Nonprofit Business Planning

Marketing Lessons for Raising Money

A recently completed five-year study provides some useful learning for those who construct written fundraising appeals.

According to Subroto Roy, Professor of Marketing at the University of New Haven and as released in INFORMS Journal of Marketing Science:

donations will go up if the beneficiary:

• was a named individual compared to an un-named group
• belonged to the same religion as the donor
• fell into poverty versus being described as poor with an undescribed past
• if the annual donation was framed in monthly versus daily amounts

When a direct mail appeal used all of these tactics, there was a 300% increase in donations (test market size was 300,000 with 200,000 cold calls and 100,000 past donors)

The test was conducted in India so I don't know the cultural nuance implications.

 

 

People Profit Planet #NonprofitSocialEnterprise

Here's a good introductory primer to nonprofit social enterprise.

http://www.king5.com/entertainment/television/programs/new-day-northwest/successful-social-enterprises-for-nonprofit-businesses/357934829

 

 

Nonprofit Urban Farming

I have just completed harvesting 20 pounds of garlic.  I acknowledge that this quantity of organically grown garlic is relatively small in the scheme of garlic growing and sales.  The good news: there is a demand.  The bad news: the cost (primarily in time) to plant, harvest, dry and clean, and bring to market far exceeds the income which is approximately $4 an hour.  While the following story and many like it tout this new back-to-earth growing program for folks who may well have skills but a difficult time getting decently paying jobs, I do wonder aloud about farming in particular, as an un-philanthropically subsidized venture.  The case below has certainly been subsidized or, in my judgement, could not sustain the number of employees it is identified as keeping engaged.  Good for it.  At the same time, all should be wary that farming is not an industry where profits abound as the consumer is just not willing to pay for the real cost of what comes to their plates with the exception of course of the 1% who have all the means to actually build and staff their own personal farms.

 

Refugees and Social Enterprise: Considerations about Resettlement

By KELLEY MALCOLM | July 25, 2016

SHARETWEET EMAILPRINT SHAREON LINKEDINMORE

Urban Farm visits / Horticulture Group

July 21, 2016; Fusion

Against the backdrop of negative rhetoric about refugees from the stage at the RNC in Cleveland last week, an example of refugees working and contributing to the community was taking place less than two miles from Quicken Loans Arena.

Currently, eight refugees are employed at Ohio City Farm, which is run by the nonprofit organization, The Refugee Response. At the farm, a six-acre tract considered the largest contiguous urban farm on the continent, refugees grow produce and flowers. Produce grown on the farm is sold to one of 18 restaurants, or at a market stand at the West Side Market, or to area residents through a community service agriculture program. The refugees who work on the farm are doing more than simply earning a paycheck; they are receiving training on how to select seed, prepare packing for, and distribute the food they grow.

The Refugee Response is a coalition that resettles and supports refugees upon their arrival to the Cleveland area. Its goal is to provide refugees with opportunities to become self-sufficient and contributing members of the community. Founders Paul Neundorfer and David Wallis were driven to start the agency after spending time working with refugees in Thailand in the early 2000s. The farming program was launched when it was discovered that approximately 80 percent of the refugees arriving in Cleveland had a background in farming. Additional programs include home tutoring, providing scholarships for students to attend private schools such as St. Ignatius and St. Joseph Academy, and fiscal literacy workshops.

Nonprofit Revenue Generating Business

Financial Sustainability is a difficult goal to achieve for many/most nonprofits.  Social (revenue generating) enterprises have been one strategy employed by a number of nonprofits with some success.  The following article tells of a Chicago "care" program that has established a market rate day care program that is expected to generate profits to subsequently be used to subsidize it's non-market rate (philanthropically supported) programs.

Yes, there are a number of challenges this strategy faces.  I presume that the market demand has been "proven" so hopefully that will not be the biggest challenge but as is true for any business, times and needs and competition can of course can affect profits.  Some folks question the legitimacy of offering two-types of services - one that is mission-focused and the other that is profit-focused.  Yes it is possible to have both be of equal quality but.....  And then there are the operating cost questions that must be managed and can also pose a variety of challenges.  

