you should protect, and use that capital you will acquire to fulfill your purpose. However, keep in mind that you can still make some monetary gains. In other words, you can make those monetary gains to protect your ultimate social goal.
3. Study the market
Whenever you enter the business world, you need to look around you. Look at the other companies on the market that offer the same services as you. If there’s plenty of them, then the profit might take a while to appear. Also, look at their social motivation. You can even take some reputable for profit organizations as example when building your own, as you can learn a valuable lesson from them.
4. Develop your business plan
Any organization needs a strict plan to follow. You should devise this plan carefully, and take some time to think about each point in the structure. Also, whenever you choose each step of the business plan, make sure it’s affordable to you. It’s essential to stick to this plan, but not if it’s too difficult.
Keep in mind that this plan should not only be about how you will operate. At first, you will need some money to get everything started. Make a list of all your expenses, and then try to minimize them as much as possible.
In the end, make sure the fulfillment of the plan will also bring the fulfillment of your social purpose that drives the organization.
5. Find a location
Just like any organization, you need a place where to operate. Depending on the nature of your business, you might need different locations. You should first decide where you need to establish your offices. Then, explore all the possibilities and find the best location. The social character of your business might require all kinds of activities, so the location or locations have to be suitable for them.
6. Establish the value or prices of your services
The last step before going on the market is to decide the worth of your products. To do this, you should first see how much money you spent to create the products or to offer the services. Then, take profit into account and establish a price for the market. Don’t forget to account for labor prices, and the costs for your employees.
A for profit charity is driven by a strong social purpose, while the organization still seeks to make some profit. If such a company becomes prosperous, this might bring the benefit of its owners. However, they will always be driven by a social dream as their main goal.
They are willing to do anything for this charitable aspect, so the ultimate purpose of such an organization is also humanitarian. By learning how to start a for profit charity, you can work both for yourself and for your prosperity and for the fulfillment of a higher purpose.