Monday, May 25, 2009

A Call to Innovate: Earned Income

Ben & Jerry's
Ben & Jerry give you a good reason to get fat: Social Enterprise / Partnershops

I previously penned the (subtly titled) article, “Hey, Nonprofits! Wake up! You can innovate or you can die.”

The piece included 20 questions that I’ll be exploring in more detail under the heading “A Call to Innovate.”

Here is the first question: Can you offset some of your philanthropic dollars with earned income?

Social enterprise. Social ventures. Earned income. Call them what you will, these efforts are an important part of the future of nonprofits.

That’s what everyone’s been saying for years.

But aren’t they also an important part of the history of nonprofits?

A few examples:

v      Thrift stores (i.e. Goodwill)

v      Museum gift stores

v      Gymnasiums (i.e. YMCA)

v      Rental facilities (i.e. Boy Scouts campgrounds)

v      Packaging/Assembly services (i.e. work-service sites for people with intellectual disabilities)

Many of these ventures are as close to the core mission of these organizations as any other part of their work. But over the past couple of years, we have seen the emergence of ventures that were more directly aimed at generating profits and less and impacting mission.

For example, a youth development organization owning a Ben & Jerry’s Scoop Shop. A pet shelter owning a consignment shop. A theater troupe operating a hair salon (I mean, that could happen, right?).

What is the ideal blend of “margin and mission”? When can innovation lead towards mission creep in the name of profits?

Here is an approach that I recommend adopting when considering what earned income activities to pursue:

  1. Create an “asset map” that charts all of the areas of expertise that are a part of your organization, as well as the tangible assets that you own (i.e. real estate)
  2. Build a “relationship map” that documents all of the connections that you have in the community that could be naturally/easily leveraged into a business relationship (i.e. your natural customers)
  3. Cross the two of these maps to see which of your assets are currently being purchased by your relationships
  4. Explore the opportunities that present themselves through this process, and determine if there are any that naturally jump out; if so, attempt to calculate the possible value of a venture aimed at monetizing that relationship.
  5. Similarly, document all of the additional needs within your relationship map. See if there are any untapped opportunities to capitalize on multiple relationships at once (i.e. if you have a relationship with several dozen churches, a floral business might be a good venture to explore… particularly if you are The Arboretum)
  6. Analyze the “highest yield” opportunities that emerge from this process to determine the 3 – 4 that make the most sense for your nonprofit.

The last of these if going to be different for each organization.

For some, the one that makes the most sense will be the most profitable. For others, the most mission-related. For others, a hybrid.

What formula do you think applies to your organization? 

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