John Walker, Finance Director at Echoing Green and Nardia Haigh, Assistant Professor of Management in the College of Management at UMass Boston are investigating social entrepreneurs who went through a process of deciding whether to establish their organization as a non-profit, a for-profit, or a hybrid. They want to understand the range of circumstances under which social entrepreneurs identify which type of business model fits best for different situations.
While they have already interviewed many for-profit social entrepreneurs, they are having a hard time finding nonprofit social entrepreneurs, which is where you come in.
If you are a social entrepreneur and struggled with the decision about whether to form a for-profit/nonprofit/hybrid entity, Nardia would like to interview you about your organization’s strategies, structure, and direction.
According to Nardia, there are many circumstances under which hybrid organizations are established, and to date, two distinct variations of the hybrid business model are evident: Multi-entity and Integrated:
- Multi-entity hybrids link for-profit and nonprofit entities – often through contracts and/or ownership. A nonprofit may establish and own all or part of a for-profit subsidiary (e.g. Embrace and Embrace Innovations), or a for-profit may establish a nonprofit and provide it with equity or other means for it to derive non-discretionary revenue.
- Integrated entities are either for-profit companies with a strong social or environmental mission deeply embedded within its business model (e.g. TOMS Shoes or Maggie’s Organics, and companies registered as L3Cs), or are nonprofit organizations that use for-profit methods to generate revenue (e.g. Ten Thousand Villages or Ecosia.org).
In this study, they seek to understand the decision-making process entrepreneurs go through in choosing which to pursue.
Nardia’s research at UMass Boston focuses on business models and strategies that address large-scale sustainability issues in positive ways. And John has significant experience as an entrepreneur, an executive, and as a board member in a range of industries, where he specializes in financial analysis, capital raising, and structuring acquisition and investment deals.
If you are a social entrepreneur and would like to participate in this research study, contact Nardia at Nardia.Haigh@umb.edu.
Nardia has promised to share the results of the study with Social Velocity readers when it’s completed. I can’t wait to hear what they find out.
Photo Credit: piermario
In this month’s Social Velocity blog interview, we’re talking with Dennis Morrow, the Executive Director of Janus Youth Programs, a multi-service nonprofit agency that works with children, youth, and families in Portland, Oregon and Southwest Washington. Janus Youth caught my eye a few months ago when Village Market, a nonprofit inner city grocery store they launched, turned a year old. Their solution to inner city food deserts fascinates me, and I wanted to learn more.
You can read past interviews in our Social Innovation Interview Series here.
Nell: What was the impetus for starting the Village Market in North Portland?
Dennis: In 2006 Home Forward (formerly Housing Authority of Portland) rebuilt the former Columbia Villa Tamaracks, Oregon’s largest public housing development, through federal HOPE VI Project funds. Renamed New Columbia, redesign plans included both subsidized rental units and moderately priced homes for purchase, a new grade school, a Boys and Girls Club, service buildings, and expansion of Janus’ Village Gardens Urban Agriculture Initiative to New Columbia. This expansion included a second community-run garden site, a second children’s garden club program, and an orchard. The new community center included a park, office/community room space for services, and space for a privately run “main street” grocery store that operated for approximately 2+ years before closing.
As Village Gardens continued to expand leadership opportunities for residents in New Columbia and the adjoining low-income Tamaracks Apartment Complex (also a Home Forward property), residents and garden leaders voiced the need to reopen the local grocery store selling healthy, fresh, culturally relevant food (no alcohol/tobacco/lottery tickets) in New Columbia where 33% of the 3,000+ residents lack personal transportation and faced a 45 minute bus ride each way to the closest grocery store. These community members also had a vision that the store could be community-run and could provide additional employment opportunities for teens/adults. They also saw the store as a central meeting place for the exchange of information (focused on healthy eating/healthy living) and a community meeting place for New Columbia’s diverse residents.
