Social enterprise is the future of non-profit organizations

I spent today with social enterprise on the brain. In a class that’s part of my non-profit management program at Duke University, David Rendall, a Mt. Olive College business professor and author of some very cool books, proposed social enterprise as the future of non-profit funding.

As of 2006, there were nearly 1 million 501(c)(3) organizations in the US — a nearly 70% increase from the 536,000 there were ten years earlier — and I’ve heard that number currently grows at a rate of 1,000 per month. As the number of non-profits grows, inefficiency within our field goes up while the pool of available donors shrinks. Competition will be high for donations, and only well-oiled organizations will be able to thrive in the super-saturated market.

Given the conditions of the market for non-profits, how can non-profits protect themselves for the future? One way to look at becoming a social enterprise: a non-profit organization that generates earned income to support its social purpose. Earned income is revenue that’s received in exchange for products or services

Here are some notes from David’s class:

Organizations should combine service with business. A great example is TROSA, an organization in Durham, NC, that provides residential rehabilitation to recovering substance abusers. TROSA gives their program participants jobs in several businesses, including landscaping, framing, moving, and event logistics. The men in the program get job experience and structure to continue their rehab, and the organization gets much-needed funding from their enterprises across the state. In fact, my home-owners association contracts with TROSA to do our yard work.

Social enterprise should participate in the Experience Economy. More and more, consumers are paying top dollar to have unique experiences. It’s why Wilco broke new ground — ignoring the naysayers — by providing albums for free to generate million-dollar interest in their tours. It’s why people from all over the Mid-Atlantic region flock to Durham for the World Beer Festival and why people go to the symphony. They want non-replicable experiences. Non-profits should consider eco-tourism, travel, direct service opportunities, and experiential events as new fundraising mechanisms.

Don’t take on business models that have been rejected by the private sector. In the age of eBay, we don’t need another thrift store. Goodwill still manages to make it work very well (while linking it to their direct service to the public), but unless you have the capacity to launch a national chain, you should leave it alone.

Consider other audiences for our organization. Too often, groups dismiss social enterprise because the people they serve can’t afford to pay. Don’t concentrate solely on your service constituency, but think about businesses and individuals who are willing to pay for what you give. For example, one of my classmates today runs a violence alternative training program for prisoners and at-risk youth. They could slightly modify their program and teach conflict resolution and alternative dispute resolution techniques to corporations. The corporate training and consulting could completely fund their prison and school programs.

And finally, don’t start a non-profit, start a social enterprise that can make money and then fund charitable pursuits. Starting a business is far, far easier than starting a non-profit. All of the forms, legal information, reporting, and liability with a non-profit added to the super-saturated market for non-profits is reason enough to concentrate on social enterprise.

David’s class was by far the best I’ve had in the Duke non-profit program, and he’s an excellent thinker on leadership and how we can expand the non-profit sector. Check out David’s blog to learn more about his teaching, speaking, and international consulting and stay tuned for more info on him. I think he and I will be sharing a lot of ideas in the future.

April 30, 2008 | Filed Under Non-Profits

 

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