Business Models

Written by Gijs Corstens (HackYourFuture)

Goals of this chapter

• Learn about the alternative revenue channels available to a code school
• Learn how to reduce the risk of shutting down due to failure in fundraising
• Create a financially sustainable organization

Summary of our learnings

• Graduate placement and Alumni placement can be an important way to generate income
• There are possibilities to take on a role of recruiter for your mentors, but be careful with this
• Business Partnerships can be a great way of generating income and getting strategic partners
• Having governments pay for your services is a great way to earn income, but is hard to set up

Introduction

Many nonprofits and foundations make the mistake of becoming completely dependent on donations from external parties. This means constantly spending time and energy raising money and never knowing how certain your future is. It also creates a lot of risk for your organisation as you become highly dependent on external factors.

An ideal way to mitigate this risk and become more sustainable as an organisation is to create other sources of income for your organisation. Below we have listed some of the possibilities we have encountered to earn extra income for a code school.

Earn revenue from companies that need to hire developers

As a community of developers and a school that graduates developers, you will build a large network of developers. Often times companies need to fill positions quickly and pay recruiters to find talent. This presents a revenue stream for code schools.

Graduate placement

The most logical way to start earning money is by charging a placement/recruitment fee for every student that you place at their first company. In The Netherlands we charge a monthly fee for internships (300 Euros per month) and a 2,500 euro fee for junior developer positions.

In the current market more experienced developers are much more in demand, and you will find that placing juniors in their first job can be harder than placing people with a bit of developer experience. Generally the harder it is for companies to recruit developers the more they are willing to spend.

Alumni Placement

Over time graduates will want to seek employment at new companies. If you can place them at a new company, you can start to earn more money as these graduates have more experience and simply have more market value. This of course requires having a strong alumni community and ideally providing value to either the developer or the company in some form.

A good way to create value is by playing the role of matchmaker. Try to understand what a company needs and then speak with your alumni to see what they are looking for in a career change. You might also consider working with a recruiter or agency that already has experience with this. They will have a larger network and more expertise. However, it may come at a cost. Still it’s worth asking if they can do it pro-bono to support your school’s mission.

Working with recruiters

In general be very careful of recruiters as many of them tend to overpromise and are unable to live up to their commitments. Recruiters in general have quite a bad reputation among developers, and it’s important not be associated with people who can hurt your organization's reputation.As an organization that is mostly powered by goodwill of volunteers, it’s very important to safeguard your reputation and have no-one doubt about your intentions or the people you associate yourself with.

Lastly, there is the option of doing recruiting activities among your teachers. Be very careful with this strategy as developers in general don’t like to be secretly headhunted, and this can significantly break your relationship with your volunteers.

We suggest a model in which you communicate to mentors, that if they are open for new opportunities, they themselves can approach you(not the other way around). You can tell them that doing this really helps the organisation earn income do keep doing this work, and I’m confident that many developers would like to see money go to your initiative instead of going to a regular recruiter.

Government contracting

If you think of your school from a value creation perspective, there is one player that benefits greatly from your activities: the government. By helping people on welfare get well-paid jobs, you are saving the government a lot of money, and this benefits them in significant ways besides direct welfare. Because of this, it’s always good to see if the government is willing to chip in for the work you do. Because governments work very differently across every country it’s hard to give a one-size fits all instruction around this topic. Instead we will simply state the most obvious ways of making financial agreements with governments.

The most direct way of working with the government would be for the government to pay for every student's education costs. This can be done by charging the government up front for every accepted student, but this can be a hard sell. An easier sell will be to have the government pay for every successful job-placement of a student on a no-cure-no-pay basis.

Other ways would be to get a general subsidy or grant for your activities under a government or municipality program.

Again this is too complex to generalize, but our advice in general is to see where opportunities lie within the government among the various layers of government: municipality/state-level/national/multi-national (EU, UN, etc) level.

Business Partnerships

All successful business partnerships are at the simplest level an exchange of value. Often times nonprofits approach partnerships without considering that they can only ask for value without giving it in return for so long. This is essential to keep in mind when pursuing corporation partnerships. And in our experience code schools can provide the following pieces of value to a company:

• Help them achieve their CSR goals (sometimes referred to as whitewashing)
• Positive media attention for a company
• Positive exposure amongst developer that companies want to recruit
• Better employment satisfaction (whilst volunteering)
• Access to a certain network of developers / talent

There are many ways to structure business partnerships, and make distinction in the significance of a partnerships. A choice can be to differentiate premium partners from normal partners where premium partners are contributing more than normal partners.

A way to sell these partnerships can be to structure partnerships in various packages that give different rewards. This can be done in various ways, but a common way is to structure a partnership around the sponsoring of a class or a number of students.

Of course business partnerships can offer you more than just money, it can help you a lot with the following things:

• Get exposure in the media, business world
• Find job opportunities for your students
• Recruit new volunteers
• Gain credibility as an organisation