So, exciting this venture certainly is as much as it is a risk.  I wish them well.  Here's the Crains article.

 

This new day care center will help fund others for low-income families

By LISA BERTAGNOLI

 

 

Concordia Day in Ravenswood.

Nonprofit Concordia Place has a plan for Concordia Day, the market-rate day care center it's opening Aug. 8.

The 6,000-square-foot center, across from Ravenswood's Metra station, is decked out in blond wood, leaf-green wainscoting and plenty of tiny furniture. All 18 staff members have degrees in early childhood education.

“This isn't babysitting,” says Brenda Swartz, CEO of Concordia Place, a $4.2 million nonprofit social services agency launched some 35 years ago out of Concordia Lutheran Church in North Center.

Proceeds from Concordia Day, which charges $2,115 a month for infants, $1,850 a month for toddlers and $1,635 a month for 2- and 3-year-olds, will underwrite Concordia Place's programs for lower- and middle-class children, teens, adults and seniors.

It's social enterprise—a way for nonprofits to create a stream of reliable, unrestricted revenue and thus lessen their dependence on government funding. Swartz expected foundations to be eager to provide grants for the endeavor.

Except they weren't. Concordia Place usually enjoys a healthy 45 percent "yes" rate for funding asks. In this case, there were fewer funding sources to turn to, and fewer that said yes, Swartz says.

“This is being proactive. It's really thinking long term,” she says. “I would hope that Chicago's philanthropic community would see that and get on board.”

The lack of support surprises Eric Weinheimer, CEO at Forefront, a Chicago-based nonprofit that represents foundations and nonprofits. “My experience is that foundations are very eager to support innovation and ways for grantees to diversify revenue sources,” he says. “That's one of the key roles philanthropy plays—to fund innovation and provide that risk capital other sources aren't going to provide.”

Swartz's theory: The line between market-rate Concordia Day and Concordia Place is dotted, rather than solid. For instance, it's not exactly like Uptown's Inspiration Kitchen, a restaurant that trains homeless people for careers in food service. The restaurant is scheduled to close July 31 due to funding issues.

“When (foundations) hear, 'This will offer market-rate day care,' they think it doesn't fit,” Swartz says. Foundations “fund the easy things,” she says.

Swartz and Concordia Place's board hatched plans for Concordia Day about five years ago. Last year, the board launched a $1.8 million capital campaign to raise money to open three Concordia Day locations by 2020. Individual donors, plus grants from Chicago Community Trust and Thrivent Financial, an Appleton, Wis.-based financial advising firm with roots in the Lutheran Church, have helped raise $720,000 to date. The campaign goes public Aug. 2.

Brenda Swartz

Swartz is scouting locations in neighborhoods like Jefferson Park and Portage Park—places with families and reasonable rents—for the second and third locations. Each is expected to generate $100,000 to $150,000 in net, unrestricted income.

That income will help pay for programs at the two Concordia Place locations, one in North Center and the other in Avondale, which serve about 800 children, teens and seniors annually. Concordia Place uses a sliding scale for tuition and also accepts state subsidies for child care; a family with a gross income of less than $15,500 would pay less than $20 a week for toddler care. Its programs for seniors, adults and teens are free.

Swartz hopes to open the first Concordia Day, which costs $500,000 to open, with 26 children and eventually build to its 47-child capacity.

Meanwhile, she says she understands that even with upscale decor, trained teachers and a savvy location, Concordia Day is a risk.

“It's risky to open a new business, whether you're a for-profit or a nonprofit,” Swartz says.

Concordia Day will deal with the same issues as a for-profit business, including making payroll and paying the rent and utilities. “We face all those things,” she says. “People think if you're a nonprofit, you don't have to make money.”

Nonprofits and Social Enterprise: A Primer

In the Nonprofit Assistance Fund's latest blog post, Kate Barr is presenting the basic Q&As necessary for a nonprofit board and management to consider the world of social enterprise (also known as revenue generating ventures).  BWB Solutions has been providing revenue generating business planning support for more than twenty years and we believe that social enterprise is one of those tools every nonprofit should consider as a potential sustainability strategy.  But as Kate emphasizes, this is not for everyone.

