The charity model has changed. For nonprofits to continue to do the work they do, it’s time they reconsider their habits and their structures. With the arrival of crowdfunding, shared economies and micro-giving like Kiva the traditional approach to funding charitable work is fading. Asking for a dime is not sustainable. Providing measurable and more predictable income streams, no matter how those steams are structured, is.
My work in the private sector motivated me to re-examine how we create systems of change for social good and how we financially support those systems. I looked at three financial models that supported progressive, mission-driven work but did not involve soliciting donations.
(1) Earned Income: A nonprofit which merchandises or sells product.
A nonprofit organization is a mission-driven organization which receives a tax-free designation from the IRS for helping others/the planet/animals. This means that a nonprofit company can generate earned revenue and not pay taxes on that revenue only if that revenue is directly in line with the nonprofit’s mission. For example, Aid for Artisans sells the handiworks of its members to museum gift stores and those sales help alleviate the economic challenges the artisans face living in poor communities. More well known, our favorite Thin Mints are actually a mission-driven, tax-free revenue stream for the Girl Scouts who can sell cookies because our favorite dessert helps young girls develop business skills.
(2) The Benefit Corporation. It’s exciting to watch the emergence of the Benefit Corporation or B-Corp. A benefit corporation is a company which is established legally as a privately held corporation but unlike traditional corporations, the B-Corp uses the “power of business to solve social and environmental problems”. Well-known B-Corps include: Method, Patagonia, Warby Parker and the Honest Company. These companies make money, but they also: (1) operate transparently; (2) often have institutionalized giving programs; and (3) have a solution-driven approach to a social or environmental problem.
(3) Private Enterprise. There are also private companies which simply do good but have not gone through B-Corp certification. One of my favorites is FEED Projects. FEED sells products, primarily handbags and accessories. The identifier is the FEED logo branded on everything. FEED products are sold at your local retailers. Operating as a private company, FEED has full control over how they expand, where they sell and what they do with their profits. FEED also has a foundation which can solicit general donations. Toms Shoes is another well-known private company doing good. Toms has a separate foundation and partners with nonprofits to distribute its products.
I left the nonprofit sector because I realized I was starting to see people as “income” and this was in direct conflict with my values. I wanted to hear people’s stories, not be pre-occupied wondering how much I could ask them for before the lunch was over. I think many executives would agree with me.
Wanting to save my own part of the world, I founded a charity a decade ago helping homeless young people. The charity grew, and successfully reached more youth. But with growth came the need to hire more staff, which required more money, which meant soliciting more donations.
My move into the private sector involved selling products. I manufactured a product, sold the product and then used whatever capital remained to grow the company by making more product, by hiring staff, and so on. My new products offer a solution to chemical plastic pollution in the world by providing a plant-based, biodegradable alternative.
These dual experiences have taught me lessons that nonprofits can learn to increase their ability to meet their missions more sustainably. There are a number of ways to make a difference in a need area but none happen when leadership spends more time looking for money than growing the outreach. We still must work to change the world but the thinking behind how we work needs to evolve. The space between “good business” and “good nonprofit work” is gray, not black and white. If you run a nonprofit, and are interested in talking about new avenues for growth, or if you run a for-profit and would like to find a nonprofit partner, please get in touch.