My favorite class from the fall semester was Social Entrepreneurship. It brought great perspective and clarity to many topics of interest to me. The one I want to delve into here is regarding the viewpoint of nonprofits; what they are and how they operate. Several different speakers highlighted one simple idea – nonprofits should use their status to their own advantage, but still look at themselves as a business. I see this through the lens of innovation and using creativity to find or increase success.
The first idea that was brought up is that of using the “fee-for-service” model. This option can take on several different forms. Boys and Girls Clubs of America offer a fee-for-service in providing an after school option, but at a highly subsidized rate. The Executive Director for the Truckee Meadows clubs discussed how this income helps to offset some of the organizational costs incurred through operations. While this idea wasn’t new, it really stuck a nerve about providing regular income to the organization.
Another aspect of fee-for-service is reimbursement, which I feel adds to the ability to become sustainable. Life Change Center, located in Reno, NV, provides recovery services for addiction and is reimbursed for those services. The executive director spoke about the center’s success rate as a result of running the organization as a business; investing in experienced professionals and further investing in keeping them engaged in their work. Their website shows their success rate of 72%, as compared to a national average of 55%, which has been partially attributed to their business mindset. A key difference the executive director pointed out was that the profits are being reinvested into the organization, rather than being distributed to investors, stockholders or other owners.
The third speaker who really hit this point home was a co-founder of Zawadisha, a nonprofit focused on providing microfinance to women in Kenya. These loans are for acquiring household items that are safer, healthier and increase available time throughout the day to focus on other aspects of life, including small businesses. One of the ways Zawadisha has been able to find success is by creating an efficient and effective supply chain. The co-founder who came to speak with us also sent me this article on the subject of nonprofits and business, which I felt was also interesting.
In each of these cases, the organization has used its nonprofit status to their advantage while operating with a mindset that they are still seeking profitability. The point where I would like to go deeper into this topic is finding ways to apply this to existing organizations, as well as helping new organizations better plan using this business mindset. That, however, will be a post for another time.
What are your ideas for implementing business solutions to nonprofit organizations? Please post in the comment section below.