Nonprofit Sustainability: Social Enterprise

As we emerge from the Great Recession, not-for-profit organizations have multiple challenges to face.

Increased demand for social services, but decreased funding.  Decreased attendance and funding for arts and cultural programs.  Decline in religious giving and church attendance.  Pressure from federal, state and local government on tax exempt status and direct competition from government on funding for services.

Dwindling tax revenue has pushed government into direct competition with nonprofits to fund essential social services.  And in Washington, DC, lawmakers' talk of tax reform increasing includes discussions on the tax exempt status of nonprofits. 

Banks are renewing their call for elimination of tax exempt status for credit unions.  For-profit hospitals pressure Congress to "level the playing field" and eliminate tax exemption for nonprofit hospitals.  And so it goes.

Churches and religious institutions are safe, for now.  But nonprofit educational institutions, membership organizations, mutual associations --- all may see their tax exempt status disappear, or at least, see the charitable deduction disappear.

Many organizations will not survive, if this occurs.  Others will embrace entrepreneurial ventures to support their missions, creating a new revenue stream based on delivery of goods or services for pay.

"Social Enterprise" has been around for some time.  Not-for-profit organizations engaging in for-profit enterprises to support their missions.  Goodwill sells second hand clothing.  Girl Scouts sell cookies. These are Social Enterprises.

More organizations are looking at this model, finding ways to support their mission by competing in the marketplace, without risking their mission.

Some money-making ventures can be a part of a 501c3 organization's programs, others may require a separate for-profit venture to be formed.  For revenue streams that are not part of an organization's core mission, Unrelated Business Income Tax (UBIT) must be paid.  Sales tax must be collected and paid, the same as any small business.

But Social Enterprise may be a sustainable revenue opportunity for many organizations.

A valuable resource is the Roberts Enterprise Development fund (www.redf.org).  This organization helps nonprofits determine if they should start a Social Enterprise, and how to go about doing it.

The Small Business Development Center at the University of North Florida is offering a fundraising workshop on August 24th from 1 p.m. to 4 p.m. at the UNF University Center, Bldg. 43, 12000 Alumni Dr. Jacksonville, FL 3222.  Call 904.620.2476 for more information, or register on their website at https://www.sbdc.unf.edu/register-workshop-series.php?workshop_groups_id=4#w74.

Nonprofits must rise to the challenge by asserting themselves into the marketplace, and understanding their economic impact and value.  Social Enterprise may be part of the answer.

Wall Street Explained

Wall Street is, essentially, a poker room.

You've got all these poker players sitting at tables. One table has all the pharmaceutical companies playing Texas Hold-em. The next has all the auto companies playing 7-Card Stud. Another has the banks sitting around playing draw poker, jacks wild.

And lined up against the Wall ... are Wall Street brokers. They are making side bets, with investors' money, on each hand of poker. The bigger the pile of chips in front of each player, the bigger the side bet (or stock price)will be for that player.

Some brokers are actually taking side bets that one or more players will lose each hand.

And the House (Wall Street) wins every time, since they get a piece of the action from everyone.

The brokers charge you for the bet, not for the wins. So they can't lose. The only losers are the investors.

It has very little to do with how well each of the players performs, and more on how willing someone is to make a substantial side bet to keep that player in the game.

Over in the corner, at the small stakes tables, are the small businesses. No one is making side bets for them. Occasionally, one of the investors goes over, watches a few hands, and slips a few chips to a player. But largely, they are ignored.

And at the end of the day, the main room has a few big winners and a lot of losers. The small stakes tables are pretty much sharing the pot, although every now and then, one of them gets hot and rakes in a pile. If they do that often enough, they get invited to the main room.

Wall Street is Vegas, baby!

Strangenomics

The New Economics. Post World War I, America embarked upon rapid expansion of it's industial infrastructure. Accelerated this post WWII. Massive investments in innovation. Exported expertise in manufacturing and process management to developing world. Developing world created a labor cost savings for manufacturing. Less investment in innovation, more investment in labor cost savings (i.e. offshoring jobs). American manufacturing declines. Quality of manufactured goods declines. Costs of manufactured goods declines, then begins to rise as labor costs and shipping costs increase. American unemployment rises.

Time for a new industrial revolution. Investments need in innovation, lean manufacturing, higher production of high quality products with fewer workers, but more, and smaller, manufacturing plants. Highly automated, highly skilled workers making higher salaries, but producing more for less.

Requires major investment in infrastructure, worker training, education.

Regain American pre-emminence in manufacturing.

America = Innovation = Stronger Global Economy

Economic Hibernation

Once upon a time there were three bears ...

The first bear was a big, fat, Kodiak-looking fellow, who dominated a huge range and ate everything within that range. He didn't allow other bears to feed in his range, and was considered to be one of The Top Bears in Bear Country.

The second bear was your Average Bear. He stayed out of the way of Top Bears and kept to his own, small range, and was content.