Janus had worked in and with this North Portland community for over 15 years and had established ourselves as trusted partners who see our mission not as “doing for” or “doing to” but rather “working with” the community to realize the vision they have for their neighborhood and their families. Both Home Forward and the surrounding community specifically asked Janus to assume a leadership role in planning and overseeing the development/operation of the Village Market. With support from Janus’ Village Gardens staff, Janus’ Administrative Team and the Janus Board, New Columbia leaders spent nearly two years researching/surveying the community on the products that would be important to sell in the store, interviewing potential vendors, developing a business plan, and designing the store’s layout which included neighborhood murals. In 2011 after having secured foundation/public funding for start-up and operational capital, the Village Market was opened as a non-profit, community-run healthy corner grocery store.
As with every new initiative of Village Gardens, the impetus for the store came directly from the resident community’s expressed needs and desire.
Nell: The grocery store industry is a really competitive one. Do you think being a nonprofit store, instead of a for-profit one, puts you at a competitive advantage? Why or why not?
Dennis: There are definitely both pluses and minuses to our nonprofit status. The advantages it creates is that it was possible to secure public and private funding (literally worth over $800,000) for start-up and initial operational costs because of the programmatic issues also being addressed by the store including community health, employment for low-income teens and adults in an economically challenged area of Portland, community development/revitalization, social impact, and public safety. It has become a positive symbol of success for the community and in the community. What we do not know yet is the degree to which being community owned/managed and a nonprofit actually impacts on consumer behavior: do folks actually shop with us because of that? Our Store Advisory Committee is in the process of beginning customer and neighborhood surveys to answer this question more directly.
One disadvantage of being a non-profit operation is that there are very few models of success nationally to draw on. As a nonprofit youth-serving organization, running a retail business is also not part of our corporate skill set. We have a very good consultant who works hard to “train us” into the intricacies of successful store management. Ultimately, however, it is not the nonprofit status which represents our greatest challenge—it is the “healthy food” concept. The grocery industry is very competitive and, in a largely low income community, also very price sensitive. Margins on products/sales need to be much tighter than in a traditional store, and there is a smaller product mix due to space limitations. This makes it essential to have the right products on shelf so product moves, to manage inventory control very tightly, and to track pricing very closely. Featuring organic produce, for instance, instead of beer is a much more significant challenge in terms of shelf life and spoilage. Eliminating sale of alcohol/tobacco products and lottery tickets essentially removes the primary profit generators from a traditional convenience store. Essentially this puts us at a competitive disadvantage with for-profit stores but the disadvantage is not in being a non-profit but in being a small, organic/healthy food store.
Nell: One year in, it looks like Village Market could be a model for solving the growing problem of food deserts in poor, urban areas. Do you think your particularly model could be a solution to this growing problem?
Dennis: We do not believe there is a one-size-fits-all solution to food deserts. The Village Market offers one potential road map. But remember, the essence of Village Market is that it was “birthed by” the community—not Janus, not Home Forward, and not some federal grant program. We trust each community to find solutions that will work for them—but in order to do this, you have to have an incredible faith in people who live in that community. We also refer to Janus as the “vehicle” through which the Village Market vision was made real, not the “owners” of the Market. A study was just completed by the Oregon Public Health Institute on Village Market which details out the various elements that have gone into its success so far, and this study could be a guide for other communities exploring these issues.
One element which does excite us is the core concept that the Market is much more than a store. It is a community hub where neighbors can gather, it is employment opportunities in a neighborhood where there are few, it is an educational program serving as home base for a team of Community Health Workers, it promotes inter-generational growth with a “Healthy Kids Snack Corner” designed by children from the neighborhood school, and it represents a beacon of hope that the community can thrive.
On the other hand, we are not yet a solution because we do not yet know for sure if the model is sustainable over time. Sales have gone up every month for the last seven months—but due to the lower profit margins inherent in the healthy food concept, we are still “living” on our start-up subsidy funds. The outstanding question now is whether a store like this can self-sustain or whether it will require some form of ongoing subsidy. If a subsidy is required, then there is a major policy issue of where it should/could come from—in essence, who will step up to provide the irrigation necessary to turn a food desert into an oasis?
