Transcript How Non-Profits Become Self

How Non-Profits
Become SelfSufficient
Zira J. Smith, Ed.D.
University of IL Extension
1111 E. 87 St., #600, Chicago, IL 60619
773-933-6774 [email protected]
MYTH: Nonprofits cannot operate a
profitable business and do their mission
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Even if their fundamental purpose is not to
provide a product or service, but to change
people; and even if they are led by values
rather than financial commitments to
shareholders…
“To help the poor people of the world, step
one…make sure you’re not one of them.”
“We have a responsibility to our program
recipients. They’ve had so many losses in their
lives and for us to come in for a year or two or
three and give them hope, only to have the
program go away, we’ve just caused another loss
and further loss of hope in their lives.” Akerlund 2000
Social entrepreneurs vs. Traditional
nonprofit thinking…why?
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Operating costs have soared;
Traditional resources have flattened;
Number of organizations competing for grants has more
than tripled…(approximately 2 million nonprofits in U.S.)
Number of people in need has greatly escalated.
Managers and Board members of non-profits realize
they must depend on themselves to insure survival;
which has led them to entrepreneurship.
Innovative is not Entrepreneurial
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Nonprofits think it is ‘entrepreneurial’ to:
 Pretty up brochures;
 Design, develop, implement new programs;
 Outreach to new audiences
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Yet, they return yearly to same donors, foundations and
government agencies, seeking their generosity…that
may be innovative, it’s not entrepreneurial.
How do they start business ventures
and still stay loyal to social missions?
They use ‘earned income’ strategies to
pursue a social objective that is tied
directly to their mission…
 May employ disadvantaged people; or sell
mission-driven products or services that
have impact on a specific problem
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(e.g.,work with potential dropouts, assistive devices,
homecare for elderly, selling curricula, in Chicago
Streetwise newspapers sold by homeless people)
EARNED INCOME -- Defined
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Income is “earned” when there is a quid pro quo – a
direct exchange of product, service or privilege for
monetary value.
Earned income for a nonprofit includes getting payment
for such things as tuition, products or services,
government contracts, consulting fees, membership
dues (when dues purchase tangible benefits), sale of
intellectual property, agreement to use the nonprofit’s
identity, royalties, ticket sales, property rentals/leases,
and so on.
Entrepreneurial Attitude…“If it’s to
be, it’s up to me”(for profit and non-profit organizations)
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Earned income is paramount!
For social entrepreneurs, it has become the
primary goal.
Philanthropy, voluntarism, and government
subsidy are welcome, but not central, e.g., see
Delancey Street.
Delancey Street
(see Mimi Silbert’s story)
Recycling ex-cons, addicts and prostitutes
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Delancey Street has never sought philanthropic
or government support for its annual operating
budget of $24 million dollars, which comes from
profits generated from more than 20 businesses,
each of which doubles as a training school
1500 residents live in five facilities around the
U.S., some built by the residents
Earned Income=Self-sufficiency
To be Entrepreneurial, “earned income”
must be generated
 Only earned income will enable nonprofits
to become “self-sufficient,” not depending
on charitable contributions and subsidies
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Social Entrepreneurs are
Driven by a “double” bottom line
Blend of financial and social returns
 Profitability is not the only goal
 Profits re-invested in the mission, not
distributed to shareholders
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Sustainability ‘OR’ Self-sufficiency
Sustainability can be achieved through a
combination of philanthropy, government
subsidy, and earned revenue.
 Self-sufficiency can only be achieved by
completely relying on earned income.
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Earning Income…Why do it?...
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You are not going to have sufficient money to meet your
mission; you will have to continue to depend on the
generosity of others, which may not there, or be enough
Can do what you want with the money; how you want to do
it, as long as you want to do it, for the clients you want
Only Board and staff need approve; you do not have to
meet others’ expectations
Social Entrepreneurship
to do ‘more mission,’
serve more people
To investigate the social enterprise
potential for your organization…the first
question to be answered:
 Will starting a business venture
compromise your organization’s mission?
