Business Models http://www.socialedge.org/discussions/business-models Business Models RSS 1.0 feed. daily 1 Business Models http://www.socialedge.org/discussions/business-models http://www.socialedge.org/logo.png Mission and Structure http://www.socialedge.org/discussions/business-models/archive/2009/12/04/mission-and-structure Hosted by Joy Anderson and Elizabeth McCance (January 2010) mission & structure

Protecting Your Mission: The best legal structure

This discussion board recently hosted a discussion about hybrid non-profit/for-profit structures (The Social and Commercial Two Step). Much of that weighty discussion focused on managing where start-up capital and ongoing revenue come from.

Today I’d like to introduce a different slant on the question of what legal structures best foster social ventures. Specifically, when launching a new venture, what is the best way to protect the mission?

Social entrepreneurs tend to have strong feelings on this subject. They see themselves as the “Keepers of the Flame” who hold the vision for the venture close and who are responsible for protecting mission. But great things are rarely done by lone individuals alone. Rather they take partners, funders, investors, customers, and countless others.

Fans of for-profits like them because they can own them. “I’m the founder. It’s my company and I’ll make sure we always do what’s right.” This simple idea is certainly appealing, but as a venture grows the founder usually needs to bring in investors who now own their share of the company. Market forces and the need to turn a profit can also force decisions down the line that a founder never dreamed of making. Finally, it can be hard to resist when some big conglomerate comes knocking at the door with a multi-million dollar buyout offer, especially if you have investors to consider.

Others see non-profits as the way to go precisely because nobody owns them. We create them explicitly to serve some social purpose. Another simple and appealing idea, but as anyone who has ever been involved in fundraising knows, keeping to a clear narrow mission when someone else is paying the bills can be hard. Boards change, what’s hot this season might be passé next year.

And finally, whether you start a non-profit or a for-profit you will have to think about your exit strategy. Yes, someday you will leave your venture, whether it is from a huge buyout that makes you rich, a messenger from G-d calling you home, or just knowing that it is time to move on.

So here are some questions to get us started:

  1. What is the best legal structure for protecting your mission?
  2. Besides standard non-profits and for-profit entities, what kind of legal tools and structures can social entrepreneurs use to protect their mission?
  3. How can social entrepreneurs make sure their mission is followed when they are gone?
  4. Do we need a new structure that reflects the new reality of social and commercial missions blending?

Join Joy Anderson, Elizabeth McCance and Jackie VanderBrug, with Criterion Ventures, in the conversation.

]]> 2009-12-04T14:00:00-05:00 2010-01-28T19:03:22-05:00 Social Edge The Social and Commercial Two-Step http://www.socialedge.org/discussions/business-models/archive/2009/12/03/the-social-and-commercial-two-step Hosted by Lindsay Clinton (December 2009) hybrid model

Are dual structures the best way to do this dance?

The desire to combine social and commercial in the pursuit of an outcome has led to creative ways to structure an enterprise—often known as a hybrid model or dual structure, because it combines a nonprofit arm with a for-profit arm. The for-profit allows an enterprise to facilitate investment, while the nonprofit can facilitate grant capital and provide non profit-making services to a community.

While hybrid structures are innovative, they are, in essence, stopgap measures to get around the fact that in most countries, there is no legal label that meets the needs of an entity that exists to provide social good and yet makes a profit. 

However, the legal system is catching up in some countries: Community Interest Companies (CIC) in the UK enable a proprietor to run a business for the benefit of the community rather than for the benefit of the owners of the company. In the US, a few states have adopted a low profit, limited liability company status or l3c, which is unique because it lets companies facilitate investments while simplifying compliance with IRS rules for PRIs (Program Related Investments). There’s also the B Corp movement, which has no legal ramifications yet (except in Philadelphia!), but serves as a “trustmark” and signifies social responsibility to customers. 

While the US and UK are on the cutting edge of the blended value business space, most countries have to work with what they’ve got. As a result, more and more entrepreneurs are choosing to launch both a nonprofit and a for-profit to get the best of both models. But this choice is not without its challenges, including questions about branding, positioning to investors and donors, competing work cultures between the for-profit and nonprofit, transparency, and more.   

We’d like to explore elements of hybrid ventures with you over the next few weeks, and have posed the following questions.    

  • Is splitting a venture into for-profit and non-profit actually just a crafty way of getting around the fact that your venture is NOT economically self-sufficient?
  • Is it truly possible for a profit-making company to separate itself from its nonprofit counterpart?
  • Might it be better from a transparency standpoint as well as a community-building standpoint to find an NGO partner with a similar mission that is unaffiliated with your company?
  • Where do cooperative business structures fit into this system?

And, here’s the biggie, the elephant in the room, about hybrid legal forms:

  • Could the creation of new legal structures actually slow down real large-scale change in mainstream business? Does a new structure—take the l3c for example—take away the incentive for large corporations to change the way they work?

Join Lindsay Clinton, with Intellecap in Mumbai, in the conversation.

 

]]> 2009-12-03T11:05:00-05:00 2010-02-14T23:21:41-05:00 Social Edge Seeding Innovation http://www.socialedge.org/discussions/business-models/archive/2009/08/18/seeding-innovation Hosted by Sally Madsen (August 2009) seeding innovationWhat does it mean to seed innovation –to help a community or a sector create new solutions?
 
In the Ripple Effect project, seeding innovation means supporting motivated organizations to experiment, learn, iterate, and scale new strategies and offerings in the water sector.  Ripple Effect is a collaboration between IDEO, Acumen Fund, and prominent water organizations in India and Kenya, funded by the Gates Foundation.
 
This project focuses on the often-overlooked areas of water transport and storage – that is, increasing accessibility to safe water, reducing the time and effort to collect water, and reducing contamination.  The water organizations include social enterprises and non-profits in diverse areas of India and Kenya. Some purify and sell water, others focus on household water treatment; some favor technological solutions, others focus on awareness-building and community activism.

With such a range of organizations, we feel that it is critical not to standardize but to help each organization innovate according to their own strategy and approach. The Ripple Effect collaboration includes funding, business support, and sharing IDEO’s Human-Centered Design innovation process (which can be applied to designing new products, services, businesses, and systems).

Ripple Effect is a new model for impact, and we’re embracing the opportunity to learn and share with others.
 
Let’s discuss innovation approaches that work: from principles for successful collaboration to the nuanced examples that come through specific projects and experiences. I’m thrilled to be able to discuss these issues with such a diverse community of thinkers and practitioners.
 
Some questions to get the conversation started:

  • What elements are important to seeding innovation? What makes innovations “stick”?
  • What types of support do organizations value most—is it funding & resources, new ideas, structures & processes, collaboration, competition. Something else?
  • How can you seed innovation in a way that meets both your goals and the goals of the organizations that you are working with? Does a funder get to choose, or the implementer? What kind of negotiation might take place?


Join IDEO’s Sally Madsen in the conversation. Be innovative!

]]> 2009-08-18T12:19:57-04:00 2009-12-21T21:24:30-05:00 Social Edge Models and what's missing http://www.socialedge.org/discussions/business-models/archive/2009/02/23/models-and-whats-missing Hosted by Charles "Hipbone" Cameron (February 2009) missing_300.pngIBM Global's 2006 report (pdf version here), Business model innovation: the new route to competitive advantage included a striking graph illustrating the finding of IBM's financial analysts that "companies that put more emphasis on business model innovation experienced significantly better operating margin growth (over a five-year period) than their peers." 

And business model innovation is something that lies at the very heart of social entrepreneurship.

All entrepreneurship tends to render "existing products, services, and business models obsolete", as Roger L. Martin and Sally Osberg suggest in their paper, Social Entrepreneurship: The Case for Definition, but social entrepreneurs go further -- since social entrepreneurship is itself a genre of new business models.

In their book, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World, John Elkington and Pamela Hartigan describe three styles of business model used by leading social entrepreneurs: the "leveraged nonprofit", the "hybrid" nonprofit and the "social business".

The "hybrid nonprofit", they write, is where most of the experimentation in social entrepreneurial style occurs, often focusing on the production of novel forms of social and environmental value -- partly because many philanthropists favor this approach, viewing it as showing some of the same "hybrid vigor" found in biological systems.  Such organizations can recover portions of their costs through sale of goods and/or services, and may innovate or use a wide variety of detailed business plans within this general approach.  Aravind's business model, for instance, charges wealthier patients more for the services they offer poorer people at less cost, and by virtue of the size of their market are able to bring in economies of scale which permit this.

Also of interest is Larry Brilliant's conference presentation on Hybrid Philanthropy at Google.

The "social business" is quite simply a for-profit entity focused on a social mission -- its main difference from other businesses being that its main aim is not to maximize  financial return for shareholders, but to achieve social goals.  Financing and scaling opportunities can be greater for businesses running on this model, because they can more readily take on debt and equity.
 

models chart


And some social entrepreneurs simply run two enterprises, using the profits from one to subsidize the social activities of the other.

• What's missing in today's business models?
• What business model for social impact does your organization use?
• What innovations are involved in this approach?
• How has it turned out in terms of both short and long term success?
• Are others adopting your model?
• What do you perceive to be its drawbacks?
• What are your stories of success?
• And just as importantly, maybe more so, what are your stories of failure?

Join Charles "hipbone" Cameron as we explore business models for social entrepreneurship, what our current business models may be missing -- and what some innovative thinking might suggest...

]]> 2009-02-23T12:24:57-08:00 2009-11-17T09:14:23-05:00 Social Edge Private Sector Development in Palestine http://www.socialedge.org/discussions/business-models/archive/2008/06/26/private-sector-development-in-palestine Hosted by Adam Neiman (July 2008) The recent Palestinian Investment Conference in Bethlehem marked the beginning of a new international initiative to stimulate private sector development in the West Bank. The event was very promising- a potentially problematic quality in an over-promised land. There may not be a place in the world where private sector development is more urgently needed or more challenging.