Here's what Kate has to say:

Myth (and Facts) about Nonprofit Social Enterprise

 

KATE BARR JULY 7, 2016

 

 

 Nonprofit management and strategy topics seem to come in waves for me at Nonprofits Assistance Fund. The theme of the last quarter seems to be earned income and nonprofit social enterprise.  While the specific questions and ideas vary widely, there are some ongoing myths about social enterprise that I hear over and over that need to be dispelled. The myths fall into three categories:

Myth #1:  We can’t do that!

• We can’t charge a fee for services, we’re a nonprofit.

Tell that to all the nonprofit hospitals, clinics, colleges, orchestras, and theaters. Of course nonprofits can charge fees for their programs and services. Not every nonprofit can, should, or chooses to include earned income in their business model, though, for all sorts of mission and community reasons.

• We’ll lose our nonprofit tax status if we have too much earned income.

Income that’s earned by providing services or goods that directly contribute to a nonprofit’s mission is considered “related” income. Think about the hospitals, colleges, and theaters above. It’s only when a substantial amount of income is earned from activities that are unrelated to mission that this is even a consideration. This is a legal question, though, and deserves professional advice.

• We’ll have to pay taxes (or, the dreaded UBIT problem.)

Similar to the answer above, most nonprofits with earned income never have to file an Unrelated Business Income tax form. Even if you do, though, what’s bad about paying tax on a profitable business?

Myth #2:  We have to do this!

• We can’t miss out on the newest trend for nonprofits.

Social enterprise businesses within nonprofits are not a recent development. Consider Goodwill, YMCA, Girl Scouts, and Minnesota Diversified Industries (MDI.)   The current interest and enthusiasm is driven by both nonprofits’ search for alternative income sources and growing consumer interest in supporting socially responsible businesses.

• A social enterprise will spin off profits that can support our charitable work.

Maybe. There are social enterprises that generate profits for the nonprofit, but in reality many social enterprises aren’t fully profitable without some subsidy of their own. A landscape business that employs people recently released from prison and provides workforce skill development and supportive services will have higher supervision and labor costs than a private business landscaper. This enterprise truly has a “double bottom line” that’s worthy of support.

• Every nonprofit should start a social enterprise.

Earned income isn’t a good fit for every nonprofit for either mission or organizational reasons.  Start with this question: is there a service or product that your organization has the capacity to consistently deliver well, that furthers your mission, and that meets an actual demand from customers who will pay for it?

Myth #3: How hard can it be?

• Current staff can run the enterprise in addition to their other programs.

Planning, launching, and growing a new business is a big job and needs attention and skills. You may have someone on staff that is perfect for the role, and you may not. During the planning stage, research the skills and experience needed for the business and then recruit and support staff to be successful.

• Customers will buy from us because we’re a nonprofit.

The nonprofit mission and reputation can attract initial attention and willingness to try your service, but over time customers will buy from you because you offer a service or product that they value at a price they are willing to pay. This is a complicated dynamic, of course, that includes brand value, competition, and marketing, but it’s risky to assume that the halo effect of nonprofit will drive sales. 

• My friend/co-worker/mother loves the idea and say they’d buy it.

Don’t skip the process of gathering in-depth research about the market for your product or service. Who is the customer, what do they value, what will they pay, how often, what’s the competition? Be honest in discovering whether or not there is a large enough bona fide demand for what you’re selling. “I think it’s a great idea” is not market research.

Look past the myths and learn more about social enterprise. We had a great discussion on this topic atSustain-A-What hosted by Pollen. Find someone who was there and ask about the lively table conversations, and read this related piece by Dameun Strange, Adapt to Survive.

There’s a concrete step for St. Paul nonprofits that have plans to launch a new social enterprise, or to grow an existing one. NAF is accepting applications for a learning series and seed grant program called Financial Resiliency through Social Enterprise. Don’t delay, applications are due July 11^th.   

