Nonprofits can raise funding in a variety of ways – from donations to grants to loans to issuing community bonds. However, there can come a time in a nonprofit’s growth where these sources alone are not sufficient or sustainable enough to fuel their programs.
When this happens, there aren’t too many other options for the nonprofit to consider. Unlike for-profit organizations, they do not have the choice of planning to increase sales revenue to fund growth. Or do they?
The concept of the nonprofit social enterprise has been around for a long time as a means to achieve social missions while sustaining the organization financially. This organizational model occurs when a nonprofit operates a business that generates revenues specifically for the purpose of achieving the nonprofit’s social, environmental or cultural mission. This model could be a great way to build sustainability and resiliency for your organization.
There are many reasons why this business model could work for your nonprofit, but we believe that there are two key reasons that will apply to all nonprofit organizations considering this option. They are as follows:
In life, there is an aspect of excitement and adventure that comes with being spontaneous and unpredictable. However, this is not the case when it comes to nonprofit revenue streams. While donations and grant funds can come into your organization in a seemingly routine pattern, it can be difficult to rely on large lump sums of funding at specific times during the year if you are not receiving much in between. Adding a sales revenue stream to your organization can increase the amount of frequent funds that your nonprofit receives in between the large grant and donation payouts. This increases the predictability of your overall financial situation, making strategic planning much simpler.
Your mission will remain central
As a nonprofit, your mission is the whole reason for your operation. It is the driver of your decisions and the end-goal of all of your organizational plans. The addition of a business to your nonprofit allows you to not only maintain this focus, but potentially enhance it. As no two social enterprises are alike, it is easy to design your specific business model to fit within your already-established vision. In fact, depending on what type of business you develop, your social enterprise could potentially have a bigger impact on society and capture a bigger audience than it did when it was solely a nonprofit.
So, what kind of business could you develop? Well, there are several business models that constitute a social enterprise; but it all depends on what type of new business operations fit best into your organization's existing practices. If you'd like to hear some specific examples of what types of social enterprise options are out there, as well as which ones are recommended for different nonprofit types, then listen to our webcast on the topic to find out more.