Development is no substitute for a diplomatic solution but no diplomatic solution can be sustained without a sustainable Palestinian economy. The political situation places many roadblocks to economic development – literal as well as figurative.

There are also some unique contours to the Palestinian economy that make traditional developmental models problematic.

Palestine has a narrow resource base, including limited water supplies and an unemployment rate (40%) comparable to the most disadvantaged countries of the developing world. But because of the donor countries and the linkage to the Israeli economy, the cost of living is far higher. A traditional free trade model, starting on the bottom rung and competing as a low wage producer, is not an option.

But Palestine has also a few advantages. The population is much better educated than usual for an early stage developing country. It has a market economy with a remarkably resilient and resourceful business community. There is a far-flung Diaspora, many of whose members are highly successful entrepreneurs and financiers. Because of its geopolitical importance, there are significant resources in the form of loan guarantees from the donor countries for internal investment as well as other types of developmental assistance.

My company, No Sweat Apparel, has been working on the West Bank since 2006. We produce organic cotton T-shirts at a sweatshop-free Palestinian owned factory on Virgin Mary Street in Bethlehem.

I came away from the Palestinian Investment Conference both encouraged and concerned. I have a couple of questions in particular that I thought the community of social entrepreneurs here at Social Edge might have some insight into:

1.    If the free trade, lowest wage producer model doesn’t apply, what kind of developmental model might work?

2.    Could “Made in Palestine” products have a competitive advantage? If so, how and where?

 
Join Adam Neiman, CEO of No Sweat Apparel, in the conversation. ]]> 2008-06-26T10:32:09-07:00 2010-03-04T04:25:12-05:00 Social Edge Case Study: A Hybrid Model for PlayRugby http://www.socialedge.org/discussions/business-models/archive/2008/01/30/case-study-a-hybrid-model-for-playrugby Hosted by Mark Griffin (February 2008) play rugbyFinding the right Non Profit/For Profit model for a small but rapidly growing youth development program.

Play Rugby was established in 2003 by National Rugby Team Member Mark Griffin. As a non-profit corporation, the NPO’s philosophy is to “develop youth through rugby.” The NPO’s curriculum-based youth development program is branded “Play Rugby USA” and has reached 4,000 children in the last three years.

Now looking as national expansion and with the endorsement of the National Governing Body, Play Rugby is contemplating the most effective structure to provide the foundation for long-term, scaleable growth, including the launch of profit-making Play Sports.

The Program
• Mission: Strengthen youth character, conditioning and academic commitment, by integrating the values of rugby into a distinct and inclusive team sports experience.
• Vision: To become the premier youth rugby program in North America.

The Program includes
• Brand/logo/TM and associated assets (curriculum, equipment, etc)
• Physical delivery of fee-based services to schools and community based organizations (note - organizations pay, not participating students).

Funding & Investment
• The NPO’s operational budget is minimal ($170K in 2007): Fundraising 1/3 / Program Services  2/3

Expansion Plans
• Transfer of program (or rights) to Play Sports
• Play Sports to grow the program entrepreneurially through establishing network of licensed affiliates and employees
• NPO to focus on Fundraising for Program Evaluation, R&D and Promotional campaigns

Proposed Structure
•  Two legally separate companies, no shared ownership, limited governance overlap (Mark Griffin only member on both Boards)
•  Transfer of Program through long-term licensing of associated assets to Play Sports in return for % revenue back to NPO
•  5 New Board Members (identified) at NPO to drive forward fundraising & related activities
•  Capital Campaign at Play Sports to raise capital for Program growth

playrugby org chart

Integral to the success of this structure is the Founder’s role in both Companies.

Questions
1.    Can the Founder chair the non-profit board while acting as CEO for Play Sports? How should this work (salary, protections, etc.)?
2.    How should the program be transferred to Play Sports -- license/purchase/other?
3.    What factors should the companies consider in the sharing of certain joint resources (such as employees, office & equipment) during the initial growth stages?
4.    Can the non-profit outsource delivery of grant-funded programs to Play Sports? What’s the best method?

Help Mark Griffin find the best hybrid structure. Join him in the conversation. ]]> 2008-01-30T15:24:59-08:00 2008-02-12T13:38:46-08:00 Social Edge Radical Collaboration http://www.socialedge.org/discussions/business-models/archive/2007/12/13/radical-collaboration Hosted by Jeff Hamaoui (December 2007) radical collaborationThe time for playing small and separate is over…

We live in a crucible in which the forces of globalization, environmental degradation, poverty and emerging markets have driven companies, governments and non-profits to a new understanding of their limits. The problems that complex, interdependent systems create are beyond the scope of any one player to solve. The hidden opportunities of this moment are beyond the ability of any entity laboring in isolation to discover.

Working across the globe with social entrepreneurs, corporations and governments, we have found that the most powerful and sustainable solutions to the challenges of this new age come from ideas that transcend traditional boundaries and ways of doing business—whether your business is shareholder profit or public benefit. These things are not mutually exclusive.

Enter Radical Collaboration…

There is a need to build platforms for truly breakthrough design by creating multi-faceted partnerships aligned to explore, develop and exploit possibility. What does that look like? It’s bringing together an international finance giant, a development agency and a construction conglomerate in synchronicity to build 100,000 units of low-cost housing in Central America. Business profits, the effect of public dollars is amplified, and poor families get affordable green homes. If this dance of interdependence is splendidly done, everyone wins.

Some key concepts to keep in mind…

The first thing to keep in mind; don’t collaborate when you don’t have to; not every opportunity is collaborative; if it is more effective to go alone; go alone – as with African saying: “If you want to go fast, go alone; If you want to go far, go together…”

1.  Opportunity leads, design follows
For sustainable investment from partners, the drivers for a partnership need to be correct; good collaboration begins with a mutual opportunity.

2.  The three C’s – Capital, Capacity and Credibility
A recognition between partners that what is being traded goes beyond capital (which is always the focus up front); partners bring value through their different capacities and their credibility in a given field; in the case of non profits this value is often overlooked.

3.  Relational collaboration:  It’s not brokerage – it’s production
Complex collaborations require an investment of time and physical proximity to hammer out the details; think of radical collaboration being organized less like brokerage and more of a movie production; we need deals produced and a production methodology…

4.  Space Matters; Context and creativity
WHERE people collaborate is critical to HOW they collaborate; again the world of films gives a useful parallel – the movie studio.  An open collaborative space that permits creativity and flow.

5.  Keep it simple
Collaborative complexity is directly related to the number of players involved – land key strategic partners first and add tactical partners as needed

6.  Transactional collaboration
When what is traded is of tactical rather than strategic importance then there is real opportunity for automated market places; this includes iterative decisions, the movement of information and the trading of simple commodities – not all collaboration need be ‘radical’…

We have been exploring this delicate choreography pulling together the experience, the networks and the nuanced understanding of how to create cross-sector opportunities. Radical collaboration doesn’t deliver pat answers, it isn’t about consulting. 

You have to use design thinking—a collaborative, iterative, and holistic approach to solving problems and mining opportunities—to help invent a new future for business.

Join Jeff Hamaoui in the conversation. ]]> 2007-12-13T11:30:40-08:00 2009-06-18T01:35:13-04:00 Social Edge The For-profit / Non-profit Hybrid Model http://www.socialedge.org/discussions/business-models/archive/2007/11/08/the-for-profit-non-profit-hybrid-model Hosted by Richard Klopp (November 2007) hybrid_300.jpgThe For-profit/Non-profit Hybrid Model: Why and How?

PharmAfrican, a Montreal-based privately owned biopharmaceutical company, was founded in 2006 to develop and commercialize health nutrition products and botanical drugs in collaboration with local African producers.

In addition to the profit-making company, the Biotechnology for Bio-sustainable Development in Africa Foundation (BDA, a Canadian and US-based non-profit), was launched to prepare the work in Africa of pedagogical and training programs for medical plant farmers, to build a quality controlled supply chain, and to build an entrepreneurial agricultural incubator to launch the trained farmers’ agri-businesses.

The foundation’s strategic relationship with the biopharmaceutical company is designed to leverage the unique value creation mechanisms of philanthropy (BDA Foundation) to create an industry in medicinal plants in the Congo. Simultaneously, the model uses the unique value creation mechanisms of business (PharmAfrican) to create the market for medicinal plants in North America and around the globe.

In this “hybrid model,” the blend between for-profit and non-profit structures came as we searched for solutions to the challenge of helping African farmers create a high quality supply of medicinal plants for the growing nutriceutical and botanical drug markets.

In the conventional model of pharmaceutical development, the risk is aggregated in the R&D phases, while in this hybrid model the risk is located in the production phases: agricultural in the Congo. Yet it is precisely this commitment to keeping the agriculture of these plants in their local habitat that allows for real social and environmental uplift.

Here are some of the challenges we have faced:

• Knowing how to position both organizations: due to their synergistic creation they tend to confound conventional investors/donors

• Manage the different organizational cultures: high energy western bio-pharma company versus methodical pace of in-country agricultural programming

• Deal with the challenges that accompany all start-ups with international scope.

Some of our questions for the Social Edge community:

• What general learning from the ideas, practices, and experience of social entrepreneurship can be applied to this sort of for-profit/non-profit hybrid model?

• What has been learned about positioning this sort of a hybrid for investment?

• What experiences can members share with us about their own successes and failures with hybrid ventures that attempt to create a “fair trade” type industry with triple bottom lines?

Questions? Comments? Join Richard Klopp in the conversation. ]]> 2007-11-08T14:23:28-08:00 2009-09-08T19:47:02-04:00 Social Edge hybrid Productivity vs. creativity: Does the culture war impact social entrepreneurs? http://www.socialedge.org/discussions/business-models/archive/2007/06/26/productivity-vs-creativity-does-the-culture-war-impact-social-entrepreneurs Hosted by Charles "Hipbone" Cameron (June 2007) a" efficiency cultures are antithetical to highly creative thinking.

