Becoming a Profitable Nonprofit While Staying Mission-Focused

Typically when we think about the "business" of nonprofits, we think about volunteers donating their time and donors giving money. That may have been yesterday's model, but today many forward-thinking nonprofits are diversifying their revenue streams and asserting greater control over their bottom lines. While private support and government funding will always be critical to nonprofit organizations, it is essential that nonprofits create their own opportunities for revenue, relying less on the generosity of others and more on good business strategies to support their missions.

But how do you create new and innovative revenue streams while maintaining your charitable status and staying true to your mission? The answer may not be simple, but it is straightforward: Accept that market principles apply to everyone, nonprofits and for-profits alike. Identify organizational assets that are valuable in your local market. And partner wisely with other organizations (especially for-profit companies) whenever there's a synergistic value proposition (i.e., look for the mutual win).

At The New York Foundling, we've had great success using our real estate to advance our mission and increase revenue. In 2008, we sold six floors of our Chelsea headquarters to the New York City School Construction Authority, enabling it to open an elementary school (P.S. 340). We used the proceeds from that sale for two important mission-driven projects: a charter school in the South Bronx called Mott Haven Academy, the first school of its kind tailored to children in foster care and the child welfare system; and a medical clinic that serves not only the children in our care but other disadvantaged youth as well.

And this year we again leveraged our real estate to our advantage by partnering with for-profit coffee company COFFEED. COFFEED's business model is based on partnering with local nonprofits at each of their locations. Because we have street-level space on a busy block, we were able to offer them an extremely reduced rent, enabling them to open their first location in Manhattan, where rent and overhead costs would otherwise have been prohibitive. Up to ten percent of COFFEED's gross revenue at that location goes directly to The Foundling to support our programs and services. But it doesn't stop there; they also have provided us with marketing space within their cafe that we use to highlight issues affecting underserved youth. COFFEED has also committed to hiring our clients — teens in foster care and individuals with developmental disabilities. In fact, they've employed three of our kids already. And, of course, local residents have a new cafe where they not only have access to great food and gourmet coffee, they also get to feel good about "giving back" through the simple act of ordering a cappuccino. In other words, win-win-win.

Both of these ventures stay true to our mission of creating opportunities for underprivileged children and families that help them to thrive. And they support great outcomes for everyone else involved.

So what can nonprofits looking to increase their revenue by new and innovative means do to make that a reality? Here are a few suggestions:

Be crystal clear about your mission. Focus like a laser on the clearly defined impact you want to make — including how, where, and with whom. Being clear about your nonprofit's mission and goals will make it easier for you and your colleagues to make strategic, mission-driven decisions, reduce needless or wasteful spending, and achieve meaningful, measurable outcomes.

Identify your key assets — and use them. Okay, so your organization doesn't own prime real estate in a large city. It still has assets. Maybe you have a dozen corporate executives on your board who are in the habit of sending holiday gifts to their customers and clients every year. Find a local vendor who creates and sells high-quality gift baskets and offer to hook them up with those board members for a percentage of the proceeds the vendor realizes from the additional sales. Again, a win-win-win. You made things a little easier for your board members, helped boost a local vendor's all-important holiday sales, and generated new revenue (not to mention potential new donors, thanks to all those baskets with your snazzy marketing materials tucked inside) for your organization. Or maybe you have a major donor list that is perfect for a luxury retailer. You get the idea — be creative and think outside the box.

Partner whenever you can. Too often in the nonprofit world, people and organizations are content to work alone and forget that they operate in a market environment. Developing partnerships with others — particularly socially-conscious for-profit businesses — allows you to amplify the impact of your own resources with the (often greater) resources of another organization. And the key to successful partnerships is for the partners to bring a valuable asset to the table. In our partnership with COFFEED, for example, we were able to offer a prime location at a reduced rent, and they were able to provide us with access to the eyeballs of hundreds of coffee buyers daily. That experience has taught us that synergistic, win-win partnerships not only tend to be the most successful, they are the most enduring.

Remember, it's not just about the money. Obviously, the monetary component of our partnership with COFFEED is important. But the partnership also provides us with a means to reach a new audience and raise awareness of our critically important mission. As COFFEED customers begin to learn more about our programs and services, we're confident their interest will translate into charitable contributions and word-of-mouth support for the work we do. In other words, when considering partners, think about their marketing reach and customer base — you just might find yourself gaining access to a whole new population of potential donors and advocates.

So, there you have it. Four things to keep in mind as you look to diversify your revenue streams and assert greater control over your nonprofit's bottom line. I'm not saying it's easy, but if you think outside the box, keep yourself open to partnership opportunities, and look for the mutual win, good things will follow.

Bethany Lampland is chief operating officer at The New York Foundling, a New York City service agency founded in 1869 by the Sisters of Charity as a home for abandoned children. Today, the organization serves more than six thousand children, families, and adults in the city's five boroughs, Westchester and Rockland counties, and Puerto Rico.

Comments

[Donna Sofaer]

Excellent article. I wish that more nonprofits understood that making a profit to benefit their mission is a good thing. It can be done as part of delivering on your mission as is the case in this example, or it can be done to support (provide funding) for a mission you believe in, as is the case with Ben and Jerry's, Paul Newman's brands, etc. On the nonprofit side, newer corporate forms such as benefit corporations require dual reporting--both on the financial changes during the year and on changes social need/benefit. Benefit corporations are not non-profit charities, they are a profit making corporation that distributes or leverages a substantial portion of profits to improve the social conditions that are the heart of the purpose statement in their corporate filings.

[Scott Adams]

I like that you talked about partnering with other people. I have been thinking about starting a non profit, but I have no idea where to start. Working with others should help you make connections and get started. I've been looking at different services and I'll consider partnering. Thanks for the information!