Building social entrepreneurship into your organization
Abstract
Social entrepreneurship is another way of evaluating the work of nonprofit organizations. Rural Action, a nonprofit organization in Athens, Ohio, started its social entrepreneurship model by deciding on its desired "end result" and then re-thinking how to get there. The organization has developed several revenue-generating programs that directly support the organization's goals. Karen Affeld, Rural Action director of development, shared this effective practice at the 2001 National Conference on Community Volunteering and National Service in Minneapolis, Minnesota.Issue
Commercial businesses receive immediate feedback on how well they're meeting the needs of customers and their efficiency based on the profit the businesses generate. Nonprofit organizations do not often get that kind of immediate feedback. Social entrepreneurs model the strategies of business entrepreneurs by implementing innovative methods for generating "social value" in an efficient and sustainable manner that is easily measurable.Action
According to Karen Affeld, Rural Action director of development, steps to take to build entrepreneurship include:
Figure out the desired results of your nonprofit organization. Frame the goals of the organization around the desired results rather than around providing a specific product or service to a set number of consumers or clients. By starting with the desired results, the organization is free to look at a variety of possible methods for getting there. As the organization works backward from the end result, it can evaluate what resources and core competencies are needed to achieve the desired result. The organization then evaluates its resources and core competencies to see whether there is a good fit. Some key questions to ask are:
- What capabilities and resources do we have within our organization?
- What capabilities that we don't have will we try to develop in house?
- What capabilities will partner organizations provide?
- What capabilities will we need to purchase?
- Do we have the resources and core competencies necessary to achieve our goal?
- Are we the best organization to carry out this work?
- How will we raise the resources that are necessary?
- Can the direct beneficiaries afford to pay a part of the cost of the service or product?
- Can a stakeholder, indirect beneficiary or other third party pay all or part of the cost?
- How much can you charge and still carry out the social purpose of the project?
There are a number of possible means for generating revenue. One is a sliding scale fee structure. Another is a minimal, below-cost flat fee. Third party payers are also possible, such as a contract for services with a government agency or another nonprofit.
Another possibility is to generate unrelated business income (which is taxable) through setting up an enterprise and using the profits to support your work. One example would be renting out extra space in your building, or renting parking spaces.
At Rural Action, the vision or "end result" is to create model strategies for the Appalachian Ohio region that involve a broad base of citizens in building environmental, economic, and social sustainability.
With the Good Food Direct program, the program produces a catalog (both printed and online) that describes the products offered by local farmers and food production businesses. The consumer places an order with Rural Action and pays for their order, which they pick up or have delivered once a week. The farmers pay a participation fee that is based on a base fee plus a percentage of that business' s previous year's sales through the catalog. There is also a markup of 15 percent that is paid by the consumer. In addition, there are several catalog sponsors that pay up to $500 for a small ad on the catalog. In 2000, the combination of all of these generated about $8,000 for the program. Of course, this is only a fraction of the program cost, but it can be used as match for grants.
The sustainable forestry program generates revenue by charging small fees for workshops and conferences and selling books and planting stock. The arts and cultural heritage program sells postcards featuring images of the various community murals painted by volunteers, and is producing a music CD featuring musicians who support this work. A manual has also been produced that describes best practices for developing community murals.
Context
Rural Action's mission is to promote economic, social and environmental justice in Appalachian Ohio. Rural Action has projects in 14 counties and makes an impact on most of the 29 counties of Ohio Appalachia.
Some of the programs are especially suited to social entrepreneurship. In the economic development programs, businesses receive a direct and measurable economic benefit from the work of Rural Action, and they are willing to pay a portion of the program costs because of the benefits they receive. This "sliding scale" practice is meant to further strengthen the agricultural and forestry sectors in the region.
In addition, Rural Action has developed several core competencies within its organization that can be marketed to other nonprofits in the region — providing financial management and strategic planning services, grant writing and board training, among others. The profits generated from these services help to fund other Rural Action programs and benefits the nonprofits served in that it is more cost effective for the other nonprofits to pay Rural Action for these services than to develop the capacity in-house.
Outcome
Altogether, Rural Action generated about $40,000 in earned income last year and about the same amount in memberships and donations. It's a small portion of their annual budget, but it is unrestricted money and as such is very valuable to a nonprofit organization.Posted On
August 15, 2001For More Information