With the US and international economy in a recession, with job layoffs increasing, the stock market down, industries pressed for profits, and the American consumer stretched; the support that nonprofits have received in the past is being challenged by limited dollars. More needs, less dollars. The result is that more nonprofits are seeking to few charitable dollars, and pushing for “market position “ against each other.
Nonprofits are good at stretching dollars, but now there are too few dollars to stretch. Now is the time to seek creative dollars and opportunities to sustain the operation.
The Business Model
Taking a page from the business sector, nonprofits are looking for niche business opportunities where they can seek new dollars, donors, and on-going funds to sustain the nonprofit. The challenge is threefold.
- Research Market Opportunities. Find mentors in that business to advise and assist. Make sure that the opportunity is in line with the organization’s mission, has proper internal organization support. Make sure the board and staff alike is clear about the purpose of the new venture, and have prepared a Business Plan to follow.
- A Feasibility Plan is important in determining that the business opportunity the nonprofit seeks has sustainability and growth opportunity. The worst thing a nonprofit can do is go into a business where the competition is so great, that the business has a good chance of failure. A good example of this is restaurants, where one out of every ten has a chance in succeeding. Proven market research and a feasibility study can assist the nonprofit in its planning process prior to business launch.
- Seeking New Investors and Donors. The good news today is that there are more donors seeking to be seen as investors in nonprofits, and are willing to donate time, money and expertise if they believe in your mission and cause. This means that nonprofits have an opportunity to seek successful business entrepreneurs, bring new expertise to the organization, and expand the resource capacity of the nonprofit.
There are philanthropists that have come together in urban settings like Kansas City to form giving networks as Social Venture Partners.
Typically this could be retired individuals, business executives, and wealthy donors who wish to see their money and personal time be invested in the nonprofit for a set period of time. They are donors who seek a “social return” on their contribution. They want to see the nonprofit succeed in their business mission and venture.
The Pitfalls
Business models are risky. That’s why they are considered entrepreneurial. When they succeed they bring great profit and recognition. When they fail, they have the potential of bankrupting or setting back a nonprofit or investors. The nonprofit should remember three things as well.
- Make sure the money and resources dedicated to the business opportunity are “set aside” from the nonprofit core budget. Risk Capital is money, personnel, and resources that the nonprofit is willing to risk, yet the nonprofit base financials will be protected.
- Make sure the legal structure of this business is separated from the nonprofit, to the extent that the nonprofit organization is protected. Good legal and business advice are critical, and usually addressed in the Business Plan. It is also possible to be successful enough in the business that for profit competitors rush into your market to kill or take over your business. This is why good mentors and advisors are critical.
- As we previously discussed donors as investors, they often bring a whole new set of expectations to the nonprofit. The nonprofit needs to sit down with these donors, so both sides clearly understand the challenges and risks.
These types of donors tend to be entrepreneurial and expect results quickly. Nonprofits are not always used to this mindset, so agreed upon measurements are important of the business venture.
Business Results
When the nonprofit prepares the proper research through the feasibility study, builds a concise business plan, and has clear expectations of the business and investors, the venture has a better chance of succeeding.
Our Services Include:
- Endowment/Planned Giving
- Executive Search Services for Fundraising Positions
- Fund Raising Feasibility Studies/Plans
- Training and Workshops
A partial list of organizations that have benefited from our services include:
Avila University
Central Georgia Community Foundation
Children’s Mercy Hospital
Colorado Boys Ranch
Community Foundation of the Ozarks
Community Foundation of South Wood County
Friends of the Zoo
Greater K.C. Community Foundation
Heart of America Family Services
Johnson County Foundation on Aging
Junior Achievement
Kansas City/St. Joseph Diocese
Kansas City Art Institute
Kansas City Public Library
Kansas City Symphony
Memphis Community Foundation
National Kidney Foundation
Park University
Rockhurst University
Sunshine Center School
Swope Parkway Health Center
William Jewell College
Yampa Valley Community Foundation
