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A lesson from Goodwill: Run a charity like a business

Bruce Dewar is chief executive officer of LIFT Philanthropy Partners.

Shuttered stores, displaced employees, piles of discarded donations and a shocked public – the sudden closing of 16 Toronto-area Goodwill stores and 10 donation centres has stunned the city.

Goodwill is an 80-year-old charity and brand institution. For decades, it collected donated clothes, household goods and other items for resale. The proceeds were used to fund programs helping people to overcome employment barriers, including physical or mental disabilities. From the outside, this was a successful operation, doing good work and serving an important purpose in the community. All the more reason for the surprise when its Toronto stores were abruptly closed in January. The branch CEO resigned this week, saying she saw "no viable option" for emerging from bankruptcy proceedings and saving hundreds of jobs.

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I have no first-hand knowledge of the Goodwill Toronto scenario, but I've seen many other charities founder and countless others fail to realize their potential. Cases such as this offer opportunities for other charities, non-profits and social enterprises to learn and avoid similar fates.

Lesson 1: Charities need to be run as businesses

The charitable sector often overlooks the fact that a successful social purpose organization must be run as a small or medium-sized business. Many have strong social bones but neglect to develop their business muscles.

Successful businesses, charities and social enterprises must all constantly assess the competitive landscape and adapt their products or services to appropriately reflect trends, needs and consumer demands.

Sometimes, the market is too crowded with similar organizations. The survivors will be those most nimble, open to collaboration and adept with technology.

It's certainly true that there is growing competition among social enterprises – such as thrift shops – that generate revenue from donated, used items. However, those that adapt can prosper. Take Toronto's Furniture Bank, for example. Driven by a goal of continuous improvement and looking to identify new sources of revenue, Furniture Bank has been working with LIFT over the past year to identify how it can streamline its operations. With input from our staff and our pro bono partner KPMG, it now has a plan to increase operational efficiency and serve 40 per cent more clients, which will lead to a corresponding increase in revenue to put toward operations.

Lesson 2: Charities need vigorous financial management

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As small-business owners know, managing cash flow is essential and requires ongoing vigilance. Revenue diversification is another important area where many charities struggle. When finance's role is neglected, it affects a charity's ability to fulfill its social mission. This is just one example of the importance of a management team with diverse business backgrounds and skills. Charities need to invest in the right management talent and the right business tools – and as donors, we need to support them in doing so.

Lesson 3: Charities need strong governance

A good non-profit board should be skills-based, with all members committed to their directorial fiduciary responsibilities. While interest in and passion for the cause is a plus, it's critical that directors maintain the same business discipline in their non-profit roles. They cannot afford to check their business brains at the door.

In the private sector or the public sector, a strong board requires a diversity of skills. When there is a gap, such as no board members from a traditional financial background or a retail background, it will be difficult for the charity to grow in a structured, sustainable way.

Goodwill is a reminder that charities need to be run like businesses. Not all will survive, but those that do will be the ones that have both well-developed social bones and business muscle.

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