 

 

Kate Barr

Kate Barr believes that every nonprofit financial question relates to strategy, structure and mission impact. She enjoys interpreting financial information to find stories numbers can tell. She loves writing, teaching, and talking with interesting people.

Social Enterprise or is It?

Is entrepreneurship and capitalism the answers to solve the world's woes?  That's essentially the question being raised and sort-of answered at this year's Skoll Foundation Social Enterprise Conference.  The following article explores in more depth the conference's conversations.  In my opinion, the answer is pretty much: some of the time but certainly not all of the time.  More importantly, I believe an underlying question should be focused on accountability.  Outside the nonprofit structure, where is the accountability to ensure that the use of all these resources and the subsequent rewards really do more than benefit those without resources.

 

Social progress advocates can’t decide if it’s enterprise or entrepreneurship

BY TOM PAULSON ON 14 APRIL 2016 0

Jeff Skoll, the successful entrepreneur at eBay and founder of the Skoll Foundation, celebrates the wisdom of the Dalai Lama at his forum in Oxford

OXFORD, England – Here at the Skoll World Forum for social entrepreneurship, there seems to be some confusion as to the meaning and relative transformative value of that last word – entrepreneurship.

Too many syllables may be part of the problem, perhaps. Whatever the case, it appears to be more than just a semantics argument.

This annual gathering of some thousand anti-poverty and pro-equity pioneers, innovators, activists and, frankly, very impressive and creative do-gooders put on by the Palo Alto, Calif.-based Skoll Foundation is definitely a global happening devoted to social justice and positive change in the world.

But what does not seem completely clear even to some of the participants is that this is not a festival simply to promote social enterprise – the ‘doing well by doing good’ notion that is all the rage these days.

Social enterprise, in case you had somehow avoided this phrase, generally (arguably, of course) means using commercial or business strategies to accomplish a social good or solve a social problem that has typically been the realm of government, charities or perhaps religious organizations.

Here in the lovely old city that was used for shooting part of the Harry Potter movies, Bill Ackman, co-founder of a New York social investment organization called the Pershing Square Foundation, said the goal should be on how to best ‘push the capitalistic system’ to drive social progress.

“Philanthropic solutions to social problems are inherently problematic,” Ackman said at a Skoll session Wednesday called ‘Getting Beyond Business as Usual.’

“I think business is in a historic transition,” said Michael Porter, a Harvard business professor. “The awareness and commitment to social progress (within the business sector) is higher than anytime in my life. … But we are not getting the kind of progress we want.”

Another participant, Alexis Bonnell, who heads up ‘innovation’ (another over-used and now near-meaningless term) for the U.S. Agency for International Development, USAID, said what’s needed is for the traditional aid and development community to embrace a more business-like mindset.

“I’ve never seen an industry that functions as elitistly (sic?) as development,” Bonnell said.

Michael Green, philanthrocapitalist and director of Social Progress Index, moderates a forum

“The social contract is broken,” said Marcela Manubens, head of social impact for the Anglo-Dutch consumer goods corporation Unilever. “We are privatizing many of the roles of the social contract traditionally handled by government in areas of human rights, water and sanitation …”

It wasn’t clear if Manubens thought this was good or bad, or just a fact.

At another Skoll session, on Thursday, focused on dealing with the massive problem of lack of access to water and sanitation across the world, all the participants talked about their efforts mostly in business lingo.

“I think the sector has come a long way looking this as a market,” said Gary White, CEO of Water.org.

Eleanor Allen, CEO of Water for People, said as someone who came from the for-profit sector she feels NGOs (nongovernmental organizations) are often too inefficient. Water for People, it should be noted, is a nonprofit NGO.

“There is a lot of money looking for a home,” said Neil Jeffrey, CEO of Water and Sanitation for the Urban Poor (aka WASUP). Jeffrey was discussing how to find investors to help pay for getting water into the world’s growing urban slums.