The story unfolds in Brian Hindo's At 3M, A Struggle Between Efficiency and Creativity, published by BusinessWeek on 11 June 2007, and was then picked up and blogged by Steve deAngelis, CEO of Enterra.

Here are Hindo's key paragraphs:

[New CEO McNerney] had barely stepped off the plane before he announced he would change the DNA of the place. His playbook was vintage GE. McNerney axed 8,000 workers (about 11% of the workforce), intensified the performance-review process, and tightened the purse strings at a company that had become a profligate spender.

He also imported GE's vaunted Six Sigma program -- a series of management techniques designed to decrease production defects and increase efficiency. Thousands of staffers became trained as Six Sigma 'black belts.' The plan appeared to work: McNerney jolted 3M's moribund stock back to life and won accolades for bringing discipline to an organization that had become unwieldy, erratic, and sluggish.

Now his successors face a challenging question: whether the relentless emphasis on efficiency had made 3M a less creative company.

That's a vitally important issue for a company whose very identity is built on innovation. After all, 3M is the birthplace of masking tape, Thinsulate, and the Post-it note. It is the invention machine whose methods were consecrated in the influential 1994 best-seller Built to Last by Jim Collins and Jerry I. Porras.

At the company that has always prided itself on drawing at least one-third of sales from products released in the past five years, today that fraction has slipped to only one-quarter. Those results are not coincidental.

Efficiency programs such as Six Sigma are designed to identify problems in work processes -- and then use rigorous measurement to reduce variation and eliminate defects. When these types of initiatives become ingrained in a company's culture, as they did at 3M, creativity can easily get squelched.

After all, a breakthrough innovation is something that challenges existing procedures and norms. 'Invention is by its very nature a disorderly process,' says current CEO George Buckley, who has dialed back many of McNerney's initiatives. 'You can't put a Six Sigma process into that area and say, well, I'm getting behind on invention, so I'm going to schedule myself for three good ideas on Wednesday and two on Friday. That's not how creativity works.'


Let's consider productivity vs creativity as a form of culture war -- how does it impact the social-entrepreneurial world?

• Is creativity a particular strength of social entrepreneurs? Is efficiency? Can we have both? Which one do we overlook at our peril?

• Do you have any strategies or tactics for continuing creativity in the face of efficiency practices? Or for ensuring efficiency despite the creative nature of your entrepreneurial culture?

• Do you personally identify with creativity or efficiency? Do you find the "other side" frustrating -- or inspiring?

Join Charles "Hipbone" Cameron in the conversation. ]]> 2007-06-26T09:32:18-07:00 2007-06-26T12:21:46-07:00 Social Edge Case Study: Gumball Capital http://www.socialedge.org/discussions/business-models/archive/2007/06/01/case-study-gumball-capital Hosted by Ilana Seid (June 2007) gumballHelp a group of Stanford students launch their microfinance social venture!

Gumball Capital was started by a few Stanford students during Entrepreneurship Week, where we ran a grassroots campaign and raised over $3,500 for a microfinance fund in three days.

We found that a lot of students weren’t familiar with microfinance but believed in the cause once we told them about it, and many were willing to donate a few dollars to our cause. More than half the students surveyed didn’t know what microfinance was, but once they read a brief description, 58% said they would donate on average $15 to a microfinance fund. Given the estimated 7 million full-time college students, we calculated the total available market to be US $105 million.

With our E-week proof of concept and the market analysis showing the existence of a market, we decided to start Gumball Capital.

Gumball Capital seeks to engage college students in microfinance through innovation and entrepreneurship. We plan to launch annual “Gumball Challenges” in November (International Microfinance Month) across college campuses in the United States to raise student awareness and funds for microfinance.


Strategy:

We envision the Gumball Challenge to be a competition between rival colleges (this year: Stanford vs. Berkeley, Harvard vs. Yale, MIT vs. Caltech) to see who can raise the most money for the Gumball Fund. It is a social entrepreneurship competition where we provide multiple teams at each college with “microloans” of about $20 -$50 and a box of Gumballs, and give the teams a week to create the most value.

The profits from these teams are deposited into the Gumball Fund, a revolving loan fund is lent to developing world entrepreneurs via Kiva.org. Each chapter will select their own entrepreneurs on Kiva to give them more ownership and control of their work. When the loan is repaid to the Gumball Fund, Gumball Capital re-loans it to another developing world entrepreneur, thereby creating a sustainable cycle of lending, and hopefully engaging many generations of college students in microfinance.

The national chapter of Gumball Capital will establish new chapters at other colleges and provide each chapter with gumballs, microloan funding and a Starter-Kit to launch the challenge. This Starter-Kit will contain promotional materials, checklists for organizing the challenge, sample fundraising ideas, and templates for recruiting judges, sponsors, members, and teams.

Sustainability and Metrics:

We are planning to allocate 3% of Gumball Fund revenues for overhead expenses. Based on our cost and revenue projections we would need $60,000 to cover costs before we are self-sustainable in two years. We rank our metrics of success in the following order: number of Gumball Challenge participants, number of donors, and amount raised.

Why Gumballs?

It is a metaphor for change. By placing a small amount of money in a Gumball Machine you allow a gumball to roll out. That one released gumball shifts all the remaining gumballs, moving them one step closer to the exit tunnel. This is similar to microfinance. Each developing world entrepreneur lifted out of poverty through microfinance helps other members of his or her community by providing jobs and goods and services. The entrepreneurs’ increased income also goes into increased health and education for their family, thereby breaking the intergenerational cycle of poverty. We at Gumball Capital believe that with a small amount of money, we can make a lot of change.


Questions:

1.    Besides looking at student body size, classes, and existing student groups related to entrepreneurship and microfinance, how else can we identify which schools would be the best to target?

2.    Based on our identity as a student-run organization, would it be best to file a 501(c)3 or get a fiscal sponsor?

3.    What are the best ways to get the surrounding community and corporations involved?

4.    Finally, we have a very nice pitch presentation. Where do we go to get funding?


Help Ilana Seid and her fellow Stanford students launch their microfinance social venture! ]]> 2007-06-01T16:42:54-07:00 2007-06-05T10:36:07-07:00 Social Edge universities Sustainability Microfinance youth Kiva Nonprofits / For-profits Partnerships http://www.socialedge.org/discussions/business-models/archive/2007/03/19/nonprofits-for-profits-partnerships Hosted by Patrick O'Heffernan (April 2007) Non-profits and for-profits can achieve significant results together that are often impossible alone. And partnerships between the two can be smooth and mutually beneficial. Our experience has shown that they are a great tool for Social Entrepreneurship as long as the benefits to both are clearly understood and all obligations are adhered to.

The benefits to for-profits organizations can range from added publicity to access to new, hard-to-reach, markets. Social benefit ventures can gain tools, resources and even skilled management assistance.  

In my own case, a partnership between my non-profit advocacy website and a for-profit video website gave me online video editing tools, bandwidth and server storage I could have never afforded. The FPO (a start-up) got tens of thousands of new members, and my site was able to achieve its social objective.

How should you proceed if you work for a social benefit venture?

•    Approach the FPO with a partnership arrangement that offers tangible benefits (not just "good PR"), i.e., 100,000 new web visitors or advertising in your newsletter.

•    Ask the FPO to provide you with services or products that are part of its normal business. Resist the impulse to ask for cash – that is charity, not a partnership.

•    Involve technical staff early in the discussions to ensure that operational problems are taken care of in the agreement, rather than fought over later.

•    Write a Memorandum of Agreement (MOA) and send it back and forth for editing and changes. Make it as detailed as the project calls for.  And remember, it is not the final agreement that is important, it is the communication process that creates it.

•    Make sure that all stakeholders in both organizations sign off on the MOA –anyone who will be involved or impacted. Make sure you deal with non-stakeholders who may have negative opinions, so they don't sabotage the agreement.

•    Stay involved and keep the relationships strong. Don't sign the MOA and then turn it over to staff to execute. Stay in touch with the project and the leadership of the for-profit organization – you may want to work with them again.

I love to work with start-ups. New companies are often easier to deal with than large established firms. They are hungry, open to new ideas, and have yet to grow a bureaucracy that throws up roadblocks to partnerships. And start-ups often have new tools and products that entrepreneurial NPOs can put to use quickly to gain publicity and new grants.

Join Patrick O'Heffernan in the discussion. ]]> 2007-03-19T13:16:01-08:00 2009-05-25T04:25:25-04:00 Social Edge Social Ventures in the Competitive Business World http://www.socialedge.org/discussions/business-models/archive/2007/03/05/social-ventures-in-the-competitive-business-world Hosted by Patrick O'Heffernan (March 2007) Fellow social entrepreneurs may want to read this life-changing book, The Social Enterprise Sourcebook.

Jerr Boschee (also profiled in our Peace Corps Entrepreneurs on The Edge series) has assembled a collection of case histories of social business startups – both non-profit and for-profit – in a volume that every social entrepreneur should read to answer the key question, "How do I do this?"

Founders of the featured enterprises describe their goals, operations, successes and failures. Each of them walks the reader through the mistakes made and the lessons learned. At the end of every case study is a factsheet on the enterprises with financial, labor and double or triple bottom line information.

The enterprises Jerr Boschee selected for the book include labor contractors providing jobs for disabled, a manufacturing firm that creates jobs for handicapped people, an asbestos removal company with a zero tolerance for drugs and alcohol, and even an interstate trucking firm employing ex-cons and reformed drug addicts.  Each case study includes advice for social entrepreneurs starting businesses.

The most important lesson that reoccurs throughout the case studies is that competition in the for-profit world is constant, brutal, unfair and sometimes even illegal – and non-profit organizations going into business need to be prepared to compete to win, sometimes at the temporary cost of their social mission.

sourcebook Many people enter social entrepreneurship to avoid the amorality of corporate scrambles for profit and market share, but the leaders in these case studies make it clear that it cannot be avoided. The real question is how you go about it.

