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When it comes to fund raising via the sales and distribution of products for nonprofit organizations typically there is only one way to participate; namely by a Traditional Event Driven Campaign where net profits are generated from buying wholesale and selling at retail.
But today I point you toward an expanded vision that increases the possibilities.
But before I reveal it consider this from an article in Inc. Magazine entitled Six Ways to Save the World: A Practical Guide to Social Entrepreneurship
“It used to be that if you wanted to make a difference, you joined a nonprofit. And if you wanted to make money, you launched a business. These days, it’s not so simple. More nonprofits are being run like fast-growth start-ups. And more traditional companies are being built around social missions.”
This statement challenges the average non-profit because many, if not most, nonprofits are maintaining a level of status quo. On occasion I’ve asked nonprofit leaders what they would do if they had double the funds. I am immediately inundated with a list of items and projects. This tells me that though they want to increase the impact, their level of income keeps them at a defined state of existence. And my guess is that a great deal of energy and planning is invested regularly only to keep the organization at the level they are now. God forbid that the economy were to vary in the wrong direction and put their very existence in jeopardy.
If you are a leader of a nonprofit, I am writing for you to consider an additional approach. This will mean educating yourself about the distinctions of social enterprise, also called social business, its development in the world today, and the fund raising potential connected to it.
First, let me say that the social enterprise marketing model, when implemented, could make a huge difference for nonprofits in the future. We are working to make the Hope Movement the nonprofit organization’s best friend.
Before I tell you more, please allow me to give you some of my history.
I have the better part of forty years experience working with nonprofits. At first it was the work I did with three churches as their pastor. One of which had a private school and all the fundraisers that go with it. I also ran a 501(c)(3) organization in the Midwest. I then worked as a Human Resource Director for a two-year Bible College in Texas for five years where I obtained the experience of working with a multi-million dollar nonprofit. I also started another 501(c)(3) organization, which I presently run, and which is supported, in part, by a donor base. My wife is a national keynote speaker and she has spoken at nearly 90 fundraising banquets for as many nonprofit organizations in 38 states. This has mostly been for women’s resource centers and among home’s for unwed mothers. I have accompanied my wife to most of these events where we rub shoulders with nonprofit leaders and some of the most caring and hardest working people we know. All of them must raise tens of thousands to hundreds of thousands of dollars yearly. We also support orphanages in Belize and in the Dominican Republic through stateside nonprofit organizations. I can say experientially that I understand the idiosyncrasies of fundraising issues.
As I go on and without wanting to oversimplify, allow me to distinguish two kinds of nonprofits.
There are those nonprofits that do not need a long term, ever-expanding source of income. This might include Parent Teacher Organizations, Athletic Teams, Boy Scouts, Youth Groups etc. Most of the time fundraising for these groups is temporary and with a distinct short-term project in mind. This might include things like buying uniforms or funding group travel excursions.
The second kind of nonprofit organizations are ones I have a personal interest in. They are those that have long-term fundraising objectives, where the budgets are much larger and growing. These nonprofits need an expanded, and often times more complex and diverse strategy; a strategy that empowers and funds the nuts and bolts of their day-to-day activity, month in and month out.
With that in mind we point you to starting a relationship with the Hope Movement where not only is there a very focused social outreach connected to its mission, but where another compensation dynamic kicks in altogether, which has a potential to increase cash flow and, perhaps, more importantly, sustainability.
To give you a feel for how much; if your organization builds a team over time that helps nourish 1,000 children, your nonprofit’s earnings could be around $50,000 a year. Remember, this isn’t just you, it’s a team built by teams who build more teams.
The first thing I know you are going to say about this way to earn money with the Hope Movement is that your organization does not have the time or energy to give what it takes to do team building.
And the second thing you are going to say is that you cannot approach your donor base, as part of this team building effort, because the cash flow they create should not be disturbed.
To both points, I totally agree. I know exactly your concerns.
But, what if we implemented a strategy that truly navigates these concerns?
What if people are found outside your community, outside your donor base, outside your volunteer staff, perhaps in other states and regions who we could expose to the Hope Movement, the team building aspects, and the earnings generated by their participation?