I asked White after his talk if Water.org (Matt Damon’s humanitarian cause celebre) is basically advocating for the privatization of water and sanitation. Why aren’t these humanitarian organizations pushing for the cheapest, most equitable and most efficient means of delivering water that we mostly use in the U.S., Europe and other developed countries – a publicly run piped system?

“I’m agnostic on who’s managing the utility,” White said.

It would be best to have a single publicly funded water system, he said, but in reality the financial cost of creating piped water and sanitation systems today for all the billions of poor who need these services would be overwhelming – about $200 billion annually over five years, he said.

“And worldwide, we’re now only spending about $9 to $12 billion a year on this,” White said. So the only realistic way to deal with this problem, he said, will be through finding ways to bring in the for-profit sector.

Yet while many here at the Skoll forum seem to be banking on the private, for-profit sector to lead the way forward to a better world – through social enterprise – that is not at all the position of the Skoll Foundation. The profit-seekers can help, but they are not what interests the Skoll folks the most.

Renee Kaplan, chief of strategy at Skoll Foundation

“People use the terms social enterprise and social entrepreneurship interchangeably,” said Renee Kaplan, chief strategy officer for the philanthropy. Skoll sees them as overlapping, but distinctly different. Social enterprises are either for-profit or a combination of for-profit and nonprofit, she said.

“The way we define social entrepreneurship means a majority of them are probably going to be nonprofits,” Kaplan said. The majority of social entrepreneurs are people or organizations that are finding new, creative ways to solve problems that the market – along with government and even other philanthropies or non-profits – have failed to solve.

I asked Kaplan if it bugged the Skoll Foundation that many participants at their forum didn’t seem to know the difference – or are taking their event as opportunity to promote business as the savior when her organization isn’t really as interested in promoting social enterprise as it is in supporting truly entrepreneurial social reforms.

“It doesn’t bug us,” she laughed. “As the financial world is evolving, as these sectors integrate, more and more of these terms are going to become confused or blended. That’s probably a good thing.”

But it clearly did bug some at this confab.

Darren Walker, president of the Ford Foundation

“Look, I’m a capitalist,” said Darren Walker, president of the Ford Foundation. “But the problem here is that markets fail to address many of these problems.”

Philanthropies and nonprofits are investing in a larger, social benefit that may not return a profit to the investors, he said. The benefit accrues to all of humanity, Walker said, in terms of happy families, a healthy planet and less suffering.

“We have exalted the individual entrepreneur,” Walker said. The hero narrative needs to be replaced with a community benefit narrative, he said, and to stop bashing traditional philanthropy, governments or the institutions that are still doing much of the heavy lifting when it comes to fighting poverty and inequity.

“Philanthropy has led the way to set up a lot of these social enterprise opportunities,” said Bill Clapp, co-founder of the Seattle International Foundation (a funder of Humanosphere, I should note).

“Business is hardly a perfect solution for everything,” Clapp said. The social sector has been booming worldwide, he said, in part because of either growing recognition of the failure (or a growing failure) of the markets, government and other sectors to solve some of humanity’s most urgent problems.

“I think we’re a long ways off before we can just chuck philanthropy and these institutions who are supposed to show a financial return in favor of social enterprise,” Clapp said.

And even one leading member of the Skoll family of funded social progress initiatives, Pamela Hartigan, thinks the term ‘entrepreneurship’ no longer works.

“It’s a problem,” she said at the forum Thursday. Hartigan, it should be noted, is the director of the Skoll Centre for Social Entrepreneurship here at the University of Oxford’s Said Business School – where the forum is taking place.

As she wrote for a post on Oxfam’s website in 2014, the terms have only worked to deflect attention from what really needs to happen: A massive overhaul of capitalism itself.

“Yes, I still think that’s what’s needed,” Hartigan said Thursday.

Maybe it’s time to rename the forum?

Social Entrepreneure Resources

The following is some great stuff from the folks at Case regarding social enterprise and entrepreneurs.  

