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Social enterprise blurs the lines between business and nonprofits

Matt Spence

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Johns Hopkins All Children’s Hospital has very little in common with the Police Athletic League, with one exception. They’re both nonprofits. The nonprofit world is as diverse as it is important. Everything from one-person passion projects to billion dollar educational and medical institutions are eligible to receive an IRS tax-exempt organization ruling.

Nonprofits are a huge and growing portion of our economy. In Pinellas County alone, more than 4,000 nonprofits employ nearly 30,000 people. Critical services such as crisis counseling, foster care, emergency shelter, indigent health services and much more flow through this infrastructure.  

The need is great. The structure is in place to meet the need. And yet, we still have hungry, hurting and homeless people in our community.

The nonprofit industry needs disruption – and disruption is here. Its name is social enterprise – market strategies applied to social problems for the betterment of all.

The field of social enterprise and its applications have evolved rapidly in recent times. For the first 100 years, Girl Scout cookies and Goodwill stores provided the archetype. Now, increasingly, lines between traditional business, government and nonprofit sectors are blurring.  Today, social enterprises sell shoes, sandwiches, and services to provide jobs, shelter, clean water and much more.  

Well Built bikes in Tampa.

Here in Tampa Bay, we have social enterprises that will shred your documents, sell you a bicycle, feed you dessert and even provide veterinary services to your favorite furry friend. Each of these unique businesses is aligned to the mission of its sponsoring nonprofit, and provides an expanded platform for the organization to reach a larger number of those in need of its services.

Given its many potential forms and structures, defining social enterprise can be a challenge. The best working definition comes to us from the Social Enterprise Alliance:

“Organizations or projects that address a basic unmet need or solve a social problem through a market-driven approach.”

To solve community challenges rather than simply keeping them at bay, the community of problem solvers need sufficient resources. Program funding needs are consistent, and resources must be uninterrupted and unrestricted, so that organizations can make long-term investments in systems, human capital, and operations.

Philanthropic or government funds, by contrast, tend to fluctuate. As a result, nonprofit leaders may find themselves faced with the counterproductive choice of fighting symptoms – in order to demonstrate short term outcomes – over fighting causes and creating long term impact.

Funding a nonprofit can and should be a three-legged stool: Government grants and contracts, philanthropy and charitable support, and earned income must all be present for a stable base.

Each nonprofit, from Johns Hopkins to the Police Athletic League, has a unique mix of support. If a nonprofit is not taking advantage of market opportunities, it is missing out on critical resources that can and should be applied to its mission. It is the responsibility of organizational leaders – particularly trustees and board members – to think strategically about the long-term viability of an organization. Social enterprise must be in the conversation.

What should exempt organization leaders and board members be asking themselves? Or, asked another way, how can an organization test its readiness to embark on a social enterprise?

  • Is there a problem our organization is facing that can be addressed through market strategies – and is there a gap in the market that provides an opportunity for our organization?
  • Do we have an internal champion to lead the effort? Do we have support from the board and executive staff necessary to embark on the project?
  • Do we have (or can we obtain) the expertise to build a product or service to meet this need? Is our product/service high enough quality to compete on the open market?
  • Is our organization strong enough to undertake this project? Do we have the startup capital and cash flow flexibility necessary to operate a fledgling business?
  • What resources will we deploy to support the project, and how will we define success, both in social and financial return on investment?

These questions are only the beginning. Fortunately, resources abound, from traditional small business development information to social enterprise specific support. The Girl Scouts have a 100-year head start on the cookie business (and $4.6 billion in revenue last year from it).

What is your favorite nonprofit’s market strategy?

Matt Spence is Vice President, Community Impact of the Community Foundation of Tampa Bay.

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