Many nonprofits are finding that in addition to their traditional fundraising efforts (grant funding, individual donors, and special events), social enterprise ventures are helping them to generate the funds they need to fulfill their missions. Let’s begin with getting a clear understanding of what social enterprise is.
In its simplest definition, social enterprise is a revenue-generating business with two goals:
- To generate revenue AND
- To achieve social, cultural or educational outcomes.
Frequently, social enterprises look a lot like traditional businesses; however, the key difference is that they are guided by their mission.
If your organization is thinking about starting a business venture to support its work in the community, be sure to take the time to first think through both the pros and cons listed below.
|
Pros |
Cons |
|
All income generated is unrestricted. In other words, it can be used to meet any need within the organization. |
Business ventures can be time consuming and can take away from the work of the organization. |
| The organization can be self-sufficient and not dependent on grant funds or donors. | Staff and board members will need a thorough education in order to gain their support. |
| It allows you to diversify funding streams. | Start-up costs will be needed. (Grant funds will generally not support these costs) |
Obviously, the decision to start a social enterprise is not a decision to take lightly. To get started, the organization should spend some time thinking about a product or service that is directly related to the work they already do. One of the most visible examples of a social enterprise venture is the retail stores operated by Goodwill Industries. Goodwill Industries provide job training for economically disadvantaged and disabled individuals; their retail stores generate additional income for the organization while also providing a hands-on training opportunity for their clients.
As you think through the possibilities for your organization, think about what you do well and how that can be expanded into a business. It is important to note that your enterprise does not have to be related to the mission of the organization; however, if it doesn’t, you will run the risk of having to pay unrelated business income tax. Finally, as you think about business possibilities, be sure to do the proper planning. You will want to be sure that the effort you invest is worth the income you generate.
We can help you think through the possibilities and look at the risks associated with starting a social enterprise. Our mission at the Faith Based Nonprofit Resource Center is to help you work through ideas, processes, and shorten your learning curve as much as possible so you and your organization can be a fruitful as possible. Give us a call so we can get started today!
