Social Enterprise — The Road to Sustainability for Your Nonprofit

Often, seeking funding from traditional sources is like filling a funnel— you receive money from grants, sponsorships, donations, and pour the money into the funnel, use it up and have to work like crazy to keep the funnel filled. And the money in the funnel usually comes with strings attached defining how you use it, report it, etc. Funnel-filling becomes an endless cycle.

Wouldn’t it be great to have a regular source of unrestricted income that you could use for operating expenses or new programs or whatever your agency needs to better fulfill its mission?

This concept of unrestricted income isn’t a pipe dream. It can be a reality that is attainable for your agency through a program of social enterprise.

Nonprofits all over the U.S. are learning about earned income (social enterprise) as a way to deal with the uncertainties of traditional funding, cutbacks and giving decreases.

What is social enterprise?

Social enterprise — or earned income — is simply money that you have generated through product sales, payment for services, or other business opportunities that is yours to use as your organization sees fit. If successful, it builds upon itself and earns more. It is unrestricted income that creates the path toward self-sustainability and enhances your mission. Although there are many opportunities to earn money, our experience has taught us that the most successful enterprise ventures are based on an organization’s current assets: what they do well (core competencies), what they know (technical and knowledge assets) or what they have (underutilized physical assets).

Sometimes, all that’s required to begin a social enterprise venture is finding a new market for current services, or re-pricing current programs or finding new uses for current space.

Specifically, some of the agencies we have worked with have developed the following earned income programs: a monthly flea market on agency property, arts and culture distance learning programs, weddings and programs at a botanical garden, customized fitness programs, nonprofit training and consulting services, contracts with school districts for science learning programs, upscale thrift stores, entrepreneurial training for children through a community store, transitional housing programs, and many more.

What is required?

Successful entrepreneurial nonprofit organizations embrace the big picture. They think and act strategically. They build a plan. They educate themselves about market trends, customer buying cycles and consumer benefits, and they know their competition. Successful social entrepreneurs “get up and get out” to test their assumptions. Most important of all, successful social entrepreneurs invest precious resources to grow and enhance their mission.

Keys to success

First of all, your board members and staff must be dedicated to learning about and creating the plan for social enterprise. Consider including entrepreneurs from the community as advisors. Ensure every member of the team is committed to the journey: It will require out-of-the-box thinking and a change from business-as-usual.

The steps to success should include:

1. An organizational focus on goals and desired outcomes for mission enhancement and revenue.

2. A plan for stakeholder communications.

3. A clear definition of the organization’s assets.

4. An objective method to evaluate social enterprise opportunities.

5. Ideas, ideas, ideas based on the organization’s assets.

6. Market research to understand potential customers, their buying habits, demographics, potential, etc.

7. Market research to understand direct and indirect competition.

8. A comprehensive analysis of costs.

9. Financing and tax issues.

10. A sales and promotion plan that includes pricing, delivery methods, promotion, etc.

11. A business plan.

Outcomes of social enterprise

In addition to the realization of a plan for earned income:

* Many organizations can expect changes to occur in the way they manage their nonprofit business, including a more entrepreneurial spirit and a better understanding of what is profitable and what isn’t.

* Many organizations will refine and enhance their current programs and services by providing value-added benefits that create new income sources through new payer markets and customers.

* Many will develop a new language and will internalize a new, objective method by which to evaluate current and future programs, services and income opportunities.

* At the core, becoming an entrepreneurial organization can result in fundamental change to support the mission.

Jean Block is principal at Social Enterprise Ventures, an Albuquerque, N.M.-based consultancy that works with nonprofits to diversify their income from traditional fundraising into earned income ventures. The company offers a free e-newsletter, which you can sign up for here.