Saturday, December 09, 2006

WENT TO A GARDEN PARTY: SOCIAL ENTERPRISE, EARNED INCOME, OR PROFIT?

Went to a Garden Party: Social Enterprise, Earned Income, or Profit
by Pam Ashlund


Los Angeles, CA

Dec 4-6

Attended a three day workshop at the Grantsmanship Center this week. The topic? “Earned Income Strategies”.

Although I couldn’t begin to summarize the three days of info in one post, I think we are all familiar with the risks of income strategies:

  • Lose money, damage reputation, hurt morale
  • Mission Drift - Get successful and: lose track of your mission
  • Funders move on (think you don’t need them anymore)
  • Become vulnerable to attack on the unfair competition front
And of course…
  • the dreaded Unrelated Business Income Tax (UBIT)

My take-away's from the meeting:

  • Any idea would not succeed without a motivated champion of the venture
  • Don’t confuse “earned” with “unrelated”
  • Proceeding on ventures without clear goals is a recipe for failure (corollary: starting without a business plan is “flying without a net”
  • The best nonprofit success stories involve a blending of the purpose of the organization and the business enterprise;
  • One excellent reason to engage in earned income ventures is that they create new income streams that could fuel building organizational capacity, but there’s a chicken/egg problem, you might have to build capacity to make the venture a success;
and last
  • The biggest barrier may be our own internal bias; that we’re in business to do social good, and that any kind of money-making enterprise might not be toward that good; or that business itself can never be good (not counting Paul Newman’s spaghetti sauce!)
This last point (our own internal barriers) gave me the most to think about.

The primary fallacy being that the social good is somehow better served by providing all services for free. To believe that perhaps participation could actually increase when clients must pay for a service is still a radical thought. Our presenter explained that the stigma of taking charity (being on the dole, etc.) is so great that many wouldn’t take it as a matter of pride and principle. It’s "the American Way" to want to pull ones own weight.

Another thought provoking question raised: is it a mistake to charge so low that it doesn’t cover the cost of what you do? Since nonprofit programs are so often subsidized with government funding, it may not be a necessity to ask that question. But…how could it hurt? At a minimum,
we need to find out the real costs of providing our services. How else can we assess the cost-benefit of our endeavors?

One other barrier (and for some this might be the toughest to combat): if anybody is unhappy with the idea of launching a social enterprise, if we receive even one complaint or question (from the public, our board or our funders)…do we just bring the whole process to a halt?

This is the chronic attitude of the helpers among us. Do we have to please everybody?

Although this may not be completely on-point here, I feel compelled to quote Ricky Nelson:

It's all right now, I learned my lesson well.
You see, ya can't please everyone, so ya got to please yourself



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