• Do you have any experience in the competitive business world?

• How do you balance the needs of cost-containment and market retention with your values?

Join Patrick O'Heffernan in the conversation below. ]]> 2007-03-05T09:46:27-08:00 2007-03-19T13:08:45-08:00 Social Edge Converting from Non-profit to For-profit Status http://www.socialedge.org/discussions/business-models/archive/2007/02/05/converting-from-non-profit-to-for-profit-status Should you consider changing your organization's status from non-profit to for-profit? Patrick O'Heffernan lays out the five key questions to ask before you make the decision. (February 2007) Should you consider changing your organization's status from non-profit to for-profit? 

This question has become a major policy issue in the health-care industry, as many hospitals are currently doing so. And social entrepreneurs in all fields are thinking about it as they see themselves harnessing the tools of the for-profit world to advance social good.


There are five key questions to ask if you are considering converting to for-profit, even before you begin exploring what form of for-profit might meet your needs:


(1) What circumstances make this conversion appropriate? 
For instance, you may want to change status because you seek investment funds to smooth fluctuating cash flow so that you can offer consistent services. Or the majority of your income derives from sales, and for-profit status may enable you to expand beyond "mission-related items."


(2) How should your non-profit's assets be valued?
If your organization's assets are largely in the form of donor lists, you will be asset-poor when you convert because the donor lists may no longer be relevant. This may limit your ability to obtain loans or lines of credit despite your for-profit status.


(3) What should happen to the financial assets that remain after the conversion?
If your organization has substantial capital or real estate assets acquired with tax exempt donor funds, will the donors object to them being acquired by a for-profit entity?  Will you owe back taxes on them?


(4)  Will for profit status actually cost you more in taxes than you will gain in access to investment or loans? 
If your organization holds significant real estate or derives significant sales or service income, you will be receiving substantial new tax bills. These may offset any advantages you gain from for-profit status.


(5)  Will switching to for-profit status negatively or positively impact your image? 
This will depend on the area you work in, your clientele and your donors. Often, however, the label "non-profit" invests organizations with a level of respect and trust not accorded private sector firms.


What has your experience been?  Let us know.  Join in the conversation! ]]> 2007-02-05T16:32:24-08:00 2009-09-19T10:44:38-04:00 poheffernan Choosing a Social Franchise: Pros and Cons http://www.socialedge.org/discussions/business-models/archive/2007/01/02/choosing-a-social-franchise-pros-and-cons Hosted by Benjamin Litalien, President & CEO of Social Franchise Ventures (January 2007)
The well documented success of franchising is a strong attraction for would-be business owners. As the International Franchise Association touts, you are "in business for yourself but not by yourself".

And though not as publicized as the 'rags to riches' stories of many franchisees, there are real risks associated with choosing the franchise route. So, as the social benefit community begins to engage the franchise sector it is critical to go in with eyes wide open, realizing that a disciplined approach is vital to tapping into the value that seems so apparent.

Here are a few of the pros and cons that must be evaluated to determine if a social franchise strategy is right for your social benefit organization:

Pros

• Systems One of the key elements a franchise offers is access to proven systems, which can reduce the amount of trial and error usually associated with launching a new enterprise. Most franchise concepts provide their franchisees with a start-up/launch kit, operations manual and a marketing plan.

• Brand Depending on the type of franchise, the brand can play a significant role. The day the business opens the public is generally aware of the cost, product line and operations of the franchise which can result in a faster path to profitability. It is also important when considering an exit strategy as a recognized brand will garner more interest in a resale.

• Support The franchise will never be the ‘mission’ of the nonprofit, which means having good management and a supportive franchise company is essential. Many franchisors offer specific job descriptions for each position and have operational staff to assist with challenges along the way.

Cons

• Limited Market Research A common misunderstanding of would-be franchisees is that the franchisor knows the best site/location for the franchise. The reality is most franchise companies do little or no market research, but rely on the franchisee’s local knowledge. As some franchisees have found out, it is very difficult to overcome a ‘bad’ location.

• Limited Flexibility The strength of a franchise system is its consistency, which provides little room for any deviation. Failure to understand the parameters up front could create significant challenges later on.

• Long-term Commitment Most franchise agreements are 10 years in length with very limited opportunity for an early exit, which can be painful if the concept is losing money or otherwise is a drain on the organization.

Social benefit organizations considering a social franchise strategy need to have good business advisors supporting their interest to help them navigate these as well as many other key elements. If done properly, it can result in a very strong source of unrestricted income and better visibility within the community.

There are thousands of franchise concepts to choose from, ranging from fast food to children’s educational programs. Ask questions below if you want me to help you address the following issues (and more):

• How should a nonprofit determine if they are a candidate for launching a social franchise?

• How can a leadership team engage the board in considering such a new, entrepreneurial concept?

• How can a nonprofit evaluate the risks inherent in a social franchise and decide what level of risk is appropriate for the organization?
Auntie Anne's pretzel shop in Denver International Airport owned by Platte River Industries, a local social benefit organization.

Jeff.Mowatt - Jan 2, 2007 4:37 pm (# Total: 23)
P-CED

Sounds good to me

Hi Benjamin,

Just checking out your website and unless I've completely misunderstood this, you're talking about using the revenue stream from membership of a franchise network to fund social purpose. I'd go along with that, though my approach which is pretty small scale would be to link any kind of for profit activity, given it wasn't contradictory to my social purpose, as an enabling revenue stream. For example, currently, the maintenance revenue from a software product which is my intellectual property, funds human rights advocacy and promotion of social capitalism.

Now I can relate to franchising or distributorship in having attempted to expand into other revenue streams with little success. It became very clear to me that many franchise operations just wouldn't understand the motive. So, I can take it that those such as Ben and Jerry's do and are in some way in tune with the world of social purpose.

Maybe I should franchise, or create a distributor network for my own product? Then we might have a cumulative effect which is kind of where I jumped in, promoting the idea of social purpose business seeding new social purpose business.

Anyway, it seems to me that at least you've got some socially aware franchises on board and can probably sell the concept to others where I'd failed. So good on you.

Regards,

Jeff

Gayle Hallgren Rezac - Jan 2, 2007 6:17 pm (# Total: 23)
author WORK THE POND!

Understanding the model

Can you better explain to me how--as an example--the Aunt Anne's pretzel shop functions as a local social benefit organization. Do the profits go to a social cause? If you have the capital to establish a franchise, could not that money be given to social cause without establishing a business and the risks involved in running a small business?

Appreciate your commments.

Gayle Hallgren Rezac WORK THE POND!

Patrick O'Heffernan - Jan 2, 2007 11:13 pm (# Total: 23)

Does a social enterprise have to have an outcome besides money

Does the Pretzel chain use organic ingredients, support local growers, create jobs for the unemployed? It seems that there has to be a double, iof not triple bottom line to be a social enterprise

mfidelman - Jan 3, 2007 1:21 am (# Total: 23)
Center for Civic Networking

Ben and Jerry partnershps

One example that comes to mind are the Ben and Jerry's ParternShops.

Short form:

"PartnerShops are Ben & Jerry’s scoop shops that are independently owned and operated by community-based nonprofit organizations. Ben & Jerry’s waives the standard franchise fees and provides additional support to help nonprofits operate strong businesses.

PartnerShops offer job and entrepreneurial training to youth and young adults that may face barriers to employment. As PartnerShop operators, nonprofits retain their business proceeds to support their programs."

Details at http://www.benjerry.com/scoop_shops/partnershops/index.cfm

mfidelman - Jan 3, 2007 1:27 am (# Total: 23)
Center for Civic Networking

turning the concept around

I was a lot more excited about this topic when I first saw the announcement, because I misread the intent.

It strikes me that what's a lot more interesting than a nonprofit owning a franchise, is franchising a local nonprofit model - i.e., taking a model that's working in one community and replicating it through a franchsing mechanism.

In a sense, this is what chapter based organizations do. Scouting comes to mind, so does little league.

I expect that the social sector can learn a lot from the franchising sector regarding ways to make it easier to replicate working models. For example, would a franchising model apply for propagating a working microfinance program?

NickTemple - Jan 3, 2007 2:27 am (# Total: 23)

Franchising / replication

I like your pros and cons here, and wouldn't disagree with any of them per se, but I think you have to go deeper into it. The School for Social Entrepreneurs has replicated as a social franchise, but the key to its success has been designing a flexible system, with core quality standards built in. It is this balance between flexibility and rigour/hard management which is the key (and provides the challenges).

Another key point is that the concept/product must be tried, tested and absolutely nailed down. And your legal agreements must be watertight, and enforceable. All of which costs money, and takes time; this often results in other organisations replicating via other means (central control, open source, etc) which can be done quicker.

There are also significant risks: some organisations are (only) fit to a particular community or locality; others are yet to establish (or prove) themselves or their business model; more still have failed due to overstretch in the course of scaling up, or drifted from their initial values and principles.

The big benefit though is that the product is embedded in communities with organisations with existing local networks and links (often crucial for social enterprises), and avoids the trampling feet of an unthinking organisation from the capital/big city (known as London-centricity in the UK). It also fosters genuine partnerships, rather than short-term arrangements brought together for a particular contract/tender/application.

See more on this on our blog.

Cheers (and happy new year).

Jeff.Mowatt - Jan 3, 2007 2:30 am (# Total: 23)
P-CED

Re: Turning it around

MF, From what I've been reading recently about Matt Flannery and Kiva, he seems to be doing something of this nature in Eastern Europe. So, I'd say the answer to your question is yes.

With Kiva's lender infrasructure and recent surge in interest, it may be something that interests them too.

One of the things that interests me greatly at the moment is asset based funding. As an example, a nonprofit in Scotland partnerning with a nonprofit in Pakistan to fund a wind energy project which returns investment in either cash or share of electricity.

