Nonprofit Business Planning

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

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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.