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Jul 17, 2014

Social Enterprise Planning Yields Unexpected Benefits

Whether or not a nonprofit ultimately starts a new social enterprise, the effort of reviewing its earned revenue potential can yield unexpected benefits.  That is what happened for Columbus Speech and Hearing Center (CSHC).

Like many nonprofits, CSHC was challenged by declining reimbursements for its client services.  Activities had turned into financial drains that had once been self-sustaining.  CSHC needed to turn a six-figure deficit into a surplus.  Approached by the Tony Wells Foundation to collaborate on a new software product, CSHC knew this social enterprise effort was not enough to turn its deficits into surpluses in the near future and it needed to take additional steps.

The process of identifying social enterprise opportunities starts with revisiting a nonprofit’s mission priorities and isolating the revenues and expenses of all its activities or lines of business.  This almost always leads to realignment of the mission criticality of each activity with its profit-loss potential.  The evaluation then turns to identifying alternative providers of each activity and evaluating the nonprofit’s relative competitive position with those other providers.

CSHC identified its occupational therapy services (OT) as a major financial drain.  It was a higher cost provider, this service had much higher overhead requirements than other CSHC services, and it became clear that its current OT client mix was financially unsustainable.  Among other providers of OT services, it saw that Children’s Hospital had a superior ability to weather the current OT funding challenges and expand to serve an existing waiting list for OT services.

From this work, CSHC decided to suspend its OT services.  It transferred its OT staff and clients to other providers and referred its OT client waiting list to Children’s Hospital.  This change alone was sufficient to eliminate most of its operating deficit.  But the inter-agency collaboration needed to make these types of transitions often creates a new dynamic.

Indeed, newly familiar with CSHC, its location, and its client mix, Children’s Hospital decided to co-locate and lease space in CSHC’s building, changing space that had once been overhead for CSHC into a new source of earned revenue for CSHC.

Combined, these two developments eliminated CSHC’s operating deficit while maintaining service continuity for its former OT clients.

It takes courage to critically review programs and activities that have been a part of an organization for years.  It also takes courage to review a nonprofit under business principles because of the common worry that the mission may suffer.  In fact, CSHC’s review of its current and potential new businesses led to several more realignments of current services and explorations of new services that have not only intensified its mission focus but have enhanced its financial ability to support and advance that mission.

While CSHC’s effort did result in the creation of CITRA, a social enterprise in joint venture with the Tony Wells Foundation, the greatest financial and mission benefit came from the many other decisions and opportunities produced by the business planning inherent in pursuing social enterprise.

I encourage all nonprofits to take the plunge into serious exploration of social enterprise.  Even when a new business does not materialize, it is highly likely that new opportunities to realign services, discover new collaborations, or streamline expenses will emerge and make the nonprofit more sustainable, as just happened for Columbus Speech and Hearing Center.

To learn more about social enterprise support in Central Ohio, email info@cincohio.com.