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Suggestions for Getting Started
Develop a Venture Investigation Committee
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Read all Jerr Boschee materials you can find (see Resources slide)
Review journalistic profiles of 14 nonprofits that have successfully started
business ventures. Free download, also purchasable in hard copy.
http://www.socialent.org/sourcebookchapters.htm
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Begin discussing benefits and challenges; how it might look for your
organization; what you would need to do to investigate; who needs to be
involved; what it would cost; where the money, time and personnel would
come from, etc.
Talk with staff; board members; clients; community residents; government
leaders; agencies; funders; business leaders, and other stakeholders that
may be impacted by the decisions
Resources to Learn More
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Jerr Boschee, Founder and Executive Director of Institute for Social
Entrepreneurs and Executive Academy for Social Entrepreneurs
(www.socialent.org) Also see Mimi Silbert, Delancey Street info.
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Venturing beyond the gates, Facilitating successful reentry with
entrepreneurship, Nicole Lindahl, with Debbie Mukamal. 2007
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Sustaining grassroots community-based programs: A toolkit for
community-and faith-based service providers. U.S. Dept of Health
and Human Services, 2008
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Building sustainable non-profits; the Waterloo region experience.
Center for Research and Education in Human Services and Social
Planning Council of Cambridge and North Dumfries, 2004
Chicago Non-Profits ‘Seeding’
Entrepreneurship Programs & Ideas
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Black-on-Black
Love—My Sister’s
Keeper
Formerly incarcerated
women need work
Biz Idea: Used
clothing boutique from
donated overstock
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Grace House
Formerly incarcerated
women need work
and job skills
Biz ideas: Individual
ideas from the
participants
Chicago Non-Profits ‘Seeding’
Entrepreneurship Programs & Ideas
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TASC: Treatment
Alternatives for Safe
Communities
Adjudicated adults
need work and job
skills
Individual biz ideas of
participants
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Chicagoland Prison
Outreach Academy
Formerly incarcerated
persons need life and
work skills to be
eligible for CPO work
training programs
Chicago Non-Profits ‘Seeding’
Entrepreneurship Programs & Ideas
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The Beloved
Community
Mission is selfsufficiency and
business
development for
community residents
Individual biz ideas of
participants
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Greater Faith
Ministries
Mission: Self-reliance
for community
residents and
congregation; and
Small Biz Chamber
Individual biz ideas
Chicago Non-Profits ‘Seeding’
Entrepreneurship Programs & Ideas
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North Lawndale
Employment Network
NLEN bee products
business, and
Formerly incarcerated
persons need work and
job skills
Individual biz ideas of
participants
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Exodus Renewal
Society, Inc.
Formerly incarcerated
persons need work and
job skills
Integrating selfemployment education
into re-entry programs
Individual and
organization biz ideas
Chicago Non-Profits ‘Seeding’
Entrepreneurship Programs & Ideas
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Home of Life
Formerly incarcerated
persons need work and
job skills
Community economic
development requires
business ownership
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Restoration Ministries
Disadvantaged persons
need work and job skills
Potential RM business
venture operation to
provide work to clients,
and develop their
individual biz ideas
Chicago Non-Profits ‘Seeding’
Entrepreneurship Programs & Ideas
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Teamwork Englewood
Re-entry citizens need
work and job skills
Renters need selfreliance education and
skills
Landlords need
marketing information
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Family Focus
Young mothers need
work and job skills
education
Children need selfemployment education for
self-esteem and business
leadership awareness
Chicago Non-Profits ‘Seeding’
Entrepreneurship Programs & Ideas
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Women’s Treatment
Center
Women in treatment
need work and job
skills
Women need legal
alternative work
options to support
selves and families
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Empowerment Zone
Community residents
need self-reliance
programs
Business owners
need knowledge and
skills development
Insights from Research
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Lack of “E” skills of staff within organizations;
Focused research & dialogue needed to assess “E” potential; (see
pages 5-7 thru 5-38 of SAMHSA book)
Must perform like a business first, not as a social service agency;
provide good products that serve customer needs; train ‘employees’
with real needs, provide real jobs, in real world, for life;
Must hire someone who knows the business being started; different
mindset & experience required
Culture clashes may result; expect initial resistance from staff, board
members, other non-profits;
Organizations are able to serve many more people in a social
venture than as dependent non-profits
It is not easy, but well worth it