 

March 2016 Newsletter

Launching Your Social Venture Starting a venture is hard. Starting a social venture can be even harder. As Sally Osberg, President and CEO of the Skoll Foundation, once said during a visit to Fuqua, “Social entrepreneurs are to entrepreneurs what Ginger Rogers was to Fred Astaire – they have to do everything entrepreneurs do, except backwards and in high heels.”     Every entrepreneur has to have a better idea, process, product, or service, a way to get that idea to market, build and fund their venture, etc.  But social entrepreneurs also have to face market failures, double or triple bottom-lines, complicated ecosystems and multi-sector partnerships with differing incentives, and more.    At CASE we spend a lot of time thinking through these issues and through our collaborations see what works and what doesn’t when launching a social venture.  So, this month, we've gathered a collection of articles to help you move towards success when launching your own social venture:   CASE Executive in Residence Alden Zecha looks at selecting and reaching stakeholders when tackling big challenges such as poverty and global health. Sasha Dichter, Acumen’s Chief Innovation Officer, and CASE’s Cathy Clark discuss overcoming funding challenges for social entrepreneurs. Anne Steptoe, a current CASE student launching a social venture, provides her tips from the trenches, and more.    From raising capital to having the right team by your side, launching a social venture is hard work but we hope these insights will help you move in the right direction.     Erin Worsham (@erinworsham) Executive Director, CASE

3 Questions to Ask Yourself Before Launching a Social Venture CASE Executive-in-Residence Alden Zecha looks at three questions you should be asking yourself before launching a social venture. Who are you serving? Directly or indirectly? How are you defining success? He reflects on his own experience launching multiple ventures and how those questions have been critical to success. Read more. MedServe: From CASE Launch Pad Winner to Launch CASE Launch Pad recipient Anne Steptoe is busy launching MedServe, an organization connecting recent college graduates with rural clinics in North Carolina using a Teach for America-style fellowship model. As MedServe accepts applications for their first cohort of fellows, Anne reflects on her four tips from the trenches for surviving (and thriving!) in the social venture start-up phase. Read more. Bridging the Pioneer Gap Between Good Idea and Investable Deal "...the 'pioneer gap' stops many promising social enterprises in their tracks. And that narrows the pipeline of deals for later stage investors — and the potential for progress against urgent challenges."  Cathy Clark talks with Impact Alpha on how the transition stage from grant funders to seed stage investors can be bridged to allow more promising social ventures to receive the capital they need to take off and become successful. Listen to the podcast now. What Else We're Reading Now Social entrepreneurship is not all about new ideas and founding new ventures. We believe strongly at CASE – and train our students accordingly – to take roles in the private, nonprofit and government sectors where they can scale impact through existing solutions. Two recent articles that resonate with our thinking include:    Ideas Help No One on a Shelf. Take Them to The World: “So don’t invent something new. If you want to make a contribution, choose one of those ideas – and spread it,” Tina Rosenberg, NY Times.   Tackling Heropreneurship: “We also need people to join and help grow those start-ups, as well as people to take roles in more traditional businesses, governments, and organizations to help transform them from the inside,” Daniela Papi-Thornton, SSIR.

Nonprofit Positioning

While nonprofits can effectively fill the void between the for-profit and public sectors, there are those moments when the for-profit sector also sees a demand and views positioning itself like a nonprofit the best strategy to success.  For example: the "bins" that serve as depositories for unwanted used items.  Most folks recognize that Goodwill and Salvation Army created this industry and have made this revenue-generating strategy a core part of their sustainability strategy.  And, at least according to the research, folks are satisfied if not excited to participate in the "give" and the outcome.  

But, some entrepreneurs see the public's good will as an opportunity to replicate the model under false pretenses.  While creating what looks like this must be charitable, it turns out that the only charity is the owner.  But in Philadelphia, action is being taken.  And one implication, maybe the nonprofits should consider banning together to conduct some marketing communications to offer the message that there are some "approved or certified" giving opportunities.  This would benefit the public and themselves and possibly limit the harm caused by those with just profit intentions.

Here's the Philadelphia Inquirer article on this subject.

City cracking down on rogue clothing bins

City crews removed and demolished unauthorized clothes-recycling bins across the city Tuesday. The bins themselves will be recycled.