The nonprofit organization I lead enrolled in the Hope Movement and we do not presently expose this dynamic to our donor base, only to those within our other spheres of influence and beyond. This very presentation is such an exposure.
The direct affect on your organization by a growing mix of team members who execute this social enterprise model would be increased funding.
We already have a practical and online system in place to help pitch the global social mission objectives to interested parties, including the earning capabilities that are folded into the project. It can only be advantageous for your organization—really, for all involved.
Plus, the more social causes in the mix, including yours, increase the motivation to enroll as we expose prospects to this social enterprise and all its heartfelt objectives. Team members can tout to their prospects that multiple social causes are funded.
It is entirely possible that a growing team of participants, trans-local to you, will enroll as a part of your growing national community of social enterprise teams, thereby generating additional funding for your organization.
With the advent of the Hope Movement and proliferation of social enterprise, the marketplace becomes a direct source of income, and adds to your fiscal diversification. This allows a long awaited marriage between the market and your social purpose. Let me say it more poignantly. To the degree to which nonprofits connect successfully to the market is the degree to which their impact and reach increases significantly. Until that happens, the relationship with a donor dollar is found to be limited, unpredictable, and subject to the variations in personal and national economy.
The Girl Scouts tap this idea only once a year and enjoy cookie sales totaling $750 million annually.
So, the nonprofit can be involved proactively in the Hope Movement endeavor, or the nonprofit can take a somewhat passive role, allowing other social entrepreneurs to grow their fundraising team trans-locally and even internationally. Our team would serve as consultants to provide direction and support where needed.
Your nonprofit’s minimum cost would be $115 monthly. This purchases products, which you can use or distribute, and matching amounts of nutrition are sent to children in need. The nonprofit earns commissions based on team results. The social entrepreneurs helping to move your project forward would do their work for free because they generate earnings in the team building process as a fellow team member. They have a vested interest in the success of this endeavor.
As an option, an interested and generous leader or individual could fund this project and of course get a tax deduction.
And I know one more set of questions you will eventually have.
Those among you who must keep in touch with all things legal and lawful might appreciate the following. But, first, let’s assume three possibilities and the legal and tax ramifications. I ran the following through legal counsel and it is believed to be accurate. But as a disclaimer, I am not an accountant nor am I providing tax advice. This is a simplified overview and I highly recommend you seek professional tax counsel.
Possibility #1: Joining forces with the Hope Movement your nonprofit earns $1,000 or less.
In this scenario, you are not required to report this earning or pay taxes on those earnings. Your organization is not in jeopardy of losing nonprofit status.
Possibility #2: Your organization’s participation with the Hope Movement earns more than $1,000.
In this scenario, this means you submit a Form 990T (Exempt Organization Business Income Return) and a tax bill is generated on those earnings. As long as you pay the tax bill, your organization is not in jeopardy of losing nonprofit status.
Note: However, you will want to explore with consultants the issues of corporate mission defined by your by-laws. For instance, if you are an organization that already has an outreach that includes families, women and children it could be that your participation in the Hope Movement where malnourished children are nourished by your participation is part of your corporate mission. This being the case, it could be that paying taxes will be a non issue.
By the way. The organization I lead had to submit a Form 990T recently as a result of our earning some money through some non-related sales. So I have personal experience with this one.
Possibility #3: Your nonprofit earns “substantial” income through the Hope Movement
At this point, and with the note above in consideration, it is wise to create a wholly-owned subsidiary, whose purpose would be to generate income via a for-profit business; in this case, your social enterprise relationship with the Hope Movement. Since this subsidiary is a separate entity for legal purposes, it would be legally responsible to pay taxes on earnings. Tax laws of a given state or country in which the subsidiary is incorporated would apply to the subsidiary, but not to the parent company, which, in this case, is your nonprofit organization. Earnings left over after taxes paid would be available to your nonprofit organization. As long as you form the wholly-owned subsidiary in this scenario, your organization is not in jeopardy of losing nonprofit status. An example; sometimes gift stores in hospitals are in this category and exist as a wholly owned subsidiary of the hospital itself.
Drawing from the three possibilities above, here is the worst-case scenario: your nonprofit earns so much it has to form a wholly-owned for profit subsidiary, a legal entity that pays taxes on its earnings. This is the worst-case scenario, if you move forward. Or, perhaps there is another worse case scenario from an opposite spectrum that if you venture nothing, you gain nothing.
