By Jessica Melton
According to a Nonprofit Finance Fund survey, 41 percent of nonprofit organizations ran a deficit in 2012. Many NPOs are turning toward a hybrid business model–adding for-profit ventures–to provide consistent revenue streams. In fact, over 50 percent of NPOs currently operate under a hybrid business model.
Janna Finch, Nonprofit Analyst from Software Advice (a website that compares nonprofit software) wanted to learn more about how to make this transition. Finch offers the following advice; in particular, how to persuade your board of directors to support your for-profit endeavor, including:
Ensure Your For-Profit Aligns with Your Mission
It’s important that you reassure the board that your for-profit won’t deter from your nonprofit’s mission and purpose. To do this, make sure your for-profit complements your nonprofit. Martin Schwartz, founder and president of Vehicles for Change, says choosing a complementary for-profit business was crucial in convincing his board to launch a used car dealership, Freedom Wheels.
His nonprofit accepts donated cars, which they then repair and give to eligible families in need. Their for-profit business created a channel in which they could sell vehicles for a profit, which is used to benefit their nonprofit’s car ownership, auto technician, and mechanic training programs.
“It’s important that your venture ties as closely as possible to the mission,” Schwartz explains. “You have to consider how the general public is going to view the for-profit venture in conjunction with your nonprofit, so it has to make sense.”
Show Risks and Costs
It is additionally important to remain business-minded when pitching your for-profit venture to your board of directors. Maureen Beauregard, president of Families in Transition, experienced a lot of trepidation among her board when she first suggested opening a for-profit thrift store. Her organization’s board eventually agreed to take a calculated risk, but only if the nonprofit didn’t acquire any debt.
Beauregard managed to secure a $300,000 grant from a foundation that was investing in social entrepreneurs and found a retail space that would be $90,000 a year. She suggested purchasing and developing the property at a cost of $30,000 per year instead, freeing up $60,000 each year to cover other business costs. Not only did this shorten the timeframe to profitability, Beauregard’s business-minded strategy also turned a liability (rental fees) into an asset (owned property) to help the organization’s bottom line.
Remember, your board has your nonprofit’s best interest in mind. Provide the evidence that your for-profit venture is both viable and beneficial, and the board will see your hybrid business model as a smart decision.
The full article can be found on nonprofit blog, Able Altruist.
Jessica Melton is an Editorial Coordinator at Software Advice. She writes on a variety of topics, from small business to software, and loves learning more about the world of nonprofits. Connect with Jessica at @JessicaMColburn.