The New For-Profit Non-Profit
As appeared Christian Science Monitor
SAN FRANCISCO - In tough economic times, nonprofit fundraisers are replacing their running shoes and ball gowns with storefronts and shopping bags.
The economy has hit nonprofits hard and forced many to slash services and layoff workers. Traditional fundraising events like award ceremonies and charity marathons are increasingly void of donors leaving many nonprofits to wrestle with remarkable budget deficits. But rather than capitulate, some nonprofits have discovered a new and creative fundraising channel that includes some curious tools: storefronts and sidewalk sales.
Experts have coined these nonprofit businesses "social purpose ventures," as they meld seemingly conflicting objectives: running businesses for revenue while delivering on a nonprofit's social mission - whether it's saving the environment or serving the homeless. Across the nation, ventures are hiring ex-cons to drive moving trucks, teens to mend bicycles or homeless to prepare restaurant meals.
"This won't necessarily save nonprofits, but it certainly gives them a new revenue stream and a new opportunity to deliver on their mission," says Jaycee Pribulsky, program manager for Seed-co, an organization that helps nonprofits construct business ventures in New York and Florida. "These programs are having a real impact [on the community] by giving many a second chance and keeping others off the streets."
According to Seed-co, the programs have been around for years, but only in the last two years has the numbers notably increased and the programs matured. Last year the group saw inquiries grow from 20 to 150 nonprofits. In a survey commissioned by the Pew Charitable Trust, 42 percent of nonprofits say they are now operating a business venture, primarily in the cultural and health institutions. Another 23 percent are planning ventures.
San Francisco's Delancey Street Foundation is one such program. The nonprofit has provided more than 10,000 ex-cons and the homeless with housing, food and a job at one of the many businesses the foundation operates.
"The conventional rule of thumb is that 75 percent of individuals released from jail will go back. If they enter our program, that statistic drops to 25 percent," says Dr. Mimi Halper Silbert Delancey Street's president. "So often convicts leave prison with no hope, no housing and no job - our program gives them that, but also gives them a way to succeed. Plus, we're giving them a real, marketable skill that they can take to their next job."
Running a small, community based nonprofit business venture is no easier than running the neighborhood grocery store and some nonprofits contends it's considerably harder. They face many of the same marketing and financial issues and are often ill-equipped to handle them.
"Ultimately nonprofits are looking for ways to shield themselves from economic uncertainty, but they have to understand that it's not always easy and it won't completely replace traditional fundraising," says William Grinker, Seed-co's director. "There has to be an inherent way to merge the business with the mission. If you can't do that then a business venture won't be easy."
According to the Pew Charitable Trust survey, business ventures often fail because of poor business planning and lack of capital. The survey also showed that only 35 percent of ventures make a profit the rest either break even or are subsidized. The Internal Revenue Service is also a roadblock. The agency told New York City's Recycle-a-Bicycle to wait five years before approving its nonprofit tax status.
"That [IRS decision] certainly hurts our ability to raise funds, but it doesn't change our commitment to seeing to it that we keep children occupied with something good to do," says its founder Karen Overton. Recycle-a-Bicycle started with a tiny grant from Seed-co to offer New York City youth an opportunity to get off the street and learn responsibility. The program brings teens into a nearby bicycle shop to learn the ins and outs of bicycle repairs and a retail operation.
"Every child that enters our program learns valuable skills they often aren't taught at home," says Overton. "The shop gives them that and our customers get the satisfaction of knowing that they're helping children."
Experts see nonprofits leaning on business ventures more in the years to come. "Tough times have led many nonprofits to our doors and the popularity is only growing," says Seed-co's Grinker. "This isn't about replacing existing funding sources, but it is a way for [nonprofits] to diversify and lessen the impact of downturns."
Recycle-a-Bicycle's Overton jokes that the economic downturn has only caused her to add the number of sidewalk sales rather than turn children away. "The shop raised about $50,000 last year. It takes more than that to run the program, but it gets me that much closer to helping children."