Laurinda - Jan 3, 2007 3:12 am (# Total: 23)

Social franchising in Africa

It is with great interest that I have read all comments, as we will be embarking on both a social and a for profit franchise model (again an hybrid) ...

I have researched the "world" for examples but to no avail! ...

Any suggestions?

Regards

laurinda


Jeff.Mowatt - Jan 3, 2007 3:24 am (# Total: 23)
P-CED

Franchising in Africa

Laurinda, Can you elaborate. You want a profit making franchise which will operate inside Africa and return social benefit.

Where will it be located?

Regards,

Jeff

Laurinda - Jan 3, 2007 4:03 am (# Total: 23)

Hi Jeff

  1. The franchise should be able to provide Multi-skilled and Multi-sector consulting services to paying customers (businesses) ... like any other business
  2. A % of profits should go to the franchisee
  3. A % of profits should be applied to social causes.
  4. A % of profits to Empowerment Gateway (brand, support ... et ...al)

Location:

Head office: South Africa

Regional offices: (maybe master frachises ???) initially in the SADC region scalling up into all 48 african countries covering North Africa, East Africa, West Africa, Central Africa and SADC.

Regards

L

 

 

 

  1.  

Jeff.Mowatt - Jan 3, 2007 5:52 am (# Total: 23)
P-CED

One possibility then

My business P-CED derives social purpose revenue from selling a facilities management software product to business and we have no African distributor. Here in the UK it is installed at the offices of several international corporations, government departments and quangos, hospitals and even a church community centre. We've partnered with for profit business on the basis of them getting 40% revenue share from sales and 50% support revenue. Any interest to your organisation? I can probably also point you at other tools which could expand your product portfolio.

mentor-one - Jan 3, 2007 8:44 am (# Total: 23)

Thoughts on franchise development as a meaningful social vehicle

As the founder / chairman of the Mass. state wide taskforce on self employment and home based employment for the Mass State Vocational Rehabilitation Council [SRC], I was approached by the SRC Chairman to develop a solution to a very pervasive problem in many rural areas of our state, reliable rural transportation for our disabled citizens.  As a disability consultant to small business and former franchise developer, I went about researching and developing a solution that would work well for all concerned.  My solution incorporates aspects of franchising with the needs of our disability community.  It offers brand identity, group buying and group core management support systems in a program without franchise fees or royalties. 

If anyone is interested in solving rural transportation issues by employing disabled entrepreneurs to service local markets feel free to contact me at mentor-one@usa.net.  This means of creating entrepreneurial synergies through the use of "the best parts of" franchising and divesting "the problem areas" can be replicated easily within the social entrepreneuring paradigm by engaging a bit of out of the box thinking.

Owen Doonan, Member, Mass State Rehabilitation Council, Chairman, Taskforce on home based & self employment for People with Disabilities

 


Benjamin Litalien - Jan 3, 2007 11:00 am (# Total: 23)
President & CEO, Social Franchise Ventures, LLC

Clarification

Thanks to everyone for the excellent responses, comments and questions!  I appreciate the interest in this emerging field and look forward to responding. 

First of all, the Auntie Anne's franchise in the picture is one of 5 owned by Platte River Industries in the Denver marketplace.  They purchased the initial site from an existing franchisee using an SBA loan, then from the profits have been able to expand over the last several years to multiple sites.  The Executive Director recently told me that 60 percent of the employees are his clients (mentally and/or physically challenged) so it not only generates significant unrestricted revenue for his organization, it is perfectly aligned with the mission.

To Gayle's question about use of capital, by investing capital in a franchise it can create a long-term, unrestricted revenue generation model that can be used to fund whatever is needed (social programming, operating expenses, etc).  Whereas many grants, gifts and other sources of income tend to be more restrictive and non-replenishable. 

Regarding Patrick's comments regarding the 'triple bottom line' to qualify as a social enterprise, I think that is the ideal, however, many nonprofits struggle to find the funding necessary to maintain their operations, let alone expand them.  Consequently, using the franchise model can give them the financial foundation necessary to find new, innovative ways to expand their mission.  As I mentioned above, with 60% of the employees being from Platte River Industries I would submit that it is serving society in a new and powerful way by creating meaningful employment.

Regarding Mfidelman's comments on Ben & Jerry's PartnerShops, they are the pioneers in social franchise, offering a unqiue program exclusively for qualifying nonprofit organizations.  I hope that more franchise companies will consider this as we gain more traction in the sector.  That being said, it is still vital to ensure that the B&J concept is right for the market and the location, and not to choose it just because they have a special program.  Many nonprofit organizations that have opened the B&J Partnershops have closed or are struggling due to poor location choices and non-receptive markets.

Nick, the program you referenced looks to be on the right track in educating would-be social entreprenuers with the details necessary, but not conducive to this blog.  Suffice it to say we are just scratching the surface!

Finally, Owen issues a challenging and thought-provoking offer!  I wonder if anyone will respond?!

More to come!  Ben

 

 


mentor-one - Jan 3, 2007 12:43 pm (# Total: 23)

On the issue of problem locations

With experience in creating, starting, innovating, rescuing, restructuring, purchasing and selling over a hundred small to mid-market business for clients and my own account over a 40 year consulting and public service career, I have had many mountains to climb.  One such mountain has dealt with evaluating those so called bad locations and coming up with resolutions that work.  I have observed a goodly number of businesses in horrible locations that had customers lined up around the corner waiting to get in and I have seen case after case when first class mall locations have had businesses close due to a lack of revenue generated.  In Falmouth, MA there is a great little ice cream shop in a totally obscure location that makes and sells a great high quality product.  A little sub shop turned grill started in recently in Duxbury, MA also has a poor location with a solid following and has become profitable within 6 months of starting up.  The food is four star quality, the price is right and the value for money is self-evident. 

If I were called on to rescue a poor location, I would look at the area demographic, research what the community likes, hates, craves and tolerates.  Only then would I begin building a solution that addresses what they like and crave as well as eliminate everything that they hate and enhance that which they tolerate until it attained the love level!

The secret is to give customers exactly what they want, crave and love. If you can do that, location is secondary. Because people will flock to those places that make them smile, offer great value and make everyone feel wanted. 

If anyone is interested in solving systemic problems blocking profitability in local markets feel free to contact me at mentor-one@usa.net.  Rarely do franchise operations attain this level of customer satisfaction.  That is why, although the IFA cites low levels of failure in comparison to independent operators, they obscure the fact that certain locations and franchisors have a revolving door of franchisee failure and resale. The answer is not easy to initiate, with bottom line hungry franchisors as it requires initiating the policy of giving customers exactly what they want, crave and love and that can impact a franchisors bottom line adversely in the short term. The long term result, rarely considered is a world class business with staying power. 

  Owen Doonan, Member, Mass State Rehabilitation Council, Chairman, Taskforce on home based & self employment for People with Disabilities


Benjamin Litalien - Jan 3, 2007 4:05 pm (# Total: 23)
President & CEO, Social Franchise Ventures, LLC

Well Said...

Owen,

Thanks for your insights on 'a good site' and the proper ingredients. It is not always obvious what makes a site 'good', but the ingredients are always the same: demand, timing and consistently quality service! I've negotiated hundreds of leases in malls, strip centers and for stand-alone sites and many times the economics for the concept can be won or lost based on the outcome of those negotiations. I've had franchisees so enamored with a site that they paid too much and were unable to get a good return on their investment. The emotion has to be tempered with good market research and good lease negotiations, especially a clear exit strategy. I always say, "If you get a great location and do everthing else wrong you'll probably still be successful; if you get a bad location and do everything else right it will still probably fail."

COSAD - Jan 16, 2007 11:19 pm (# Total: 23)
A Minnesota based nonprofit organization devoted to enterprise development in Tanzania

Any Social Franchisor for Tanzania?

Hello Mr.Benjamin Litalien. Happy New Year!

I read your article with Great interest! Thanks for sharing your expertise and Wisdom.  I am a native of Tanzania currently based in Minnesota, USA. In 2001 I cofounded a nonprofit, COSAD, Inc. whose mission is to empower individuals by providing support and innovative solutions through community projects development(www.cosad.org)

As a practical interpretation of COSADs mission, this year, among other things, we are embarking on a Community Reinvestment Fund Program(CRFP) which provide micro loans for local enterprise projects in Bukoba, Tanzania. Could you please be kind to suggest to me any 'social franchisors' or 'social venture capitalists that can partner with COSAD to provide these initial funding? We working with small entrepreneurs with viable and "bankable" projects, but because of luck of access to capital they have their dreams and hope shattered! And COSAD strives to inspire them again. Any help out there? Can also contact me at: smart@cosad.org or tel: +612 227 0065


Jeff.Mowatt - Jan 16, 2007 11:37 pm (# Total: 23)
P-CED

Re Tanzania

Cosad, Something which I can refer you to is the development of the <Ned> philanthropic franchise.

http://www.omidyar.net/group/ned/

Following progress of this collaborative development, though not directly involved in it, I can tell you there are plans to set up in several developing countries and link up with KIVA to offer microloans.

Hope you don't mind if I copy your message and post it on their discussion at http://www.omidyar.net/group/ned/news/23/

Jeff

COSAD - Jan 16, 2007 11:51 pm (# Total: 23)
A Minnesota based nonprofit organization devoted to enterprise development in Tanzania

COSAD- Center for Enterprise and Community Development-Tanzania

Jeff,

Awesome! Thank you for your very prompt response and willingness to connect/suggest some lead. Yes, please please feel free  to share the idea accross your people of good will.

 

Please tell me more about KIVU. Did you say they are setting up Micro banking scheme in Africa?/ "developing countries?

Keep in touch please, Thanks

Smart,

Minneapolis, Minnesota

 


Jeff.Mowatt - Jan 17, 2007 12:04 am (# Total: 23)
P-CED

Kiva

Smart, Kiva.org seems to be off air at present but here's a description

http://www.nextbillion.net/activitycapsule/1547

Essentially P2P microfinance which is taking off in a big way.

