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Should Your Non-Profit Start a Social Enterprise?

October 16th, 2012. Filed under Revolution! Solutions,Social Good,social good models

Maintaining the funding for a non-profit is tough. Sure, there are donations and volunteers, but even then you still need money to keep the lights on and pay for your office space. Most non-profits end up spending as much time applying to grants and trying to keep their financial heads above water as they do actually trying to accomplish their mission.

Some non-profits, like Goodwill, have created non-profit social enterprises where the money they gain from the donated goods they sell is used to keep the organization running. What most people don’t know is that there is a second kind of social enterprise that a number of non-profits have been testing: starting a for-profit business that helps to accomplish the mission of the non-profit while supporting it financially.

For-Profit Social Enterprises Created by Non-Profits

How does it work? It’s different for each organization. For example, the non-profit Aspen Pointe operates for-profit coffee houses that employ veterans, seniors, at-risk youth, and the disabled, and Work Options for Women operates a restaurant in town that trains and employs poor women while donating their proceeds back to the non-profit.

For charitable organizations in need of funding, it can be a great boon to the bottom line. Moreover, as evidenced by the above companies, it can serve as a concrete way to help the very people listed in your mission by offering jobs and training and paying for those things at the same time.

Last but not least, regular people often like supporting businesses like this because they can feel good about their money going to help people who need it.

What Your Non-Profit Needs to Know Before Starting a For-Profit

So, is starting a for-profit social enterprise right for your non-profit? There are several questions to ask before diving into it.

First off, if you’re going to start a for-profit business, it needs to make money, so it’s important to feel confident that you have people in place with the necessary skills and experience to succeed in the marketplace. Beyond this, the culture of your charitable organization needs to fit with the idea of starting an enterprise – there’s a big difference between people who want to help needy kids hands-on and those willing to operate a business that supports that mission.

Other logistical questions that need to be answered include whether or not you have the money required for startup and operating costs, and if the end result of starting this business will be worth the funds that it takes away from your non-profit. And you’ll definitely want to talk to lawyers and financial advisors about how to deal with unrelated business income.

But the most important question isn’t logistical at all: is starting this for-profit social enterprise really going to help with the mission you set out to accomplish? The answer is going to be different for every non-profit, and only you can answer this question.

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