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Feb 4, 2015

Determining the Role of Earned Income in a Nonprofit

I was flattered by a recent blog by the Georgia Center for Nonprofits to see that their most popular article in 2014, once again, was their article on how to use the Linking Mission to Money matrix to evaluate a nonprofit’s mission-focus and financial sustainability.  Written by Marc Schultz and titled “How Allen Proctor”s Grid Will Revolutionize Your Nonprofit“, it opens with this quote: “Every nonprofit is really two businesses run at the same time.  That’s the central tenant of Allen Proctor’s “dual-business model,” a social enterprise-based approach to sustainability rooted in his extensive work consulting with nonprofits nationwide, and detailed in his book Linking Mission to Money®: Finance for Nonprofit Leaders.”

The two businesses, of course, are the mission-oriented, money-losing side and the social enterprise side which is dedicated to generating sufficient profits to sustain the mission side.  The article includes a very useful chart that helps to see the role of social enterprise in any sustainable socially-oriented, mission-focused organization.  The article has been so popular that the Georgia Center for Nonprofits asked me to write a follow-up article that identified nine key factors a nonprofit needs to consider in maintaining its fiscal health.

Most important is to pare down marginally-profitable and unprofitable activities that are NOT closely tied to mission.  These activities drain time and money from the higher mission activities that form the core purpose of the 501c3 organization.  Next most important is to take an entrepreneurial approach to profitable activities that are lower in mission but are based on the expertise and business structure of the nonprofits’ core activities.

Social enterprise still does not get the popular attention of traditional for-profit business, so many nonprofits are overly wary of the feasibility of running a profit-oriented business to support their mission activities.  Those doubters should go to the Georgia Center’s blog for a link to a wonderful article, also by Marc Schultz, “Funding Your Mission with Social Enterprise.”  If you have any lingering doubts, read his quick summaries of 14 (yes, fourteen) social enterprises  run by nonprofit members of the Georgia Center, with links to learn more about those 14 businesses.

If your interest has peaked and you want a quick introduction to the opportunities and challenges of starting a social enterprise to support your social impact, attend the introductory workshops offered by the Center for Social Enterprise Development, “Generating New Revenue for Mission-Related Ventures”  on February 10 and later in May.  Registration closes February 6 for next week’s program.  So register NOW.