Nonprofits Run Successful Businesses to Raise Money
WASHINGTON (AFP eWire - July 11, 2003) - In an economic climate in which many nonprofits are looking for new funding sources, one answer is to start a business venture.
A new report provides an overview of the practice, with several examples from the nonprofit field, and presents information on how to build a successful, sustainable, revenue-generating enterprise.
'Powering Social Change: Lessons on Community Wealth Generation for Nonprofit Sustainability' was released July 2 by Community Wealth Ventures Inc., a consulting firm in Washington, D.C. that helps nonprofits with business ventures and corporate partnerships.
The report included a survey that found that 69 percent of business ventures by nonprofits were profitable or broke even. About one-third of the organizations generated annual gross revenues of $100,000 to $500,000. It took an average of about two and a half years for the ventures to earn a profit, consistent with conventional wisdom about small business start-ups, according to the report.
'The question is not whether social entrepreneurship is right for every nonprofit; it's whether every nonprofit is ready to take on the challenge,' said Charles King, founder and co-executive director of Housing Works and an adviser to the report.
Culture is often the biggest stumbling block to starting a business venture, the report said. People wonder if they are selling out or losing their soul if they create a profit-earning enterprise. However, the report, which looked at 72 nonprofits representing 105 ventures and partnerships, found that nearly 90 percent of the organizations started businesses in line with their missions.
For example, Nation's Capital Child and Family Development is an organization in Washington, D.C., that operates 25 daycares and produces 500,000 nutritious meals for the daycares' children. To provide these meals, the center built an institutional kitchen and hired a professional culinary staff. After recognizing that the kitchen had the capacity to generate 1.2 million meals a year, the center's leaders started a successful catering service to make and deliver meals for other childcare and eldercare facilities in the area.
Business ventures are not just for the large nonprofits either, the survey found. One-third of the organizations had annual operating budgets of less than $1 million, and 46 percent of the organizations were community-based.
The most popular business ventures were related to an employment-training mission: retail and thrift stores, employee training programs, clerical services and light manufacturing. For a copy of the report, visit Community Wealth Ventures Inc.
Related AFP ResourcesDonor Perceptions: Larger Charities More Effective, Smaller Charities More Efficient With Funds
RESEARCH: As a Canadian Donor, What Do You Want?
Charities Raising More Money, But Still Losing Donors
Does Your Organization Have “Relationship Capital?”
Overall Giving Returns to Pre-Recession Levels, Study Finds