Pitch in with the collaborative discussion I mentioned earlier and Chris Cook (I hope) will tell you how a nonprofit in the UK co-invests with a nonprofit in Pakistan to produce electricity.

Jeff

COSAD - Jan 17, 2007 12:22 am (# Total: 23)
A Minnesota based nonprofit organization devoted to enterprise development in Tanzania

KIVA & COSAD

Thanks Jeff!

Please keep me posted. I am very appreciative for sharing these wonderful esources.

 

.../smart


Jeff.Mowatt - Jan 17, 2007 12:35 am (# Total: 23)
P-CED

Re: service icon

No, nothing to do with me. I'll communicate privately to avoid cluttering this thread, Jeff

joeherren@realtyamerica.org - Jan 22, 2007 1:52 pm (# Total: 23)

Nonprofit Franchisng

I notice some of these franchises are financed by SBA. So, they must be for profit enterprises. SBA will not lend to nonprofits.

Does anyone know of any actual nonprofits franchising their nonprofit enterprises?

mentor-one - Jan 23, 2007 10:14 am (# Total: 23)

re: non-profit franchising and financing

Joe,

 

If you check my earlier posting on "rural transportation", we have developed a model for social franchise packaging that selects the best features of commercial franchising, eliminates the negative aspects and takes a page or two out of the "Brook Farm" social experiment.  Granted we are focused on service to the disability community, but this cookie cutter design can be applied to other venues as well.  Our plan is to develop a series of social franchise like business programs to enable people with disabilities to work and gain independence.

 

As to financing, we have developed several grant like programs to fund individual consumer projects.  These include applying state and federal VR funds to self employment business plans much like individual employment plans and turning 22 plans are funded.  With this approach, we are able to secure between $3,000 and $7,000 per case for self employment.  Often this can be coupled with Social Security Administration [SSA] PASS plans to generate sufficient non-repayable funds to start micro business ventures.  A further venue is the Federal Grant to States program earmarked for people with disabilities. It is the Assistive Technology [AT] Loan Program and its subset small business loan program. This is a flexible term low interest guarantee loan program for people with disabilities that has reasonable limits in the $30,000 range with very flexible repayment terms. I was one of the initiators of this program in Mass. which was issued to the Mass Rehab Commission [MRC] and is administered by Easter Seals and funds through Soverign Bank.  I currently serve on the loan review committee for Easter Seals.  As a former consulting investment banker, I have been considering the development of social equity funding products that can incorporate elements of low risk; equitable yield earmarked to fund further needs with success based support systems to emulate the best elements of franchising.  I have developed several interesting funding vehicles that could be used to capitalize such initiatives.  Vehicles like this are needed in areas like Bosnia,  where international funds are scooped up by the bureaucracy and never seem to trickle down to the people in need.  We have identified a large disability population over there resultant from the war that is barely hanging on by a thread and only wants to work and earn a living.

 

Best regards,

Owen

 

OWEN P.DOONAN III, Chairman of the Board

THE-Group [The Handi-CAPABLE Executive Group]

 

Virtual management, IT & mentor consultants to Entrepreneurs, Professionals and Executives with disabilities. Advocates for  virtual access to public meetings and home  based employment  for the homebound and people with severe limiting disabilities.

 

Statutory Member, Massachusetts State Rehabilitation Council.

Chairman, Massachusetts Statewide Task force on Home Based and Self Employment for people with disabilities.

Founding member  Massachusetts Statewide Task force on Acquired Brain Injury [ABI] & Traumatic Brain Injury [TBI].

Member Easter Seals - MRC Assistive Technology Loan Review Committee

E-mail: mentor-one@usa.net

]]> 2007-01-02T09:25:00-08:00 2007-02-03T09:10:50-08:00 Social Edge Franchise Business Models Should your organization go "hybrid"? http://www.socialedge.org/discussions/business-models/archive/2006/11/01/should-your-organization-go-hybrid Hosted by Patrick O'Heffernan (October 2006) A hybrid organization tightly integrates a non-profit (NPO) and a for-profit (FP) unit into one organization.

See all Hybrid Model discussions and advice on Social Edge HERE. (updated August 2008)

The advantages of hybrids go far beyond additional revenue streams; they can extend your mission, enhance your brand and provide those you serve with additional opportunities for success.

But they can cost time and money. So how do you decide if the work and legal expense (up to $15,000 in the US) are worth it?

John Cesario and Chris Wiltsee of Youth Movement Records (YMR) are now making that decision. (YMR trains at-risk kids to work in the music industry - and keep their integrity). They share their criteria with fundraising expert Patrick O’Heffernan.

1. The for-profit unit should extend the NPO's mission

It must add value to the services offered. In YMR's case, it provides their kids from poor neighborhoods with opportunities for success and the skill and will to go to college.

2. It should reduce the pressure to raise money

The for-profit unit must do more than cover its start up and running costs. It must send enough money to the NPO to make a significant difference and to compensate for the time and work the NPO staff will put into it.

3. It shouldn't require an expensive infrastructure

As much as possible, the FP unit should share "backend" resources, space, and equipment with the NPO.

4. Failure shouldn’t undermine the NPO

Not all for-profit ventures are successful, so the NPO must ensure that failure of the FP does not cause its failure.

If the criteria work for you, what are the next steps? Start with due diligence (a US term for careful research).

1. Talk to business executives who understand your social mission and find out if they will become customers or suppliers, or possibly venture partners. You will need to build the same kind of network in the for-profit world that you have built in the NPO world. Bringing them on will help in conversations with skeptical donors and board members.

2. Talk to your donors. Do they understand the benefits for you, do they have reservations, or will they pay the setup costs for you? Do they have expertise that can help start and run the for-profit unit?

3. Work out the operational details. How will the FP transfer resources to the NPO – through licenses, cash payments or fees? How will your staff divide their time, or should you plan to hire separate staffs? Will they be housed together? Will you have overlapping boards?

4. Research your country's laws. Some countries have restrictions on blending for-profit and non-profit organizations. Tax authorities in most countries have precise rules governing resource transfers.

5. Find a lawyer or a barrister who understands both NPO law and the licensing and tax laws of for-profit enterprises. YMR needed both a non-profit tax attorney and an entertainment attorney.

When all that is done, make your decision. As of this writing John and Chris are still doing their “due diligence.” They have built an organization whose kids have a 90% high school graduation rate in the middle of a 48% community and they don't want to jeopardize that success. But their kids are going into a profit-driven world, either before or after college, and they need the connections, internships, part time jobs and experience a for-profit unit will give them...

What's your experience? Jump in the conversation!

Laurinda - Oct 31, 2006 9:27 pm (# Total: 28)

The Empowerment Gateway Group experience

It is great to see the focus back on hybrids. We have spent the past three years structuring our organisation. It was a challenging time to say the least.

As the founder my vision was to create a self-supporting structure that would provide the funding required for social and environmental initiatives being generated within the group.

You say that For-profits can fail, it isns't a different situation for NPO's. Any initiative can fail. ... when you are running only an NPO ... our research has indicated that often the NPO compromises its vision because of "hidden or not so hidden" agendas of donors and sponsors.

 In the FP case you will face the normal market barriers to entry ... but it is up to you to design strategies to overcome it.

... in our case, our integrated and blended model is working for us ...

The only factor that is critical is that you have to remain focused on your vision, and your goals ... research your external and internal environment ... take cognisense of political and socio factors that may affect your inititiative ... and most important ... remain independent as far as possible ...

When you forge alliances and partnerships be careful of who you are aligning or partnering with ... design exit strategies that you can implement ... if you see that it is moving your organisation away from its goals and vision ...

Look forward to all your comments.

Laurinda

(South Africa)

 

 


sikuluj - Oct 31, 2006 11:28 pm (# Total: 28)
SIMA Community Based Org

Join

 We are willing to join our organization go "Hybrid. Please can you provide us more details and how we can involving or participate.

Please send information via this address Johnstone Sikulu Wanjala, Program Coordinator Sima Community Based Organization PO BOX 1691, Kitale 30200 Kenya or via email sikuluj@yahoo.com


Sigward von Laue - Nov 1, 2006 12:27 am (# Total: 28)
SEKEM Initiative, promoting development

Sekem, over 20 years success as a hybrid

Could not agree more, it is good to think about hybrids, and even better to implement them. CSR goes only so far, but non-hybrid commercial entities have a mission (and share holders) that is essentially "not social" (i.e. it is not the primary focus).

One thing that is proved right in Sekem over and over again, is that the commercial entity has to think and behave in a commercial manner (looking after the bottom line), with social considerations comming (a very close) second, whereas it is the reverse for NGOs. Using this approach, Sekem has now established a number of commercial ventures (organic food, organic textiles, phytopharmaceuticals, IT solutions for farm management, plant breeding, farm supply provision)... and a number of social ventures (kindergarten, school, vocational training centre, handicapped and street children project, literacy, hygiene and adult education, research academy, medical centre)...

Regarding the issue of sharing staff; initially this is probably necessary, but as the business and the NGO grow, one has to ascertain that there is no conflict of interest...

...a strong vision and clearly defined roles of the NGO and the commercial entity are here essential.

Patrick O'Heffernan - Nov 1, 2006 9:27 am (# Total: 28)

HIDDEN AGENDAS

VEry interesting comment from Laurinda..the impact on NPOs due to hidden agendas of supporters, donors, etc. In my experience, the agendas have not been so hidden, but vry good point. Having a hybrid could complicate the situation because the number of agendas double. Could you give us some more history of the organization and perhaps a url? Thanks

Patrick O'Heffernan - Nov 1, 2006 9:29 am (# Total: 28)

Sharing staff

How did you make the separation between the staffs? That is a tricky process in both financial and personal terms. Can you give us some more insight into your experience. And what is your url, so we can learn mor about the organization?

