Geri Stengel is an entrepreneur's entrepreneur. With her experience in both business ventures and nonprofit organizations, she is uniquely positioned to bring the two fields together. And that is what she has done, devoting herself to social enterprises. Stengel, through her organization, Ventureneer, educates and mentors individuals as they establish businesses with a heart; and nonprofit organizations that start businesses to help support their social missions.
During a recent interview with Stengel, I asked her what a nonprofit that wants to establish a business should do, what they need to pay attention to, and for tips that might help a nonprofit successfully launch a business. Stengel steered me through the following points.
- Planning is the most important thing a nonprofit can do before launching a business. Part of that is simply to assess the organization's internal strengths and assets. What do they have to offer that they might be able to make money from?
Try to build on existing strengths rather than dreaming up something totally new. Stengel cited an example of a nonprofit in upstate NY which needed to replace government income that was disappearing. They already were receiving part of their income from a thrift store. But the ED thought that model might be improved upon rather than starting, say an ice cream store (this was an actual suggestion).
The ED drove the neighborhoods and realized that there were some successful dollar stores in the area, but they operated in more upscale areas than the thrift store had. These stores catered to an upscale clientèle and the stores were well organized, very clean, and seemed more professionally run. With more research, the nonprofit decided to launch a dollar store in a nicer neighborhood. In this way they would be building on an expertise they already had but just improving it. This is an example of an organization assessing its internal assets and assessing the marketplace as well.
- Can you do the planning and research in house or do you need to tap an expert? Decide if you can get your plan together by yourself or if you might need a consultant to help. Stengel says that hiring a consultant is not at all necessary. There are courses and many resources that can help. If there is a certain sticking point that you're having trouble with, then see if an outside person can help. For instance, Stengel cites the example of a nonprofit that was very good at actually running a business but terrible at writing a business plan. That is where help can come in handy.
- Stay true to your mission. Make sure the for-profit activity fits with your primary mission. It will be easier to get the support of your board, volunteers and donors. Make sure that the business you choose is compatible with your mission and reflects your organization's values. However, while keeping your mission in mind, do pick the best business idea for your organization. You do need to make money, so pick an activity that is likely to succeed.
- Don't be afraid of failure. It can paralyze you. Businesses do fail at an alarming rate, but your best insurance is research and planning. Market research is particularly crucial. Stengel advises that you go to trade shows, talk to vendors, visit similar businesses, shop the competition, look for information about public companies that do what you are thinking about.
- Know who your competition is and make sure there is room for improvement or innovation in that space. One nonprofit realized that there were no coffee shops in low income areas. The name brands stick to upscale locations. But, some low income people, especially the Latino community, love coffee and are willing to pay for it. So the organization opened a shop in just such an area.
Don't depend on people buying your product or service just because of your mission. You still have to have the right product and the right customer base to succeed. The biggest causes of business failures are lack of expertise and unrealistic planning. Make sure that you overcome both of those problems with some hard-headed and business-like analysis.
- Be ready to hire expertise and to pay the going rate for it. Stengel says that you may have to pay a for-profit salary to the person or people who will run your business venture effectively. This can be tough for a nonprofit and the rest of the staff. Stengel gave the example of that coffee shop having to hire a really experienced barrista. In your planning, be sure to research comparable salaries so you can be realistic about what it takes to get started.
I asked Stengel for a list of resources that would be useful to readers. She recommended the following:
- Social Enterprise Alliance
- Community Wealth Ventures
- SeedcoPolicyCenter and Seedco's The Double Bottom Line
- Generating and Sustaining Nonprofit Earned Income: A guide to Successful Enterprise Strategies, Edited by: Sharon M. Oster, Cynthia Massarsky and Samantha L. Beinhacker.
- Enterprising Nonprofits: A Toolkit for Social Entrepreneurs, by J. Gregory Dees, Jed Emerson, Peter Economy.