How Non-Profits Become Self- Sufficient Zira J. Smith, Ed.D. University of IL Extension 1111 E. 87 St., #600, Chicago, IL 60619 773-933-6774 [email protected]@illinois.edu

How Non-Profits Become Self-Sufficient

Zira J. Smith, Ed.D.University of IL Extension

1111 E. 87 St., #600, Chicago, IL 60619773-933-6774 [email protected]

MYTH: Nonprofits cannot operate a profitable business and do their mission

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? 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

Nonprofits think it is ‘entrepreneurial’ to: Pretty up brochures; Design, develop, implement new programs; Outreach to new audiences

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

(e.g.,work with potential dropouts, assistive devices, homecare for elderly, selling curricula, in Chicago Streetwise newspapers sold by homeless people)

EARNED INCOME -- Defined

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)

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

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

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

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.

Earning Income…Why do it?...

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 Entrepreneurshipto 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?

Suggestions for Getting Started

Develop a Venture Investigation Committee

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

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

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.

Venturing beyond the gates, Facilitating successful reentry with entrepreneurship, Nicole Lindahl, with Debbie Mukamal. 2007

Sustaining grassroots community-based programs: A toolkit for community-and faith-based service providers. U.S. Dept of Health and Human Services, 2008

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

Black-on-Black Love—My Sister’s Keeper

• Formerly incarcerated women need work

• Biz Idea: Used clothing boutique from donated overstock

Grace House• Formerly incarcerated

women need work and job skills

• Biz ideas: Individual ideas from the participants


TASC: Treatment Alternatives for Safe Communities

• Adjudicated adults need work and job skills

• Individual biz ideas of participants

Chicagoland Prison Outreach Academy

• Formerly incarcerated persons need life and work skills to be eligible for CPO work training programs


The Beloved Community

• Mission is self-sufficiency and business development for community residents


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 North Lawndale

Employment Network• NLEN bee products

business, and• Formerly incarcerated

persons need work and job skills


Exodus Renewal Society, Inc.

• Formerly incarcerated persons need work and job skills

• Integrating self-employment education into re-entry programs

• Individual and organization biz ideas


Home of Life Formerly incarcerated

persons need work and job skills

Community economic development requires business ownership

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


Teamwork Englewood• Re-entry citizens need

work and job skills• Renters need self-

reliance education and skills

• Landlords need marketing information

Family Focus• Young mothers need

work and job skills education

• Children need self-employment education for self-esteem and business leadership awareness


Women’s Treatment Center

• Women in treatment need work and job skills

• Women need legal alternative work options to support selves and families

Empowerment Zone• Community residents

need self-reliance programs

• Business owners need knowledge and skills development

Insights from Research

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

Documents

How Non-Profits Become Self- Sufficient Zira J. Smith, Ed.D. University of IL Extension 1111 E. 87 St., #600, Chicago, IL 60619 773-933-6774 [email protected]@illinois.edu