Patrick O'Heffernan - Nov 1, 2006 9:33 am (# Total: 28)

infrormation on hybrids

I will pass your email address along to John Cesario who inspired this blog and perhaps he can send you some specific advice. I also read a great book lately, called The Elements of Influence" by Alan Kelly that explains how both NPOs and FPs play similar strategic games and that understanding these games can help NPOs reap someof the advantages of FPs.

Laurinda - Nov 1, 2006 12:33 pm (# Total: 28)

Hidden Agendas

Hi Patrick

Regarding agendas not "being so hidden" ... I couldn't agree with you more, although our research has indicated that some are cloated and not always obvious ... and by the time the NGO people becomes aware of them, they are so deep in dependency that they can't break the ties.

You make a very valid point in that hybrids have the potential to create other scenarios regarding above subject ... again it boils down to planning and a comprehensive knowledge of your market environment, including identifying "networks" of influence (both negative and positive).

We classify ourselves as an IVO (Integrated values organisation). We are a consulting group, started by engineers that had enough of "The business as usual crap" ... and wants to see a real change ... narrowing of the gap between the 1st and 2nd economy (read below poverty line) ...

Our URK is www.empowerment-gateway.com (although we have removed most of the on-line content as we are focusing on human capital capacity building phase)

Regards

Laurinda

 

 

 


balar - Nov 1, 2006 6:18 pm (# Total: 28)
Tamilnadu Primary School Improvment Campaign, India

Hybrid organisations are ideal but how to do it?

The idea of becoming a hybrid organisation is the ideal move for non-profits in the present globalisation, but how to do that.  Most of the business ventures started by us become failure, it is not generating any income.  The donors are not willing to support Non-profits running for profit business, they ask us to help people start their own business and leave them there.  Achieving quality and scale is a big problem, we do not get qualified staffs for profits because our salaries are low, nonprofit work culture is not conducive for business.  May be instead of hybrid we have to evolve a new organisation which generates its own income.  I am not sure but we would welcome suggestions, please also send details about successful hybrid organisations.

V.Balakrishnan


jimfruchterman - Nov 2, 2006 9:04 am (# Total: 28)
Benetech

Benetech uses a hybrid structure

We created a wholly-owned for-profit subsidiary in 2000. The main goal was to move unrelated business income into the sub (and pay taxes), and protect the nonprofit parent's status. In 2001 we had more than $1 million in consulting revenues, and it might have been a big problem for us if that revenue stayed in our charity.

Mozilla Foundation, the nonprofit developer of the FireFox browser, did the same thing about a year ago: they were bringing in so much advertising revenue that they wanted to protect their status as well.

Patrick O'Heffernan - Nov 2, 2006 1:15 pm (# Total: 28)

thanks laurinda

I checked out your website. everyone on this blog should take a look

Patrick O'Heffernan - Nov 2, 2006 1:16 pm (# Total: 28)

did paying taxes reduce your income

How did you decide what income to pay taxes on at Benetech?

Aviar - Nov 2, 2006 1:28 pm (# Total: 28)

Social Entrepreneur

I am starting a social entreprise (hybrid) as we speak. I have been consulting with accountants, professors of nonprofit management and development, attorneys, and others. Can someone experienced in developing a hybrid tell me how you began the organization/business? Can a for-profit business become a social enterprise (i.e., a corporation using surplus income to fund its social aim instead of going to stakeholders)?

 

Christi


Laurinda - Nov 3, 2006 10:43 am (# Total: 28)

Blending the value system and integration

Christi

You ask can a FP became a social entreprise? Can't see why not ... start by getting your support for the change within yr organisation before you deal with other stakeholders. You can integrate values top down or down up ....

Integrate values into your control systems, policies and procedures ...

You are working with a breed of individuals that are anchored on "facts" ... manipulation of facts et ..al. ... so the first thing you need to do is ensure that they have taken a "heart-set" ownership of yr vision before they let their heads control the processes. Without a "heart-set" change ... you will not succeed.

Regards

Laurinda


Patrick O'Heffernan - Nov 6, 2006 9:09 am (# Total: 28)

many FP's are social enterprises

A social enterprise has a bottom line that includes positive social impact. Just because there is a second bottom line of profit does not mean that it is not a social enterprise. The micro-enterprises funded by the Grameen Bank, the Nameste-Direct Foundation, the micro loan window of the WB, etc. are FP's. What is important is how the business/organization conducts itself, not whether or not it is organized to make a profit. As Laurinda says, "integrate values into your control systems, polcies, and proceedures.

Can a FP become a hybrid? Sure, and some do, usually by creating a NPO unit or foundation that works on the basis of a soical bottom line. But a more intersting question is how does a NPO become a hybrid? Larinda's point about "heart-set" change is important. Many NPO's dream of developing a revenue stream that frees them from fund raising. They either transform themselvs into a LLC or a C-Corp ( in the US, other forms in other countries), or they create a FP arm. What is important is that they understand that an FP has a different set of obligations, constituents, laws, and expectations than a NPO. Thinking through these beforehand and planning on how to keep the heart-set when the mind-set changes is the most important step.

SandraDickinson - Nov 6, 2006 9:36 am (# Total: 28)

making a learning game to solve the mystery of profitability

Recently launched: http://selearninggames.wikispaces.com

Selearninggames is a wikispace for social entrepreneurs to make a learning game together that will solve the mystery of nonprofit earned income venture profitability.

 

Venture entity structure may turn out to be one of the clues to the mystery. 

 

What’s the game?  It’s making the game! 

 

The meta-patterns that solve the mystery of profitability are hidden in our collective experience.  Discovering patterns is what makes learning fun!  During the collaborative process of making the game, we will explore our common problems, and common solutions will emerge.  Our tacit knowledge (stuff we don’t know that we know) becomes explicit. 

 

As we apply, test and refine together, the most effective set of solutions become the meta-patterns accelerating profitability for our own ventures.  These meta-patterns become the design principles of the game we make.

 

Please join us for fun and profitability!  It’s free.  You can easily edit pages, upload files, join in our discussion.

Feel free to share this invitation with like-minded folks you know :).   


Patrick O'Heffernan - Nov 8, 2006 4:06 pm (# Total: 28)

what a great idea!!!

What a great idea! I notice to that the site itself is a hybrid with Google Ads. I will join and "play around with it"

institute for china africa relations - Nov 9, 2006 2:58 am (# Total: 28)

We want to be hybrid.

Our Institute for China Africa Relations will soon be online with its own website www.inchinaafrica.org. What are the essential differences between the site of an NGO with that of a hybrid?That is speaking techinically and structurally.

We conceived the idea of a wholly Not for Profit organisation, but the reality on the ground made us think otherwise. Funds are scarce and the needs are numerous.So we opted to intergrate FP and NFP from the word go. We do not intend to create a seperate entity but run both from the same office. Will it work? I agree with Patrick that some FP are impacting positively and do the services of not for profits well.

Eustace Emeka Amuka CEO/ INSTITUTE FOR CHINA AFRICA RELATIONS

Patrick O'Heffernan - Nov 9, 2006 10:14 am (# Total: 28)

You raise 2 questions

First, there will be some website differences. The programming and design elements are the same, although you may use them differently. If you are going to sell items on your site, you will need "shopping cart" technology and a way to receive money, either through credit cards or Pay Pal. I suggest you check with the credit card companies and your bank because there are some steps you will have to take to move credits from a credit card firm to your bank account, especially if there is currency exchange involved. This varies from country to country and bank to bank, so I can't give you details for your situation.

Secondly, you will want to do some marketing and customer contacat and relations on your site. Depending on the beusinesses you go into, think about how your site can be used to generate customers and how you will track customers and potential customers. There should be a way to capture emal addreses of people who visit, perhaps by asking them to register. Once you have email, what kind of messages do you want to send them regarding the goods or services you ofer, and how often do you want to send them. There is Customer Relationship Management software for this, although you may wnat to start with just a spreasheet and see if you will need CRM software. Perhaps someone on the site can suggest free CRM software NPOs can use.

One business dea you might consider is, if you work with local artisans, arrange to sell items on your site and keep a perscentage. If you do this, you will also have to put in place what is called "fullfillment" - that is, a way to "ullfill" orders. This means recording the order, responding to the customer to let him/her know the order has been recieved and providing a way to track the order, maintaining an inventory so you have the items on hand to ship, packing for international shipping (a artform in itself!) , shipping through customs in the countries you will deal with, and paying for shipping.

A hint on charging for shipping - this is actually a profit center for most mail order firms - they charge more for handling and shipping than it costs them so they make a little profit on it also (when you ar a hybrid, you have to think in terms of profit).

Can you share offices? Yes, but local laws vary. If your non-profit status exempts your organizationf rom taxes, make certain that housing a FPO in the same office does not cancel your tax exemption. You may have to confine the NPO to a certain section of the office (at least on pater, if not for real), and charge them for that space. As a non-profit, local laws may prohibit you from giving away resources to a FPO.

Staffing and salaries may also be tricky. Does your country treat FPO workers differently from NPO workers? If so, your staff may have to keep their jobs separate -- one person may not be able to work both FPO and NPO. If the tax laws are the same for both, this will not be a tax question, but it will be an accounting question. You will have to keep separate books for hte FPO and the nNPO and staff will have to charge their time to the two entities.

If the two entities share resources like a fax machine, internet connecton, accosuntant, etc., the NPO will have to bill the FPO for its use (which is an easy way to transfer income from the FPO to the NPO without taxquestions.)

My advice is to draft a plan with as many specifics as possible and then take it to your lawyer or to a business advisor for corrections, changes, suggestions and references. And good luck.

Anyone else on the page have any suggestions for Eustace?

abromber - Nov 10, 2006 5:22 pm (# Total: 28)

A Lawyer's perspective

Warning: this is a long post!

