Nonprofit Entrepreneurship and Enterprise

Dear Kim,

I was curious about your take on the notion of “enterprise” in nonprofits, as promoted in Richard Steckel’s book, “Filthy Rich: How to Turn Your Nonprofit Fantasies Into Cold, Hard Cash.” He makes a convincing case that nonprofits can develop partnerships with businesses and companies for mutual benefit rather than always simply asking for money.

From his book, “Unlike fundraising, this is an exchange of equal value, a business deal between partners in which both parties benefit. Not surprisingly, that is the definition of nonprofit enterprise.” Numerous examples are given such as the licensing of Sesame Street characters, New York’s Museum of Modern Art selling the air rights over their building, and the partnership between B. Dalton Bookseller and PBS to promote literacy.

It is an intriguing notion and I’d value any feedback you’d give.
—Have Bootstraps, Ready To Pull

Dear Bootstraps,

I must start with a major point to ALWAYS KEEP IN MIND. Steckel’s statement, “Unlike fundraising, this is an exchange of equal value, a business deal between partners in which both parties benefit” is very flawed. Fundraising should be an exchange of equal value also–an organization protects the environment, works to end racism, produces great theater or music, educates children, or whatever other good it does is of the SAME OR GREATER VALUE than the money exchanged with it by the donor. Creating business income is simply another type of value and a different type of exchange.

Nevertheless, nonprofit entrepreneurship is actually an old and well respected idea. Classic nonprofit stores can be found in many communities from the well known Salvation Army, Goodwill and UNICEF, to more local museum gift shops, thrift stores, restaurants and coffee shops benefitting battered women’s shelters, retreat centers, and schools. Girl Scout cookies are about 10% of all the commercially baked cookies in the USA.

I am very much in favor of creating income streams outside of donations if possible, however the road to a successful business is bumpy, even for dyed in the wool capitalists, let alone soft hearted nonprofits. Deciding to pursue a venture requires serious planning, proper capitalization and above all, deeply looking at whether the business is in line with the mission of the organization. However, in times of government cutbacks and falling foundation revenues, as well as high unemployment (in other words, the times we are in now!), having even a small income from a business or corporate partnership could keep a group alive.

In addition to the book you referred to, Steckel has another book, “Nonprofit Piggy Goes to Market”. There are also two brand new books on this topic: Amherst Wilder Publishers has just put out “Venture Forth! The Essential Guide to Starting a Moneymaking Business in your Nonprofit” by Rolfe Larsen; and our own Andy Robinson has just published “Selling Social Change (Without Selling Out)” through the Chardon Press Series of Jossey Bass Publishers. Robinson’s book looks specifically at grassroots social justice groups and their successes (and some failures) with entrepreneurial effort.

Yours in diversifying your income streams,
—Kim