For-profit ventures help nonprofits shore up the funding they need to maintain and expand their programs

By Abny Santicola

Achievement Centers for Children and Family Service Association

Achievement Centers for Children, a Highland Hills, Ohio-based organization that serves children with disabilities and has specialized classrooms that school systems refer children with severe autism to, started a for-profit consulting program in response to repeated inquiries from school systems, teachers and paraprofessionals on getting more training on how to educate the children with autism in their classrooms.

The cost per child per year to go to one of its specialized classrooms can be $50,000 to $60,000 for a school system. Its for-profit consulting program, Training by Achieve Consulting, can cost anywhere from $15,000 to $30,000 a year. Other, more traditional ways Achievement Centers for Children gets its funding are through the United Way, individual donors, state and foundation grants, billing commercial insurance, and Medicaid.

“What we’ve found is a niche in the community [where] there was a need,” Patricia Nobili, executive director of Achievement Centers for Children, says. “Our expertise and track record matched it, and we thought that this would be another tool for us to ensure the continued viability of our organization in fulfilling our mission, which also is doing our best to provide most services regardless of a family’s ability to pay, which is getting harder and harder to do. We thought this would be one avenue that could help us accomplish that.”

Now in its third year, the consultancy has grown from a staff of one to three full-time consultants and one part-timer. Consultants set up classrooms, work one on one with individual children, and train paraprofessionals and teachers.

Nobili says the venture has been moderately successful. The organization wrote a grant and committed money from its endowment to help subsidize the startup. As expected, it lost money the first year, but it exceeded expectations in year two and made a small profit. It’s struggling a bit this year — the consultancy is expected to pull in about $400,000 toward the organization’s $8 million budget for 2009 — but Nobili chalks that up to the state of the economy.

Achieve Consulting’s success encouraged the organization to start a second venture in which it charges businesses and other groups to use a high-ropes course at its facility for team-building exercises. It collaborates with Corporate Quest, a company that offers organizational consulting and customized retreats, for the business. It turned a profit its first year, and Nobili anticipates that when the economy turns around, business will pick up again.

The case was similar with Family Service Association, a San Antonio-based organization founded in 1903 that serves a population of low-income children, families and seniors, the majority of whom have household incomes of less than $15,000 a year — and more than half of those have incomes of less than $5,000 a year. The organization participated in an initiative about two and a half years ago where Community Wealth Ventures, a firm that helps nonprofits generate revenue through business ventures and corporate partnerships, helped it look at its earned-income options. The organization focused in on its senior services, which it’s been providing for 40-plus years and that offer in-home, personal-care assistance for seniors to allow them to stay in their own homes and independent for as long as possible.

Family Service Association’s senior services have earned a strong reputation for dependable, high-quality care, and the organization often had inquiries from people interested in paying for its senior-care services. But Nancy Hard, president and CEO of Family Service Association, says the organization would turn them away and make referrals to for-profit entities. With the help of Community Wealth Ventures, the organization developed a business plan for and launched At Your Service, which serves — at market rate — seniors as well as individuals who have recently been hospitalized and need temporary care. Now in its second year, Hard says, At Your Service is expected to break even by year three.

What do a nonprofit organization that helps low-income families and a used-car lot have in common? In most cases, not much.

But that’s not the case with Vehicles for Change, a community initiative founded in 1999 that repairs donated cars and sells them for $700 to low-income families in Maryland, Virginia and Washington, D.C.

In its first few years, the nonprofit would take newer or luxury donated vehicles to auction to try to turn a profit. But it quickly realized it wasn’t getting the best bang for its buck, and President Martin Schwartz and his team saw a unique opportunity to generate more funds. Though a little off the beaten nonprofit path, the solution was a no-brainer: set up a for-profit used-car lot.

In 2005, Vehicles for Change launched Freedom Wheels, where it sells donated vehicles (that are deemed to be in good shape) at market rate to benefit its programs. Today, Freedom Wheels accounts for $1.3 million a year, just less than 30 percent of Vehicles for Change’s total annual operating revenue. Without it, Schwartz says, the organization would no longer exist.

Vehicles for Change isn’t the only nonprofit crossing into for-profit territory in search of a way to supplement more traditional fundraising efforts. Far from it. Whether traditional fundraising methods aren’t filling the coffers the way they used to or an organization is expanding and needs a way to support new programs and services, more and more charitable organizations are carving out space within their missions for revenue-generating programs.

And in a time when dwindling government and foundation support, decreased corporate giving, and unsteady individual giving are causing budget shortfalls throughout the nonprofit sector, a fresh, viable revenue source isn’t something to turn your back on.

“Right now in our current economy, I think it’s imperative that charitable organizations look at other avenues to generate money,” Schwartz says. “And the beauty of it is that once you get the venture up and running, you can count on it on a regular basis — as opposed to fundraising, where in a poor economy like today, donations wither and foundation and government funds get tighter and tighter. If you’re only relying on those avenues for funding, you could be in big trouble.”

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