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How Non-Profits Become Self-Sufficient Zira J. Smith, Ed.D. University of IL Extension 1111 E. 87 St., #600, Chicago, IL 60619 773-933-6774 zjsmith@illinois.edu MYTH: Nonprofits cannot operate a profitable business and do their mission

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How non profits become self sufficient l.jpg

How Non-Profits Become Self-Sufficient

Zira J. Smith, Ed.D.

University of IL Extension

1111 E. 87 St., #600, Chicago, IL 60619

773-933-6774 zjsmith@illinois.edu


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MYTH:Nonprofits cannot operate a profitable business and do their mission

  • Even if their fundamental purpose is not to provide a product or service, but to change people; and even if they are led by values rather than financial commitments to shareholders…


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“To help the poor people of the world, step one…make sure you’re not one of them.”

“We have a responsibility to our program recipients. They’ve had so many losses in their lives and for us to come in for a year or two or three and give them hope, only to have the program go away, we’ve just caused another loss and further loss of hope in their lives.”Akerlund 2000


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Social entrepreneurs vs. Traditional nonprofit thinking…why?

  • Operating costs have soared;

  • Traditional resources have flattened;

  • Number of organizations competing for grants has more than tripled…(approximately 2 million nonprofits in U.S.)

  • Number of people in need has greatly escalated.

  • Managers and Board members of non-profits realize they must depend on themselves to insure survival; which has led them to entrepreneurship.


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Innovative is not Entrepreneurial

  • Nonprofits think it is ‘entrepreneurial’ to:

    • Pretty up brochures;

    • Design, develop, implement new programs;

    • Outreach to new audiences

  • Yet, they return yearly to same donors, foundations and government agencies, seeking their generosity…that may be innovative, it’s not entrepreneurial.


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How do they start business ventures and still stay loyal to social missions?

  • They use ‘earned income’ strategies to pursue a social objective that is tied directly to their mission…

  • May employ disadvantaged people; or sell mission-driven products or services that have impact on a specific problem

    (e.g.,work with potential dropouts, assistive devices, homecare for elderly, selling curricula, in Chicago Streetwise newspapers sold by homeless people)


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EARNED INCOME -- Defined

  • Income is “earned” when there is a quid pro quo – a direct exchange of product, service or privilege for monetary value.

  • Earned income for a nonprofit includes getting payment for such things as tuition, products or services, government contracts, consulting fees, membership dues (when dues purchase tangible benefits), sale of intellectual property, agreement to use the nonprofit’s identity, royalties, ticket sales, property rentals/leases, and so on.


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Entrepreneurial Attitude…“If it’s to be, it’s up to me”(for profit and non-profit organizations)

  • Earnedincome is paramount!

  • For social entrepreneurs, it has become the primary goal.

  • Philanthropy, voluntarism, and government subsidy are welcome, but not central, e.g., see Delancey Street.


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Delancey Street (see Mimi Silbert’s story)Recycling ex-cons, addicts and prostitutes

  • Delancey Street has never sought philanthropic or government support for its annual operating budget of $24 million dollars, which comes from profits generated from more than 20 businesses, each of which doubles as a training school

  • 1500 residents live in five facilities around the U.S., some built by the residents


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Earned Income=Self-sufficiency

  • To be Entrepreneurial, “earned income” must be generated

  • Only earned income will enable nonprofits to become “self-sufficient,” not depending on charitable contributions and subsidies


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Social Entrepreneurs are Driven by a “double” bottom line

  • Blend of financial and social returns

  • Profitability is not the only goal

  • Profits re-invested in the mission, not distributed to shareholders


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Sustainability ‘OR’ Self-sufficiency

  • Sustainability can be achieved through a combination of philanthropy, government subsidy, and earned revenue.

  • Self-sufficiency can only be achieved by completely relying on earned income.


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Earning Income…Why do it?...

  • You are not going to have sufficient money to meet your mission; you will have to continue to depend on the generosity of others, which may not there, or be enough

  • Can do what you want with the money; how you want to do it, as long as you want to do it, for the clients you want

  • Only Board and staff need approve; you do not have to meet others’ expectations


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Social Entrepreneurshipto do ‘more mission,’ serve more people

  • To investigate the social enterprise potential for your organization…the first question to be answered:

  • Will starting a business venture compromise your organization’s mission?