Tricia L. Nadolny, STAFF WRITER
LAST UPDATED: Wednesday, February 24, 2016, 1:08 AM
POSTED: Tuesday, February 23, 2016, 4:09 PM
image: http://media.philly.com/designimages/partnerIcon-Inquirer-2014.jpg

On a vacant lot beneath Route 1 on Tuesday, a bulldozer lifted its blade high above a bubble-gum-pink clothing donation bin and then brought it down like a hammer.

It jabbed, denting the bin's top. It pulled, flipping the bin on its front. And it smashed, pummeling the bin flat.

"No more clothing bins," one man yelled, as a crowd of spectators around him cheered.

That's a lot of hate for a hunk of metal.

But city officials say donation bins like the one pulverized in Nicetown on Tuesday - and up to 70 others the city will remove by the end of the week - disturb the quality of life for those who live near them, attracting graffiti, illegal dumping, and drug activity. The bins have long been a problem, but seemed to multiply last year, in part when a for-profit donation company facing criticism for code violations in New York dropped scores of blue and pink bins here, seemingly overnight.
"Nobody requests these bins. No one's looking for them," said City Councilwoman Cindy Bass, who represents some of the most affected communities and who sponsored legislation last year to regulate donation bins. "They're an eyesore."

Clothing discarded in donation bins - part of the nearly billion-dollar worldwide textile recycling industry - is often resold in bulk overseas, where used wares are at a premium because many consumers can't afford new items. The rest is recycled into wiping rags, carpet padding, even car-door insulation.

While many consumers assume all bins are operated by nonprofits, that's not the case. Some companies partner with a nonprofit, cutting them a flat check and keeping any profit over that amount. Others operate largely under the radar, making it difficult to know where the donations go and whom they benefit.

City officials on Tuesday recommended that those looking to donate used clothes use a reputable, well-known nonprofit like the Salvation Army or Goodwill.

There also are donation bin companies operating legally in Philadelphia. Those bins can't be on the public right-of-way or within 500 feet of any residential property. And they must have the name and contact information of the owner on the front or side.

While the city has targeted 70 bins for removal, city officials say there are likely more on private properties that are also illegal and will need to be addressed. Department of Licenses and Inspections Commissioner David Perri said Planet Aid, a national textile recycling nonprofit, owns about 40 percent of the 70 targeted for pickup.

Andrew Rice, a Planet Aid spokesman, said its crews removed all of those bins after receiving notice from the city. Perri said many bin owners were not responsive to warnings that their bins would be removed.

"We did our best to try to notify the bin owners," Perri said. "And at this point, we're just going to take them."

As for the removed bins, Perri said, the city will break down the wooden ones and will sell the metal ones to a scrap yard.

Of course, if any owners want their bins back, Perri said, they can pay the fines and processing fees.

"We'll be happy to sell them back," he said, "if they so please."

[email protected]

image: chrome-extension://lifbcibllhkdhoafpjfnlhfpfgnpldfl/call_skype_logo.png215-854-2730

@TriciaNadolny

Read more at http://www.philly.com/philly/news/politics/20160224_City_cracking_down_on_rogue_clothing_bins.html#TzTS1VR4celPhTlV.99

Nonprofit Sustainability Lessons

Ruth McCambridge has written the following consciousness-raising piece on nonprofit business modeling and what can go wrong.  Lessons aplenty.

 

The FEGS Autopsy: Bad Nonprofit Business in a Tough Operating Environment

By RUTH MCCAMBRIDGE | 22 hours ago

When the New York social services mega-agency FEGS (Federation Employment & Guidance Service) suddenly declared its closure at the end of 2014, onlookers were shocked and more than a little confused. How could the failure of the largest social service agency in New York occur overnight? Within a few months, we heard the Human Services Council was to do a forensic report on the causes of the failure of the $250M/year, largely government funded agency, and at least some of us have been waiting for its analysis with some curiosity.