Nell: How do you integrate Village Market with the other core homeless youth work of Janus Youth? Have you ever been concerned that the market might distract the organization from your mission?
Dennis: Janus’ organizational mission is to “be a leader in creating innovative community-based services that enhance the quality of life of children, youth and families by working in partnership with others to create a safe and healthy community.” We are actually not a homeless youth service agency but a multi-service agency for children, youth, and families. Janus operates over 40 different programs at 20 different locations including long-term residential treatment, a full continuum of services for runaway/homeless youth, home visiting/parent training for teen parents/infants/children, a youth scholarship fund, and Village Gardens. Our organizational chart is actually a tree reflecting different branches of service with each leaf being an individual program. The Village Gardens limb actually has several leaves besides the market including two community garden sites, a community health-worker project, a flock of organic hens, and an organic farm run totally by teenagers. The Village Market is a “stretch” for Janus, but it is a natural leaf on the Village Gardens limb—and when we were asked to be the vehicle for this community vision, our mission clearly tells us that is exactly what we should do. Each of Janus’ “limbs” of service operate with a high level of autonomy but with a core set of values based in Safety and Respect: creating a Safe environment for staff, youth, and families to grow, learn and heal and building Respectful relationships with others which empower them to find effective solutions for themselves. So the Village Market does not so much “integrate” with our mission as it “fits” within our mission.
Nell: The Village Market was obviously a big risk for Janus Youth to take on. Were board and staff initially concerned about the risks and how did you overcome those fears?
Dennis: This type of venture represents a huge risk to any organization. Our leadership staff and Board were extremely concerned particularly around the financial area. Starting up a new business requires substantial start-up capital as well as subsidized operational capital for an initial period of time. One of our Board members owns a business consulting firm, and he personally worked with the community planning team to build a sound business plan. This plan also had substantial input from our “grocery store consultant”. We then worked with Home Forward to solicit funding for the business plan and were successful in raising over $800,000. Home Forward contributes free rent and utilities as part of their investment. The Board approved opening the store based on two parameters: 1) We would not open until all of the start-up/operational capital in the business plan had been raised; and 2) Once open, we will operate the store as long as it does not require a subsidy from Janus. We were successful in meeting “1” and are now in the process of testing out “2”—but the Board is clear that we cannot afford to drain resources from other program areas in order to support ongoing operation of the store. Either it will reach a “break-even” point as a stand-alone business or we will need to find the operational subsidy necessary to maintain it on an ongoing basis.
It is the ultimate question for many nonprofit leaders. But often one that they can’t answer on their own. Perhaps because nonprofit leadership may be so mired in the weeds, or so used to doing what they’ve always done, or simply lack fundraising expertise or knowledge of new trends and tools. The end result is that they simply can’t figure out how to raise money in new and better ways. Which is where a revenue assessment can turn the tide.
Let me give you an example.
Institute for Human Services (IHS), a large social service agency for homeless men, women and children in Honolulu, Hawaii, enjoyed success in government grant funding, but had been unable to diversify their funding as much as they would like in individual and corporate areas. At the same time, their small fundraising staff was over capacity and struggled to keep up with the volume of work. The board of directors was eager to help fundraise but didn’t know the best way to get involved.
The organization knew they had the opportunity to raise more money, but didn’t know how to prioritize their resources to do so.
IHS hired Social Velocity to conduct a revenue assessment to find opportunities for growing their funding. I interviewed board, staff and external funders to get their insights about fundraising at IHS. Then I reviewed organization financials, materials, technology, staffing, planning, and other processes. From this analysis, I wrote a 30-page analysis with specific recommendations for improving fundraising in each revenue area and presented my findings to the staff and board.