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Suggestions for Getting Started

Develop a Venture Investigation Committee

  • Read all Jerr Boschee materials you can find (see Resources slide)

  • Review journalistic profiles of 14 nonprofits that have successfully started business ventures. Free download, also purchasable in hard copy. http://www.socialent.org/sourcebookchapters.htm

  • Begin discussing benefits and challenges; how it might look for your organization; what you would need to do to investigate; who needs to be involved; what it would cost; where the money, time and personnel would come from, etc.

  • Talk with staff; board members; clients; community residents; government leaders; agencies; funders; business leaders, and other stakeholders that may be impacted by the decisions


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Resources to Learn More

  • Jerr Boschee, Founder and Executive Director of Institute for Social Entrepreneurs and Executive Academy for Social Entrepreneurs (www.socialent.org) Also see Mimi Silbert, Delancey Street info.

  • Venturing beyond the gates, Facilitating successful reentry with entrepreneurship, Nicole Lindahl, with Debbie Mukamal. 2007

  • Sustaining grassroots community-based programs: A toolkit for community-and faith-based service providers. U.S. Dept of Health and Human Services, 2008

  • Building sustainable non-profits; the Waterloo region experience. Center for Research and Education in Human Services and Social Planning Council of Cambridge and North Dumfries, 2004


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Black-on-Black Love—My Sister’s Keeper

Formerly incarcerated women need work

Biz Idea: Used clothing boutique from donated overstock

Grace House

Formerly incarcerated women need work and job skills

Biz ideas: Individual ideas from the participants

Chicago Non-Profits ‘Seeding’ Entrepreneurship Programs & Ideas


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TASC: Treatment Alternatives for Safe Communities

Adjudicated adults need work and job skills

Individual biz ideas of participants

Chicagoland Prison Outreach Academy

Formerly incarcerated persons need life and work skills to be eligible for CPO work training programs

Chicago Non-Profits ‘Seeding’ Entrepreneurship Programs & Ideas


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The Beloved Community

Mission is self-sufficiency and business development for community residents

Individual biz ideas of participants

Greater Faith Ministries

Mission: Self-reliance for community residents and congregation; and Small Biz Chamber

Individual biz ideas

Chicago Non-Profits ‘Seeding’ Entrepreneurship Programs & Ideas


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North Lawndale Employment Network

NLEN bee products business, and

Formerly incarcerated persons need work and job skills

Individual biz ideas of participants

Exodus Renewal Society, Inc.

Formerly incarcerated persons need work and job skills

Integrating self-employment education into re-entry programs

Individual and organization biz ideas

Chicago Non-Profits ‘Seeding’ Entrepreneurship Programs & Ideas


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Home of Life

Formerly incarcerated persons need work and job skills

Community economic development requires business ownership

Restoration Ministries

Disadvantaged persons need work and job skills

Potential RM business venture operation to provide work to clients, and develop their individual biz ideas

Chicago Non-Profits ‘Seeding’ Entrepreneurship Programs & Ideas


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Teamwork Englewood

Re-entry citizens need work and job skills

Renters need self-reliance education and skills

Landlords need marketing information

Family Focus

Young mothers need work and job skills education

Children need self-employment education for self-esteem and business leadership awareness

Chicago Non-Profits ‘Seeding’ Entrepreneurship Programs & Ideas


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Women’s Treatment Center

Women in treatment need work and job skills

Women need legal alternative work options to support selves and families

Empowerment Zone

Community residents need self-reliance programs

Business owners need knowledge and skills development

Chicago Non-Profits ‘Seeding’ Entrepreneurship Programs & Ideas


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Insights from Research

  • Lack of “E” skills of staff within organizations;

  • Focused research & dialogue needed to assess “E” potential; (see pages 5-7 thru 5-38 of SAMHSA book)

  • Must perform like a business first, not as a social service agency; provide good products that serve customer needs; train ‘employees’ with real needs, provide real jobs, in real world, for life;

  • Must hire someone who knows the business being started; different mindset & experience required

  • Culture clashes may result; expect initial resistance from staff, board members, other non-profits;

  • Organizations are able to serve many more people in a social venture than as dependent non-profits

  • It is not easy, but well worth it


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