This talk about hybrids is of great interest to me, since I do a fair amount of work in this area. Most of the people who talk about hybrids refer to an enterprise that combines a business purpose and a social purpose within a single entity or a "family" of entities. Usually, these hybrids take a few basic forms:

First, a nonprofit can carry on a business within itself, without a separate entity to carry out the business. The biggest advantage of doing it this way is simplicity. But the nonprofit may be subject to liabilities from the business, and if the business becomes too big, it can jeopardize the charity's tax exempt status. Also, because nonprofits can't issue shares, it can be hard to raise capital.

Secondly, a for-profit corporation can operate in a socially responsible manner and can dedicate profits to charity, without the need for a separate entity. Again, the advantage is simplicity. But the managers of a for-profit business owe a duty to maximize return to shareholders, and so their ability to run the company in a "charitable" manner creates real tensions, and it just isn't feasible beyond a certain point.

More common is a situation like Jim Fructerman describes, where a nonprofit creates a subsidiary to own and operate a business. If the subsidiary is wholly-owned by the charity, this works quite well. However, if the business needs outside investment, you have problems, not only because of the duty to shareholders, but also because IRS rules limit a charity's ability to participate in a business with non-charity shareholders, especially if the charity does not hold a controlling interest in the business. In practical terms, this means that the charity may have to reduce or eliminate its involvement in the business if it wants outside investors or if its need for capital grows because the business grows. These rules also hold true for joint ventures between charities and for-profit entities.

I favor LLC's for these kinds of ventures, because they allow for very flexible management structures and the members of an LLC can agree to almost any distribution of authority and profit they want. As "pass-through" entities for tax purposes, LLC's allow each investor to pay tax (or not) based on its own tax status. A charity can use its tax-deductible contributions to buy a share in such an enterprise. Social values can be built into the "DNA" of the company, profits can be allocated in proportions different from capital contributions, a charity can be given control over certain aspects of the business that are related to its exempt purpose, while investors can be given authority over pure business decision, outside entities can be issued special classes of shares that give them veto power over certain types of decisions,like mergers or changes in structure, etc. LLC's can also issue a full range of debt and equity instruments, which gives them flexibility to develop creative capital structures. And, if they are structured correctly, LLC's can be perfect vehicles for PRI investment. The big downside is that LLC's are not suited to public companies, nor are they very well suited to ventures where investors will come in and out on a frequent basis.

Another great option is to use various agreements -- rather than ownership -- to structure collaboration between a charity and a business. These agreements, including management service agreements, loans, rents, royalties, etc. provide a simple way to make sure that the charity is compensated for the use of its assets, so there is no undue enrichment to the owners of the business. property drafted, they can also keep the relationship between the two nice and neat and avoidd any nasty problems with IRS.

None of these options is perfect, and none are really designed as vehicles for social enterprise as we are coming to understand it. But they are the best we've got under current law.

In my view, what is really needed is an entirely new form of business entity that would allow a social purpose and a business purpose to co-exist peacefully. It wouldn't be a 501(c)(3), and it wouldn't be a regular tax-paying business. It would be tax-advantaged so long as the structure, compensation and profit participation operated within certain limits. It might have to issue some kind of social impact statement each year, along with its financial statements. Some have suggested that the price of ownership units should be set by the company itself, rather than by the market, to avoid the corrupting influence of Wall Street. Most agree that some kind of special tax designation would almost certainly be needed.

There is a growing movement to develop such an entity, and conversations have begun with several state legislatures and with the IRS. But these efforts are very young, and there is a lot of work to be done to determine what the key characteristics of such an entity should be, and how it could acheive legal recognition. After all, it took ten years after Wyoming passed the first LLC law in the country (in 1977) before any other state adopted one, and that only happenned after the IRS agreed to treat LLC's as partnerships for tax reasons. That was the last time a truly new form of business was created in the US.

Methinks we have a long road ahead.

Laurinda - Nov 11, 2006 9:42 pm (# Total: 28)

Hybrid Structure (The Empowerment Gateway model)

Carrying on from previous message.

I couldn't agree with your post more. It took us nearly three years of trials and runs ... not to mention a tremendous amount of research.

We have a NFP fundation at the top which owns via a share structure 40% of all operational companies which are for profit. This has two benefits:

* maximising shareholder value the NGO benefits and because they are the major shareholder they have control.

* we have also introduced a policy of 10% of turnover as a CSI contribution monthly which is channeled via the NGO for endorsed social, environmetal and economic projects such as SMME development.

We then created under the FP a channel of operations which has three legs of ops ... i.e. commercial (which deals primeraly with the 1st world business, NGO and gov ... and charge market related)

a social franchise that manages all the NGO projects

and an environmental franchise

It is a simple structure within a very complex framework.

... and it is working.

We run a series of 9 workhops testing the idea prior to start of implementation. The response from all sectors was terrific ... we got a 95% buy-in of the model.

Regards

Laurinda

 


Patrick O'Heffernan - Nov 12, 2006 10:33 pm (# Total: 28)

I also like the LLC model

We are considering shifting ThePeopleChoose to an LLC partially or completely owned by the non profit that incubated it. But we have to consider the liability implications. Because TPC was incubated by a television network, there is an FCC license at stake...the license is worth millions of dollars, and so cannot be put a risk. Risks that can flow from a website that posts politically oriented user generated media - even a C3 that is non partisan, can include libel, slander, and copywrite violation, plus political interference at the FCC.

This is why we are exploring the LLC model. I wonder what abromber and laurinda think about this. Also, I want to complement Laurinda on the thorough tesitng....this is the way it should be done.

Ed Beauchamp - Nov 13, 2006 7:12 am (# Total: 28)
World Tourism Foundation

We call a Hybrid a "MD PPP"

The World Tourism Foundation calls a Hybrid a "Marketplace-Driven Public-Private Partnership" (MD PPP).  Structurally there are two interdependent organizations to connect the very different motivators each world holds.

The FP World Tourism Network could not exist without the branding and political access provided by the non-profit World Tourism Foundation. Likewise, the World Tourism Foundation could not exist without the business mentality of the FP World Tourism Network driving revenues. All revenues (the Top-Line) the FP generates are shared 50-50 with the NPO.

Hybrids/MD PPPs are win-win! Today's consumer WANTS to purchase products and services that have a "do-good" aspect. Governments and wealthy donors can no longer carry the load of social issues. The marketplace provides the only hope. NPO should actively seek alignments with FPs, and FPs with NPOs. It is definetly the "shape of things to come."

Our Chairman has projected "by 2025 any corporation that does not provide returns EQUALLY to shareholders and social issues,.... will fade from the marketplace!" She adds that "this includes some of today's largest and well known corporations."

Ed


Mal Warwick - Nov 13, 2006 11:24 am (# Total: 28)
Author, consultant, public speaker

Putting this question in context

Let's not lose sight of the unavoidable facts:

  • * Most new businesses fail.

  • * Laws vary hugely from country to country. Some places a nonprofit can easily start a for-profit related entity. Other places that's just not possible. And in some countries it's much easier to start a business than a nonprofit that most social ventures choose that route.

  • * Any enterprise, whether for-profit or non, can incorporate social ends into its mission. It's misleading to assert that only a nonprofit can have a social mission -- or that in a for-profit, the single bottom line must take precedence. That just isn't so. In my latest book, "Values-Driven Business," co-authored with Ben Cohen of Ben & Jerry's, there are two dozen examples of values-based, for-profit businesses in which social ends are at least as high on the priority list of the owners or managers as is simple profit.

    • Patrick O'Heffernan - Nov 14, 2006 11:49 am (# Total: 28)

    I second Mal's obersvation

    Mal's book, (reviewed earlier on this site and in a podcast) lays out great information on this topic for both NPOs and FP's. Mal's firm is a good example of how a FP can incorporate social ends. The Greenfest, which was just held in San Francisco, had hundreds of such businesses and tens of thousands of people at their booths

    shawtreatment - Dec 22, 2006 6:17 am (# Total: 28)
    Brad Arsenault, Cofounder

    Hmmmm - I must look into it

    I'm the cofounder of http://www.shawtreatment.com , and thus far and after 2 years of research, we've decided to follow the Newman's Own 'recipe' of business. Which is to say, run it as a for-profit and give it all away. But I plan to look into the hybrid system in Canada. Does anyone have experience with hybrids in Canada?

    Rosalyn A.J. - Jan 2, 2007 8:14 am (# Total: 28)

    Looking for a speaker on Social Entrepreneurism

    Our organization, Executive Service Corps of the Charlotte Region (NC, USA), will be hosting a spring community forum on nonprofit advancement that will include a session on social entrepreneurism.  We are looking for a speaker and would appreciate any recommendations.

    Rosalyn Allison-Jacobs

    Deputy Executive Director


    Mae - Jan 9, 2007 8:01 pm (# Total: 28)

    Hybrid and Start Up's

    Hello Everyone!

    I am seeking some insight and advice. I am with a start up organization that will be a womens association/membership. Our organization consists of seven core programs that have the opportunity to involve earned income strategies. In addition, we would like to have a foundation which reaches a certain target market in addition to expanding our mission as well as a mix of social enterprises. Because we are a start up, does anyone have any advice on things I should look out for, do etc?

    Thanks!

    Mae


    Carrie V. - Jan 30, 2007 11:21 am (# Total: 28)

    Why not a self-sustaining non-profit?

    Hello Everyone!

    Can you please provide me with some pros and cons of just sticking with the traditional 501c3 route but creating an earned-income enterprise?  I am doing just that at the moment- and the income is related to our social purpose (healthcare) so I won't need to worry about unrelated income tax.  I feel that going the nonprofit route makes us much less "threatening" to our target market, which is typically wary of for-profit business.  Also, while we will run this venture as a self-sustaining and scalable enterprise, 501c3 status does allow for the possibility of government/private grants, should we decide to go after traditional donations.  I would like to hear some thoughts from the group!

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