Nonprofits rethinking business model

Buffalo's Business First featured an article about how nonprofits are developing new ways of generating unrestricited operating dollars: Entrepreneurial Ventures! As the article relates:

The region’s nonprofit service providers are faced with the toughest of challenges: How to deal with increased demand while facing declining revenues.

Small agencies are dealing with it. So are the largest.

Even the millionaire agencies – those with at least a million dollars in revenues that have made it onto the Business First Million Dollar Nonprofits list – say the situation doesn’t appear to be getting easier. They had collective revenues of $1.92 billion in fiscal 2007, but individually many are struggling and seeking ways to stay solvent. Many are exploring new funding options from foundations and contract opportunities as well as earned income through for-profit social enterprises.

Hauptman-Woodward Medical Research Institute will start one such venture Jan. 1 when it begins a management contract with the Industrial Macromolecular Crystallography Association (IMCA), a consortium of nine of the nation’s largest pharmaceutical companies. The five-year contract calls for Hauptman-Woodward to manage IMCA’s Advanced Photon Source near Chicago, where X-rays used for X-ray crystallography are produced.

In addition to the $1 million management fee over a five-year period, the real value of the venture comes in the form of future possibilities, says Eaton “Ed” Lattman, CEO and executive director at HWI, a $7 million organization.

“We earn some money out of it, but we also get on the radar screens of these nine companies,” he says. “It’s at least equally important that we might get them, for example, to be customers of the high output crystallography lab here at the institute, or we might develop intellectual property with one of these firms.”

The agency is not alone. Nonprofits are increasingly investing in social enterprises despite the economic downturn, according to a survey by Community Wealth Ventures Inc. and the Social Enterprise Alliance of Washington, D.C. More than half of the 848 social sector organizations surveyed already operate a social enterprise, while 60 percent indicated they plan to launch another in the next few years.

Those considering their first enterprise cite a motivation to increase revenues and to extend the mission of their organization.

Mark Foley, president and CEO of Community Services for the Developmentally Disabled, says he’s been focusing on better business practices to avoid cutting programs or making layoffs at the $21 million agency. Now he’s beginning to explore the possibility of social enterprise.

“I don’t know that I’ve come up with anything that’s rocket science here,” he says. “Nonprofits have to be more business-like when funding support from donors and government start shrinking.”

The sale of reproduced rare prints and artwork is the newest venture for the Buffalo & Erie County Public Library, which already earns dollars through Fables Cafe in the central library. Bridget Quinn-Carey, executive director, says the library is exploring a variety of opportunities for new revenues.

“We’re rethinking what we’re doing in our retail store too, thinking how can we better take advantage of this great real estate in there,” she says.

A cafe is also bringing in new revenue at the Buffalo Museum of Science. First opened this summer during the run of the popular Body Worlds exhibit, the museum is continuing the venture along with an increased emphasis on facilities rentals such as weddings and events in the main hall as well as the auditorium.

CEO Mark Mortenson says the nearly $3.3 million organization is looking at expanding those opportunities, as well as overnight programming for families.

“We always want to make sure it’s a unique experience every time an individual comes here,” he says. “We have a three-year approved strategic plan now aimed at identifying funding opportunities to change experiences throughout the museum.”

Habitat for Humanity Buffalo, with overall revenues of $1.5 million, has found better than expected success through its Restore, a retail shop that sells donated goods including building supplies, appliances, furniture and housewares. Over the four years since it opened in North Buffalo, the store has generated $500,000 in income, enough funds to build 12 houses.

David Zablotny, executive director, says the venture is working.

“It’s been much better than anyone has expected,” he says, adding that the agency is looking at whether it would make sense to add a second outlet, as other Habitat chapters have done. “That money we brought in through the Restore last year Is about 12 percent of our revenues, so we’re looking to find ways to increase that number.”

The YWCA of Niagara began a social enterprise last year with the creation of The Catering Crew, a catering company/culinary training program for the women living at its Carolyn’s House shelter in Niagara Falls. In this case, the venture serves a dual purpose: providing women with both training and a paycheck, and with additional revenues funneled back into the program.
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