Donations As a Business Model

by Adam Juda on Thursday, July 30, 2015

I'm not a fan of using donations as part of a business model. In my guide to software revenue models, I refer to such strategies as "begging" and suggest that organizations dependent upon gifts are destined for abject poverty. Sure, if you want to send me money because you like my pricing blog, I'll be sure to cash your check. That said, I'm not relying upon gifts from strangers to put food on my table.

Nevertheless, there is a for-profit company that regularly receives donations from me. Even though the firm's CEO pockets millions of dollars each year, I continue to give. The nature of this for-profit company? It's a blood bank. While many don't realize that such operations are run as for-profit business, I do. I can't find a non-profit that accepts my blood, so given the choice of donating to a for-profit or not donating at all, the choice is clear.

I tell people I donate blood, but I really don't. The dark truth is that my "donation" is a donation in name only. In return for my blood, I receive non-tangible, non-monetary rewards. Not only do I earn the right to feel like I helped people with serious medical issues, but I also earn the right to hold my selflessness over those who don't donate.

If you run a charity (or even a company) that relies upon donations as part of a business strategy, you must go out of your way to ensure that your donors receive compensation in return. Even intangible rewards can influence behavior immensely. The larger the reward (relative to the cost of donation), the more likely that the donor will return and new donors will consider assisting your organization. Cheap trinkets are often far less powerful than the feeling of having made the world a better place.

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