The economy being what it is, nonprofits are looking for new revenue sources. Starting a business to fund your good works is one option. This is the first of a 3-part series on evaluating such undertakings and making them work.

Is a business venture right for your nonprofit?
Adding a social enterprise — a business that strives for social impact as well as profit — to your nonprofit has some distinct benefits:

• diversifies the funding stream
• funds overhead/administration so “all donations are used for program,” as so many donors want
• can fund innovation that traditional funders may balk at
• adds entrepreneurial energy to the agency’s culture
• adds new skills to the organization’s staff
• enhances the nonprofit’s brand

With all that good stuff in the wings, social enterprise is worth checking out.. And, don’t be squeamish. Such activities have been part of the nonprofit sector for decades. From Girl Scout cookies to selling textbooks developed by a nonprofit or Ben & Jerry franchises used to raise money and provide job training. How about the thrift stores that support so many causes?

All businesses with a social-good overtone. It’s OK. It’s legal. And it takes many forms.

• cause marketing
• licensing
• temp agencies to employ recently trained clients
• restaurants or cafes
• packing and assembly of products
• clerical or IT services using graduates of job-training programs

Widespread as they are and enticing as the income may be, social enterprises are not right for every nonprofit. First of all, like every business venture, they require a lot of planning, a good product that people want, and the risk of failure is high.

How do you make it work for you?
As with any new project, this first task is to know your own capabilities. Do you have — or can you get — the management, staff, facilities, and funding to undertake a business venture? Are you hungry enough, innovative enough, and willing to take risks?

Small businesses fail when they lack sufficient experience, funding, understanding of basic business practices and competition, or just don’t make sales.

Most nonprofits probably don’t have business experience or understanding of some business practices. That’s a warning, not a stop sign. You can acquire the skills you need by educating your current staff or by bringing on staff that is business savvy.

And, truth be told, you may have more savvy than you realize. Assess your board, management, and staff. Really talk to them. Find out what they know that you didn’t realize they knew. Get ideas from them. In those discussions:

• Be honest about your strengths and weaknesses.
• Make sure your have the passion to become entrepreneurial.
• Be clear about your mission and how a for-profit arm would help that mission.
• Assess your courage . It’s risky.
• Figure out who the right person is for the job, someone who is experienced with business, decisive, and maybe even paid more than those on the nonprofit side.(Yeah, I know that hurts but you have to talk about it.)
• Decide what you’ll measure to determine whether you are successful.

In my next blogs, I’ll talk about ways to ensure success from the start and how to choose the right social enterprise for your nonprofit.

How has your nonprofit used social enterprise to improve delivery of its services?

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