Consider this quote from that same Inc. Magazine article.
“A 501(c)(3) nonprofit can still generate earned income. And plenty do. The National Center for Charitable Statistics estimates that nearly 70 percent of the $1.4 trillion generated by nonprofits in 2008 came from the sale of goods and services.”
However, just recently I did some research to upgrade these numbers. Based on 2012 statistics the amount generated is now up to $1.7 trillion and the sales of goods and services approaches 80% of that number.
So, where are things heading? Does it bother you that only 20% to 30% of the income for nonprofits comes from donors? Is there a hidden message here?
With all of this in mind could it be that Development Directors of nonprofit organizations of the future will have a new dynamic added to their job description? In addition to recruiting and building relationships with a donor base and organizing fundraising events; it will also include building an expanded national and international team of social enterprises who promote the Hope Movement.
Done right, this could bring incredible fiscal change to the charity, who, until the entrance of social enterprise, had all their fundraising eggs in just a few traditional baskets. For some nonprofits, whose last fundraising event hinted of an uncertain future, this could provide much needed relief.
As an active member of the nonprofit community, I understand conviction; but it’s not conviction any of us are short on. We are short on sustainability. In almost all cases where social change is pursued, there is enough conviction to save the world, but not enough fiscal sustainability to keep our convictions animated. Debatably, because fiscal sustainability does not exist at the levels hoped for, we hold back somewhat; we play it safe. We digress into a risk aversion model of leadership. Vision and mission degrade to caution. What suffers most is the social cause your organization exists to address.
But I believe social enterprise through the vehicle of the Hope Movement and the visionary leadership of nonprofits like yours can be a contributing force to change all that.
At whatever level your nonprofit finds itself, the growing, and undeniable popularity of social enterprise cannot be left alone. Generally, social business is becoming a viral idea that many are espousing in our culture. We see it as marketing genius that leads to even more cause-based goodness.
Realize that you are living at a time when consumers announce a business as irrelevant if they’re not contributing to quality of life enhancements or pertinent social causes. A business without a social mission is guilty of strategy malpractice because the market expects more than lip service to making a difference in the world we all steward. Because this is true, businesses who do not make the transition to social business will be abandoned by their customers.
So let’s think that point through inversely. Could it be that the natural implication for a nonprofit organization gleaned from this kind of attitude says that your social cause could—and should—be better funded if it was connected intentionally to the market? Especially since that is where almost all the money is. Obviously, a social organization is expected to address social concerns, but how effective and far-reaching should their impact be? Doesn’t the very nature of a nonprofit, and the convictions that drive that nonprofit, mandate not just the most successful effort possible, but corresponding results? So how much more worthwhile outcomes would be the nonprofit organization’s reality if more funds were generated via the market?
You will be glad to know that we have no marketing stigmas. There is no hype; no manipulations; no exaggerated claims; no sales fluff; no pressure to “act now” or “lose out.” None of that exists here.
Our marketing strategy always includes methods of those who take the high road. A business focus with this kind of social mission simply doesn’t have to revert to compromised tactics. We are more likely to send out mass news releases and get the word out fast and furiously to those within our spheres of influence and beyond, because we have profound social and life-changing reasons to do so.
As positive an impact as can be delivered by your participation you may also be considering how to avoid the loss of not getting involved, especially in a culture where this kind of social innovation is not just popular and, in some quarters, expected, but also called both “contagious” by one expert and “the most dynamic business model of this millennium” by the Harvard Business Review.
The only status climbing we are interested in is taking a malnourished child to nourished. We measure our success by the number of vulnerable children we can effectively transition to healthy. Presently the Hope Movement generates 1,800 servings of nutrition every ten minutes and growing. And if we can join hands with your nonprofit organization, and the honorable objectives you hold dear, then we will be glad to add how you measure your success to our social mission equation. This will create a social reach based on a win-win relationship.
My guess is that this subject needs some forthright discussion. I am at your service to help you with that discussion. My cell number is below.
Thank you.
Tony McWilliams
Cell Phone: 469-955-2001