Monday, June 04, 2007

As Casselman Points Out; Social Enterprise Fundraising Is Not All Kittens, Chocolates, and Roses

Ben Casselman's "Why 'Social Enterprises' Rarely Works" (June 1, 2007; The Wall Street Journal Online, summarizes what many of us non profit professionals whispered among ourselves, after our attempts; it is tough to operate a for profit business, when one is also running a non profit organization, too. His piece is located at:

The social enterprise paradigm is a newer concept in American non profit fundraising. The basic social enterprise premise is that a non profit can also conduct for profit business as a source of revenues for its programs and operations. For instance, a woman's shelter may start a second hand clothing store as a method to raise funds for its shelter programs.

Many non profits liked the sound of the concept, once it arrived in fundraising literature and discussion, because it sounded like a consistent, potentially very successful revenue stream. It is interesting to ask whether perhaps this speaks to the non profit sector's impression of itself? Perhaps there is a thought among non profit managers (who are not confident in their fundraising success) that the for profit world is inherently financially successful?

As Casselman points out, few considered that a for profit business (like a non profit business) is not truly self-sustaining when it's run by a non profit. Creating a new business is hard work and after its established, it's ongoing. In other words, many for profit enterprises require loans to get businesses up and running and in striving to be a self-sufficient for profit business - the focus on the mission is lost. The social enterprises often taking precious time and resources from the non profit parent organization's work. Being overly focused on the new business, the non profit may miss key needs in the community or solutions. This happened to the featured non profit in the article; they did not see the forest for the trees.

It is tough work to run a business AND run a non profit organization. A non profit really may go from running one organization to running two, but on one organization's staff, volunteer base, revenue, and resources!

Social enterprise-ism caught on so well because, as Casselman explains of the 1980's and '90's, " cutbacks in government grants and a downturn in private funding pushed many organizations to seek ways to generate revenue. Prominent grant-making organizations such as Pew Charitable Trusts and Kauffman Foundation began asking recipients develop plans to sustain themselves. Many nonprofits saw social enterprise as a way to become both more efficient and more independent."

Organizations were creating new organizations hoping to up revenue and gain the support of potential grant donors.

If nothing else, lessons have been learned. There have been success stories, as Casselman describes, but if a non profit is considering social enterprise - they must research who has been successful and how they've become successful at it. I suspect they might find that the cost/benefit ratio only works for organizations at a specific size and beyond (large), and ones that are tying their mission directly to the work of the for profit business (in other words, the program work winds up making money).

We fundraisers are always listening for new fundraising (and friend-raising) methods. Us grant writers, specifically, are equally eager to be certain that the organizations that we write grant proposals for remain of interest to our past and potential grant donors. In aiming to be more self sufficient, as Pew and Kauffman Foundations encouraged, some of us went too far down the wrong road (at the expense of our missions). That's OK as long as we're willing to admit our mistakes, as non profit agencies, and get back to being mission-focused. Ultimately, as you and I know, no donor (grant donor or other) will continue to support us if we do not meet the need in our community that our mission statements address. This is first, and foremost.

Septemeber 1, 2009 Addition to This Post:
See The Foundation Center's article Social Business Wins Big Investment for a social enterprise success story! The points made, in this post, speak to what social venture investors are described as looking to fund, in this linked article.

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