Seriously examine the opportunity to provide services for fees

Some of Romania’s NGO resource centers have already tried to recover costs by charg-ing fees, with mixed results.³⁸ The successes and failures of these experiments should be examined, so that centers can identify the real opportunities for charging for their work. One approach could involve variable pricing, where different types of clients pay different fees.³⁹ Another option is cross-subsidizing functions, to allow funding for important services that cannot be charged at full cost. For example, pub-lications can be sold in order to subsidize the cost of training sessions. This shift in strategy also requires a simultaneous process of educating clients that the services they are accustomed to receiving for free actually cost money. Clients should be made to perceive value in these services. One donor, interviewed April 16, 2004, even suggested that no service of support organizations should be completely free, so that the benefici-ary will have some control over quality of service and a minimal interest in the service they receive.

A British organization called the Directory of Social Change (DSC) provides a good example of successful use of paid services. According to the official website of DSC,⁴⁰ this support organization for the voluntary sector in the UK wants “to be an internationally recognized, independent source of information and support to voluntary and community sectors worldwide. ... We are able to contribute towards positive social change by supporting these organizations to succeed.”

DSC offers advice on fundraising, resource management, advocacy, organizational management, and strategic planning. It also promotes the NGO sector and publishes reference guides, handbooks, CDs, and e-information. It organizes practical training courses, topical conferences and briefing days, as well as Charityfair, the biggest annual forum for the sector. The vast majority of these services are paid according to a well-thought-out marketing plan, which has been enhanced by the recent appointment of a marketing manager. DSC is the leading provider of grant guides and handbooks to the UK voluntary and community sector, and it has a list of 100 books, journals, and CDs. It sells these materials through a variety of methods, including a secure online bookshop. The group is paid for the hundreds of training courses, conferences, leadership

and fundraising briefings, and summer schools that it hosts. These events have earned both money and a good reputation for the organization.

According to its annual report,⁴¹ DSC’s resources consist mainly of earned revenue, which provided 80 percent of its total income in 2002 and 95 percent of its income in 2000. DSC is not financially dependent on any single funder, and it does not have an endowment or any donated reserves. The organization occasionally receives grants and sponsorships, which provided GBP 524,684 in 2002. The marketing and advertising function is very well developed, and in 2002, it cost DSC a total of GBP 207,000.

Specific steps:

➣ Assess the market potential: The first step is to determine who are the current and future potential clients for paid services. Resource centers can perform market research themselves, via questionnaires distributed through mail or dur-ing various events, interviews and focus groups. They can also obtain resources to commission professional market research—a model that was implemented by the NonProfit Information and Support Center in Lithuania. Hiring pro-fessional market researchers probably makes more sense for Bucharest-based resource centers, which offer services to a larger number of more geographically dispersed clients.

➣ Build some business-related knowledge: To be able to charge for their services, resource centers need appropriate knowledge about market research, business planning, and costing. It might be a good idea for resource center staff to partici-pate in business-oriented training and internships with small- and medium-sized businesses.

➣ Do not plan to become a “nonprofit businesses”: Resource centers should not try to live entirely on income generating activities. They should balance their funding portfolio and continue to subsidize other necessary services, such as advocacy or sector integration, which most likely could not be self-sustainable.

➣ Perform cost-benefit analyses: Centers need to conduct analyses to help them decide what services they should provide for a fee, and how much to charge for them. It may turn out that some projects undertaken on a paid basis actu-ally eat up more resources than initiactu-ally planned. Some services may have less tangible opportunity costs, such as loss of focus, downtime incurred in other projects, and issues related to independence or credibility. Furthermore, some projects may require serious initial cash outlays, such as equipment, for which the break-even point is too late to provide any significant benefits in terms of sustainability.

➣ Present clients with the future shift in strategy: Resource centers can use annual reports, training sessions, NGO forums, and other opportunities to prepare clients for the idea that donor support for many services are likely to cease. At

the same time, centers should understand clients’ needs and expectations and start building truly value-adding services that clients would feel motivated to pay for. Services need to be really worth the money that clients pay for them:

It’s hard to charge for basic, non-personalized training and general information.

Instead, centers should offer practical, personalized training, with case studies and examples taken from local experience.

➣ Price carefully: In setting prices for their services, NGO resource centers should be careful to start neither too low nor too high. They don’t want to send the message that their services are cheap because they are not professional enough, but they don’t want prices so high that potential clients are discouraged from even analyzing the potential benefits of buying these services.

➣ Use barter arrangements: Resource centers can perform services, such as training or consultancy, in exchange for something else, like meeting rooms, printing services, Internet connections, discounted accommodation, and so on. This approach has been used successfully by a number of centers: An NGO resource center in Hungary, called NIOK, pays more than 50 percent of its costs via in-kind contributions, and CENTRAS Constanta managed to secure a fast Internet connection in exchange for promotion services.

➣ Explore financial management and accounting consulting as a service: There are few accountants qualified in NGO accounting, which is different from typical business accounting, so this should be a highly valued service. The vast majority of NGOs get accounting services on a contract basis, from accountants who generally do more work connected to business and are not always qualified or interested in providing the best solutions for NGOs.

➣ Publicize services to beneficiaries of funding programs and donors: Resource centers should let NGOs know about their services, even while the NGOs are in the application phase, to convince them to build such services into their budgets.

Donors should also be made aware of the centers’ services, because donors often need professional monitoring and capacity building for their grantees but do not have the flexibility and staff to perform such work.

➣ Obtain accreditation as training providers from the Ministry of Education: If a trainer can issue certificates recognized by the ministry, then the training services they offer will be more highly valued. In certain cases, public institutions may insist on only using ministry-certified trainers. The procedure is rather costly and bureaucratic, but it is worth considering via a cost-benefit analysis.

➣ Function like a business: A donor representative interviewed on May 28, 2004, said that centers should be able to function like small businesses. Their business plans should very clearly state their target groups, list what services are provided, and describe how community resources can be mobilized. Building a relation-ship with people who need the centers’ services is a key ingredient for success.