With Social Velocity’s revenue assessment, IHS has hit the ground running making improvements to their fundraising function. They have already hired a new Development Director who has been able to shoulder more of the responsibility for fundraising, freeing the Executive Director to participate in more donor relations activities. They are looking forward to reviving past donors through more targeted fundraising strategies, caring for existing donors and creating broader opportunities for constituents to support the mission more personally. The staff and board are energized by the specific fundraising role and responsibilities I outlined for them. The assessment really turned the tide for them, as executive director Connie Mitchell explained:
The analysis and recommendations turned on the light bulb for me about how an investment in one key development staff could multiply our results over a short time. We’re also confidently using our resources more wisely for a better ROI when it comes to fundraising tools and media strategies.
A revenue assessment is for nonprofit organizations that know they want (or need) to raise more money, but don’t know how to get there. Here are the steps I go through in a nonprofit revenue assessment:
- Interview Stakeholders. I conduct in-depth, one-on-one interviews with the executive director, key staff, key board members, and key funders and other external constituents to understand what is working and what isn’t.
- Review Documents. I analyze all organization documents, policies, procedures, financials, systems, and materials to understand the internal and external processes for raising money.
- Assess Organization. I look at 6 elements of the organizational structure (mission and vision, strategy, operations, etc) to determine how well they contribute to fundraising effectiveness.
- Analyze Revenue Streams. I look at all current and potential revenue streams to uncover opportunities for increases.
- Review Fundraising Infrastructure. I review all aspects of the organization’s back-end functionality for raising money (such as donor database, materials, systems, technology) in order to uncover areas for increased efficiencies.
- Deliver Analysis and Recommendations. I write a 15-20 page detailed analysis with recommended actions for increasing funding streams.
- Present Assessment. I present the assessment and recommendations in-person to staff and board for questions and discussion.
It doesn’t have to be so hard. A revenue assessment can give you a clear road map for moving your organization from financial insecurity to long-term financial sustainability.
Photo Credit: Julia Manzerova
Earned income, or the sale of goods and services, is a somewhat misunderstood and unexplored financial opportunity for nonprofits. Yet there are countless examples of nonprofit organizations that sell goods or services to supplement their revenue, like the Girl Scouts, Goodwill, museum gift shops, hospitals, charter schools.
If you’ve ever wondered if earned income might be an opportunity for your nonprofit to raise unrestricted revenue, download our “Evaluating Earned Income” webinar. This webinar is part of our ongoing Financing Not Fundraising webinar series that shows nonprofits how to create a more sustainable financial engine for their organization.
Earned income is not right for every nonprofit, but every nonprofit should at the very least analyze whether earned income is a potential opportunity.
This webinar will help nonprofit leaders:
- Understand what earned income is and when it is most successful
- Learn about other nonprofits and their earned income businesses
- Evaluate whether earned income is a possibility for their organization
- Determine if their organization is ready to explore earned income
- Understand the steps in launching an earned income stream
Evaluating Earned Income Webinar
The registration fee will get you:
- A link to a recording of the webinar, which you can watch as many times as you like
- The PowerPoint slides from the webinar
- The ability to ask additional follow-up questions after the webinar
And if you missed last month’s sold out Raising Capacity Capital webinar, we are did repeat of that webinar. Capacity capital is the money that every nonprofit needs, but most find so hard to raise. Capacity capital can help your nonprofit to:
- Hire a development director
- Launch an earned-income stream
- Expand your programs
- Evaluate your impact
- Train your staff
It is money for infrastructure and organization building. If you want to move your organization out of the starvation cycle, you have to learn how to raise capacity capital.
The Raising Capacity Capital webinar will show you how to:
- Talk about the importance of capacity capital to your donors and board
- Create a budget for the capacity dollars you need
- Break the goal into donor ask amounts
- Identify prospective donors
- Give your board a role in the campaign
- Gain the confidence to start asking for the money you really need
Raising Capacity Capital Webinar
Photo Credit: www.girlscouts.org
A little over a year ago I started introducing tools on the Social Velocity web site to help nonprofits, who might not be able to afford consulting services, grow their programs, create a financing strategy, revamp their board. I am blown away by how popular these tools have become.
