Nonprofit Business Planning

Nonprofit Revenue Venture Displaces Local Culture

Most folks I talk with believe that a donation of their used clothes to Goodwill or the Salvation Army is going to be recycled into the many retail outlets dotting the US.  These clothes will provide revenues from sales and will also provide employment opportunities.

This belief is partially valid.  But did you know that up to 80% of the 2.5 billion pounds of clothes that are donated eventually end up in open-air bazaars or similar outlets outside of the US?    These "affordable" items have market and while they do indeed provide employment opportunities in the US (e.g. sorting and bundling) they are not likely to resurface within US borders.  Contrary to the perception of the revenue model (sales in retail outlets), the real revenue model relies on shipping these items abroad.

Would US citizens not continue contributing if they fully understand their clothes don't get distributed as expected.  I'm guessing not -- recycling as it is thought of, and getting a charitable contribution still provide emotive and financial rewards even if one element of the end result differs.

Just the same, US consumers might benefit from understanding that the distribution of their goods abroad may be affecting the earning potential of domestic textile and apparel manufacturers in the countries where US goods arrive.  It may also affect the culture where local clothing styles are supplanted for US styles.

So, a good revenue model for US charities but one which creates, perhaps, an excellent ethics and mission conversation for the committed board. 

But wouldn't the boards already have had these conversations?

Nonprofit Offerings Selling On Higher Moral Ground?

While I believe the label "social enterprise" extends to far more types of ventures than those identified in American Public Media's Marketplace article (e.g. nonprofits are social enterprises and they may operate social enterprises as well), the article does a nice job discussing both the strategic, promotional and branding opportunities that arise from using the "moral high-ground" value proposition and positioning strategies unique to these entities.  

Two important points were made: First, consumers may be attracted to vendors and their offerings when both are positioned as being on the higher moral plain.  Second, you still need to have a great product or service.  

The article also notes that the higher moral position may offer a meaningful value to prospective investors.  This positioning has been used effectively with some corporate investors (like a Ben & Jerry's) but not so much with main-stream investors.  Perhaps this is a strategy that might be emulated more frequently. 

 

 

Nonprofit Board To Examine Revenue Model

Let's say you are a board member of a nonprofit that had developed the following revenue model: part donations from individuals, part donations from foundations and corporations, and part support from the government.  Depending on the location of your nonprofit, the relative weight of the parts might differ.  For instance, if your nonprofit is located in some really rural part of the country, the "part" of your income from government might be significantly larger than let's say, if your nonprofit was located in Boston.

Now, let's say the government portion was going to change because the "public" had decided that what your nonprofit offered was no longer viewed as having the same value as it once had and particularly, in times when the public had so many competing demands? 

Now the reality.  This is not an academic question. For the makers of Big Bird, the question of continued government support appears to be a question for today.  I know that the smart folks in Public Television regularly review their revenue model.  I know that they know what they need to do should the Administration change and the public goes along with the new "sherif" and decides that indeed, Public Television should not be supported with public money.  I am also confident that there's time to help the public understand the real costs to the public of cutting support of Public media.

What the Big Bird situation should remind all nonprofit boards is that a revenue strategy that has worked in the past may not be best for the present or future.  Smart boards, like the folks at Public Television, must continue to examine their worlds and the variables in those worlds to revisit their models.  And perhaps Mr. Romney is not that far off in suggesting that just maybe Public Television or Radio needs to add advertising to its revenue model.  Would this be at all feasible (that there is a demand) and really have a negative impact on mission?  That's the question for the board to answer.

Nonprofit Business Planning Success is Sweet

Here's a nonprofit that took business planning with a mission very seriously and based on current results, very successfully.  Sweet Beginnings is focused on giving ex-offenders their just-out-of-prison opportunity to re-enter society.  As you might know, ex-offenders face extreme challenges to getting jobs because basically, no one wants to hire them.

Sweet Beginning, located in Chicago's West side is a producer of bee-gernerated products.  But beekeeping and making honey are the gateway activities which provide a work experience and skills.  After the pre-readiness training, the work experience is scheduled for 90 days and then a transition into the "real" world.

Sweet Beginnings began with $140,000 investment by the Illinois Department of Corrections.  The money was used to develop a business plan and buy beekeeping equipment.  Annual sales today are $100,000 with a five year projected sales of $2 million.

Kudos to the developer nonprofit NLEN and Brenda Palms Barber for good planning and execution on what appears to be heading toward a sweet win:win:win effort! 

See the story in the Christian Science Monitor.

Nonprofit-Public Business Model-Zooey

Ok, so I played with the words but needless to say, this blog entry is about the publicly-owned LA Zoo who's fundraising and membership program is operated by a nonprofit, a really productive nonprofit that raises $10-13 million a year.  As a cost-reduction plan, the City is planning to privatize the management of the Zoo, conceivably a $20 million annual savings.  This is business planning at its best -- when an operator doesn't have the funds and values the service, it can either raise fees, cut services, or find a way to cut costs.  Privatizing can achieve the first goal and theoretically not affect the service.  Not so simple however when city employees and wages are at stake, so that must be factored in while thinking through the solutions. 

Complicated yes -- impossible no.

To think further about these business planning issues, see the related LA Times article.