The third bear was Hungry Bear. He wandered throughout Bear Country, sampling a little of this, a little of that. Top Bears, and even Average Bears, would try and chase him out of their territory. He was lean, hungry and constantly on the move, and never content.

Then, famine came to Bear Country. Food was scarce. To conserve his strength, Top Bear reduced his territory, which meant he couldn't find enough food to maintain his massive size. The game warden, whose job it was to protect the bears, and to protect the other creatures from the bears (a real conflict, if you ask me!), had to step in and give food to the Top Bear, because, as he noted, "This bear is just Too Big to Fail!"

Average Bear grew lean, then gaunt. He kept begging for food from the game warden, but the game warden had given nearly all the food to the Top Bear. Average Bear ate the crumbs that were left, and grew leaner, and weaker.

Hungry Bear, already lean, kept moving faster and into more territories. The other bears didn't have the energy to chase him away. He grew even leaner, but stayed on the move, and was even hungrier than before.

Then came the winter, when bears hibernate. Top Bear was still fat, from all the government food the game warden had given him. Average Bear was emaciated, and hungry and sick. But both bears crawled into their dens to hibernate.

Hungry Bear looked around, and didn't see any other bears. They were all hibernating. So, he began moving throughout their territories, eating a little of this, a little of that. As long as he kept moving, and didn't hibernate, he had plenty of food to sustain him.

Spring came, and Top Bear yawned and came out of his den. And there was Hungry Bear, having taken over a lot of Top Bear's territory, and Top Bear was too tired to chase him off. Besides, there was still some of the government food left.

Average Bear never woke up.

So, what are you going to do? Hibernate, or get lean, strong and expand your territory?

GONZO NEWS

If the world is my oyster, where's the horseradish?
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A monk asked Yueh-shan, "What does one think of while sitting (kazen)?"

"One thinks of not-thinking," the Master replied.

"How does one think of not-thinking?" the monk asked.

"By not thinking," the Master replied.
~Zen Mondo
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If you're not living on the edge, you're taking up too much room.
~ GonzoZen Koan
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INGREDIENTS

(1) The Nature of Money
(2) Acknowledgements
(3) Cerebral Resuscitation

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(1) The Nature of Money

I spend way too much of my time dealing with money.

As a consultant, I have clients who want help getting money. The mission-based businesses (not-for-profits) want grants and donations, the for-profit entrepreneurs want grants (failing that, they want loans or venture capital or profits), the government agencies want grants (failing that, they want a bigger piece of the tax pie, or find better ways to save/spend/allocate money).

I served on the board of an economic development company which helps small businesses find money.

I have to collect money from my clients. I have to pay money to my creditors. I have to figure out how to make the money coming in at least equal the money going out.

Thirty years ago I left home for my First Really Big Adventure --- I had joined the U.S. Peace Corps. After an extended period of matriculation (a career academic -- two colleges, four majors, three scholarships, a GPA that wouldn't register on the Richter Scale, and finally ... a Bachelor's Degree in English/Journalism/Political Science/Psychology, [pick one]) I taught one semester of high school, fled screaming and signed up for The P Corps. Next stop, the PI, Philippine Islands, Republika ng Pilipinas.

For three years, I lived modestly and happily on $125 a month.
{Here was a typical day: Dawn - wake up, hit the beach, swim, snorkel, fish, lay out in the sun, shower, eat breakfast, by 8 a.m. in the field working with farmers. Noon - hit the beach, swim/snorkle/fish, shower, eat lunch, take a siesta. 2 p.m., back in the field, work w/ farmers/fishermen until 6 p.m. Hit the beach, swim/snorkle/fish, shower, eat supper at dusk. Young men come by, pick me up to join them in serenading their girlfriends. In bed by 10 p.m. Six days a week. Sunday all day at the beach. White sand and palm trees as far as you could see, and not a building in sight.}

Needless to say, that experience shaped my perception of what was IMPORTANT WORK and what was not. But even then, I was finding that money was intrinsically linked to IMPORTANT WORK.

I lived in the town of Sta. Magdalena, about three dirt roads off of the paved road, in the southernmost part of Luzon, the main island. I learned the local dialect, ate the local food, drank the local wine (lambanog, distilled palm wine that the Philippine Air Force uses to fuel jet fighters), and attended every barrio fiesta (of which there was at least one a week). My main project was managing a tree nursery, propagating coffee, cacao, pimenta (black pepper), and leucaena (ipil ipil). The funding for this project came from the International Human Assistance Project.

The Bureau of Agriculture had selected this town for a Peace Corps Volunteer because they needed to develop new cash crops. The market for copra (dried coconut, from which coconut oil is derived) had plummeted. Rice prices were fixed by the government at an incredibly low level. Those two crops had formed the basis of the local economy --- they needed to diversify.

Market research had shown a very high demand for coffee, chocolate (which comes from madre de cacao, NOT the coca plant, which is where cocaine comes from) and black pepper. Soil samples and ag research showed the elevation, rainfall and soil in Sta. Magdalena were ideal for growing these. Ipil ipil was grown for firewood, to help prevent deforestation of the native hardwoods.