I started Social Velocity almost four years ago because I saw a real hole in the nonprofit sector. Small and medium nonprofits working on social change lacked access to expertise and resources to strengthen and grow their solutions. The Teach for Americas of the world were building impressive organizations and replicating their solution far and wide. But they were doing so with the help of deep networks of experts and money. They were the lucky ones.
But there are equally impressive solutions housed in much smaller, less resourced nonprofit organizations that aren’t really seeing the light of day. Because these organizations don’t know how to put a growth plan together, figure out how to finance the impact they want to have, or create a compelling ask for money to build, their solutions are not reaching as far as they could.
Social Velocity exists to help those small and medium-size nonprofits who want to be entrepreneurial, grow their programs, get their board engaged and invested, raise money to build their organization, break out of the starvation cycle.
And there are some nonprofits that are so small or so new that they aren’t ready yet for a customized solution. So our tools are there to help them start creating momentum on their own.
Our Step-by-Step Guides help a nonprofit to:
- Create a theory of change, which is the fundamental backbone of any nonprofit effort to get more strategic and garner more external support.
- Develop a case for support, a clear, well-articulated, compelling argument for why a donor should give to your nonprofit.
- Craft a sustainable financing plan, that lays out how enough, sustainable money will flow through your doors to support your mission.
- Create a business plan for an earned income venture to result in new, unrestricted revenue for your nonprofit.
And the E-books we have developed describe:
- How to move from the exhausting hamster wheel of fundraising to a more strategic, sustainable effort to finance your nonprofit, and
- How to create a groundbreaking board of directors that can strengthen and grow your impact
And our Monthly Webinars describe how to find individual donors, evaluate earned income potential, create a message of impact, raise capacity capital and much more.
You can learn more about all of our tools here.
I’m committed to continuing to expand our inventory of tools so that more nonprofits can strengthen and grow their impact. So I’d love your ideas for other tools you would like to see.
Photo Credit: Andrew Morrell Photography
Once a month (or maybe more often depending on the response) I will pick a reader’s question to answer. It can be about anything related to nonprofits, social innovation, boards, financing, fundraising, social innovation, philanthropy, you name it. Each month I’ll pick the most interesting question and write a blog post response to it.
And as an incentive, the person whose question is selected for the first month’s post in the series will receive a free copy of my e-book, “10 Traits of a Groundbreaking Nonprofit Board”
So start sending me your questions. I can’t wait to read them!
Photo Credit: e-magic
After 3+ years of a difficult recession it looks like the economy might be starting to turn around. That’s great news. But for the nonprofit sector, which is always the first hit by and last to rebound from a recession, it might still be awhile until they enjoy the looming economic recovery. But it does no good for nonprofit leaders to throw up their hands and curse the economy. Instead, nonprofits should seize this opportunity to rethink how their organization brings money in the door.
There are some key things nonprofit leaders can do to create a sustainable financial model in the midst of lingering economic uncertainty:
- Take a Step Back. Stop putting your organization in the “fundraising” box and take a big step back. Figure out an overall financial model for your organization that connects with your mission and your organization’s core competencies. Don’t just go through the regular fundraising motions (direct mail, events, grants). Rather, analyze how to create a long-term financial model for your organization.
- Harness Your Board. Your board of directors ideally is a group of people who bring connections and expertise that could help your organization. Tap into that. Educate them on what your organization needs and brainstorm how they can help. Now is not the time to be shy. Be strategic about what your board can do and get them to do it.