At the time, this was the promise of that commission:

This Commission will examine the recent closure of several nonprofit human services organizations in an effort to understand the contributing factors from management and oversight to challenging fiscal environments. Lessons learned will be extrapolated and used to inform the development of several sets of recommendations aimed at various audiences, including nonprofit human services managers, nonprofit human services boards, government funders, philanthropy, and auditors.

That report, “New York Nonprofits in the Aftermath of FEGS: A Call to Action,” was released on Wednesday. To some extent, I agree with Josh Nathan-Kazis of the Forward, who has written some of the best coverage on FEGS’ failure, when he writes of the report that the authors dumped nearly all responsibility on government. In fact, the report appears in some ways to externalize much of the responsibility for FEGS’ failure.

But what HSC is really saying is that the operating environment makes viability extraordinarily difficult for the state’s nonprofit providers. The states do not pay full costs, and their payment schedules are erratic, which can cause any number of problems having to do with lack of liquidity, unreasonable fundraising burdens, and underpaid staff.

But this is not the reason why FEGS went under.

Government contracts also carry with them a plethora of regulatory requirements and duplicative auditing and transactional procedures that could be streamlined by the various government contracting bodies, as the report also acknowledges. These limitations inherent to government contracts are a big part of what you might call the “operating environment” of a service provider, but they, too, do not appear to be the reason why FEGS went under.

 

When Growth Is the Risk Factor

Instead, let’s for a moment take just the “they do not pay full costs” statement. What that means is that organizational growth carries with it an ever-higher burden of fundraising and transactional costs, and a higher level of risk that needs a cushion. In other words, the more they grow, the harder it is to fill the gap and serve the contracts. If they are not building reserves with that growth, they become more and more unstable and unable to take any kind of hit.

It’s a business model thing. Every time you sell an additional unit of service, it creates additional liability. A look at the organization’s revenue and expenses since 1998 shows little in significant surpluses from year to year even as the organization grew. This spells danger in the basic construct of the organization, and this finally somehow produced a massive $20 million deficit in 2014.

The 2014 Form 990 shows it as a $20 million increase in expenses with no accompanying increase in revenue and a $20 million deficit. The year before, the deficit was $1 million.

The HSC report does address both the systemic lack of financial margins among the state’s providers as well as what they call a “lack of adequate risk assessment in the sector,” saying, “Providers must accept responsibility for aggressively identifying, assessing, and addressing risks to their fiscal health and put in place the checks and balances needed.” HSC also rightly found that the lack of full cost coverage resulted in a lack of appropriate administrative infrastructure.

But in FEGS’ case, on top of this basic business plan problem, the organization had invested heavily (to the tune of a reported $70 million) in a much-touted social enterprisethat reportedly never made a profit but continued over time to eat up additional “seed” money. This social enterprise—a back-office service, ironically—is blamed for providing inadequate financial information to FEGS’ own decision-makers. On top of that, high-level administrators were getting healthy raises even as it became clear that the organization was in financial trouble, and it was in possession of multiple facilities that were not in use.

So, yes, the state bears responsibility for not treating their nonprofit providers fairly, but let’s be honest about the role the FEGS board and administrators played in this disaster scenario. Presumably they understood the operating environment and the business model, and they would understand the need for carefully considered growth and the need not to take a flyer on yet another risky endeavor in AllSector on top of their first in the growth of that organization to become the largest among New York providers.

But despite FEGS’ own deadly mistakes in an unforgiving environment, HSC has, justifiably, taken the opportunity to ring a loud alarm bell regarding the all-too-common problems that the state of New York hands its providers with every contract they award.

It is right to ring that bell, and nonprofits need to advocate for that operating environment to be fixed as part of their own business models. But individual nonprofits must understand that operating within that environment takes tight management and governance, and that was not something that FEGS appeared to be very good at. The report admonished providers on this, advising them to “just say no” to contracts that take them into a danger zone. That’s a good start—and, by the way, basic to this business model right now.

State of Social Enterprise

Check-out Rolfe Larson's State of Social Enterprise.  You will learn a lot: http://managementhelp.org/blogs/social-enterprise/2016/01/14/state-of-social-enterprise-2016-crowd-sourced/