Cover Story: Safety Line
For example, Achievement Centers for Children, an organization that serves children with disabilities, operates two revenue-generating programs: Achieve Consulting, which trains paraprofessionals and teachers working with disabled children; and a high-ropes course it rents out to companies for team-building exercises. (See the Sidebar.)
While Achieve Consulting is directly related to Achievement Centers for Children’s mission, if the high-ropes course starts to drive significant dollars, it might be considered unrelated business income — something the organization might have to consider down the road.
Heather Peeler, managing director at Community Wealth Ventures, a consultancy that helps nonprofit organizations become more self-sustaining through social-enterprise ventures, says that based on a recent survey of more than 1,000 nonprofit organizations, for those with social enterprises, close to 70 percent of the ventures are structured as divisions or departments within the nonprofits. But when the products or services offered are unrelated to the mission, they’re often established as for-profit subsidiaries.
Planning for social enterprises
Starting a revenue-generating venture is not for every organization. But organizations that are ready and go through with the process gain a profitable means of funding and a new way of thinking about themselves. Jean Block, owner of Jean Block Consulting and principal of Social Enterprise Ventures, says an organization should begin with an internal assessment to determine if it — staff, board and management — is ready to invest “in what will be a journey of serious change.”
Though there’s profit to be had in starting an earned-income venture, there are risks. But the risks can be mitigated by proper planning, identifying potential pitfalls and coming up with strategies to address them. Peeler says her firm recommends organizations find the intersection between the following three things to determine if an earned-income venture is right for them:
- Organizational assets. This includes things like the organization’s brand or reputation, and the skills and expertise it has, and looking at the opportunities that these assets present to the organization in the form of a potential earned-income venture.
- Market opportunity. Are there enough customers to sustain the venture? How many potential customers are there, and what would they be willing to pay, etc.? Interview potential customers, check out the competition and get an understanding of the marketplace you’re thinking of entering.
- Organizational capacity. How well is the organization positioned to be successful with an earned-income venture? Does your organization have the ability to, say, process checks and issue invoices to customers? Does it have the capability to manage customer-service inquiries? Does it have an entrepreneurial culture that allows people to take risks and the “organizational stomach,” as Peeler says, to sustain the ups and downs of a business cycle?
Organizations also should ensure that they have the right talent in place to run the venture.