- Create a Plan. If your organization doesn’t have a strategic plan and a revenue plan, create them. You raise money by being strategic, first about what your organization is and does, and second about how you are going to create sustainable revenue streams. People give to causes that they care about, and they give even more money to organizations that are strategic about what they do and how. A good strategic plan is an invaluable tool around which you can build investment. And a good revenue plan gives you a step-by-step way to generate money.
- Reallocate Resources. As a nonprofit organization you have limited resources (money, staff, technology, time) with which to raise money. You want to make sure that the effort you put in has the highest return on investment. Calculate the direct and indirect costs of every revenue-generating activity and determine the real net income you generated. Are there better, more effective ways to raise more money for less cost and effort?
- Use Technology. Move your communications with donors and prospects online. You’ll save money and have a better chance of getting more and bigger gifts. Send email newsletters, campaigns, event invites. Survey your donors. Create an online community through social media where people can get to know your organization and become involved. People will become more interested in your work and more invested in the organization.
- Learn from the Best. Now is the time to learn from others, get a fresh perspective, find a mentor or coach for your Development Director. Use social media to find interesting and innovative people and ideas. Talk with your fellow social change leaders locally, nationally and internationally. Attend online conferences and webinars. By getting out and hearing what others have done and how they have innovated you will find new ways to grow revenue.
- Strengthen Your Case. Money is raised around a case for support. It can be tempting when times are tough to fall back on a message of need. “We need to raise $50,000.” But the better way is to clearly connect donors with the change you are creating in the community. If you don’t have a case for support write one. If you have one, revisit it and make sure that it is compelling, clear, concise, inspiring. Invest donors in the change you are creating.
- Clone Your Best Donors. When you are struggling to find new donors, go back to the source. Dig into your database to determine the characteristics (demographics and psychographics) of your best (most years of giving, biggest dollar, greatest upgrade) donors. Then survey them (formally or informally) to find out why they give, what messages resonate with them, what they read, where they get their information. You want to understand how they tick so that you can find others like them.
- Diversify Your Funds. When one revenue stream (or several) are down, you want to be able to draw on other streams. Are there other revenue streams you could launch or strengthen? Have you explored earned income? Could you grow your individual donor base? There are many ways to raise money and always potential for new avenues. Explore whether some of these make sense for your organization.
Things may be looking up, but it’s going to be awhile for the nonprofit sector. Instead of waiting around for a better economy, make some significant changes now to how you raise money. In so doing you’ll be turning this challenge into a tremendous opportunity for your organization.
I’m delighted to announce that, by popular demand, we are releasing today the Financing Not Fundraising, 2011 e-book. This 27-page e-book is a compilation and expansion on the 11 blog posts from 2011 in the Social Velocity Financing Not Fundraising blog series.
In the midst of an incredibly challenging economic situation that is not getting better any time soon, the Financing Not Fundraising, 2011 e-book outlines a new vision for how the nonprofit sector gets funded. Fundraising in its current form just doesn’t work anymore. Indeed, traditional fundraising is holding the sector back by keeping nonprofits in the starvation cycle of trying to do more and more with less and less.
What the sector needs is a financing strategy not a fundraising strategy. Nonprofits have to break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities. Instead, nonprofits must work to create a broader approach to securing the overall FINANCING necessary to create social change.
This 27-page e-book is a compilation and expansion of the Social Velocity blog series Financing Not Fundraising from 2011. The blog series is ongoing, with new posts added throughout each year. We’ll begin adding new posts to the series in the new year, but in the meantime, this e-book captures and expands on the posts from 2011 in one place.
The 12 chapters of the Financing Not Fundraising, 2011 e-book are:
- What is Financing Not Fundraising?
- Create A Financial Strategy
- Align Money and Mission
- Find Individual Donors
- Develop a Message of Impact
- Raise Money for Building Capacity
- Explore New Types of Money
- Evaluate Earned Income
- Calculate Net Revenue
- Move From Push to Pull
- Stop Lying to Donors
- Getting Started
You can download the Financing Not Fundraising, 2011 e-book here.
If you want to learn more about how to apply the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series