I was placed there because of my agricultureal background, having grown up on a kudzu farm in South Carolina, where my father worked one full-time job in the textile mill, another in the fields. My mother worked at least two full-time jobs just keeping it all together. The farm raised mostly kids and dogs.

The Sta. Magdalena Nursery thrived. We distributed dozens of seedlings the first year. Three weeks after the first seedlings were given to smiling, nodding farmers, I visited each to see how they were tending the seedlings. About half were still in the plastic bags, having never been planted, and were little dried sticks. The rest had been stuck in the ground and forgotten.

Perplexed, I asked why they hadn't taken care of the plants. They apologized, mumbled, and promised to do better. I re-distributed seedlings, and three weeks later, the same results.

Faced with the failure of the project, I vented to the mayor, who commiserated, ordered everyone to take care of the seedlings, then left for an extended vacation with his mistress. I re-distributed seedlings, three weeks later, same results.

I did what any sane person, facing similar circumstances, would do. I had a few beers. San Miguel, for those who like beer, is one of the great beers of the world. I later found out, having spent about 9 months in the provinces, that it tastes even better cold.

With a warm San Miguel in my hand, I sat down on a crate in front of the sari-sari store (the Philippine equivalent to 7-11.

The daughter of the owner of the sari-sari told me she had heard about the problem I was having with the farmers. Bles Fuata had grown up in Sta. Magdalena, gone away to college in Manila, found a job there and was back home for a visit. She said the problem was, I was giving the seedlings away.

"But, these are poor farmers," I protested. "I can't charge them. Besides, this project is supposed to help them!"

Bles patiently explained that, unless the farmer perceives a value in something, he has no use for it. They accepted the seedlings because they didn't want to hurt my feelings.

Without paying for something, it has no value, she said. If they have some sort of investment in it, it becomes worth something.

So, we sold the seedlings for one peso (about 5 cents American). We didn't distribute quite as many, but they were all planted, cared for and thrived.

Conclusion (and about damn time): The farmers of Sta. Magdalena formed a cooperative. They are growing and selling coffee, cacao and black pepper.

They are harvesting firewood they have planted instead of deforesting the mountains. They have an investment in their own future. When I left Sta. Magdalena, I turned the nursery over to the cooperative, who hired a young man just graduated from the University of the Philippines with a degree in AgroEconomics.

So what did I learn about the nature of money? I learned I can live modestly and happily, that value is what the customer perceives it to be and nothing more, and that money is more than just a method of exchange, it is a means to an end. But not the end itself.

(2) Acknowledgements

I want to thank Bles Fuata for her wisdom. I want to thank Father Lito Fuentes of Sta. Magdalena parish for his friendship. I want to thank Sunshine Smith for referring me to Dr. Mark Albion and his "Making A Life, Making A Living" website and book [www.makingalife.com], as well as Responsible Wealth [www.responsiblewealth.org] and Business Leaders for Sensible Priorities [www.businessleaders.org].

And I want to thank my wife Miriam for indulging me in my insanity that dismisses material wealth as the measure of success. I am the richest man I know.

Prepare for Success

Now is the Time to Prepare for Success

Community organizations have been undergoing an incredibly difficult time over the past several months. The economic recession has brought an increased demand for services, while philanthropic investments are either static or shrinking.

And most economists say this situation will be with us for awhile, and may even get worse before it gets better.

And to top it all off, most organizations are forced to use a system of funding that is, at best, fundamentally flawed. Organizations are forced to compete for funding from those whose own self-interest should dictate they advocate collaboration and partnerships.

Let’s take advantage of the current economic situation to complete re-invent fundraising and philanthropy. And those who start soonest, grow strongest.

Value Relationships

It has long been conventional wisdom that fundraising is based upon personal relationships. As a Board Member or supporter of Organization X, I go to see my friend and ask for his support for the organization. And we build our donor base upon those types of relationships and support.

But when my friend goes on the Board of Organization Y, guess who he’s coming to see? And so we go round and round with the check-swapping philanthropy. And it becomes evident that personal relationship fundraising is self-limiting, and reaches the point of diminishing return very quickly.

But when there is a value relationship between the donor and the organization’s services, we can move beyond the check-swapping philanthropy cycle into the realm of community investments. If I have a vested interest in the organization’s success, either personally or professionally, I am more apt to view any support I provide as an investment. And I continue to make an investment in the organization when I see that there is a return on that investment, in the form of positive outcomes that mean something to me.

When we reach the level of investment support rather than gift support, we can become a more sustainable, stronger organization.

What value does your organization demonstrate? Can you show the Return on Investment?

Th(INC), LLC --- The Innovation Company, can help you in securing investment support. We also work with you in helping forge the strategic collaborations and partnerships you will need to succeed for the future.

Call us at 904-553-2354. We offer a unique, cost-effective service that not only saves you money, but will help you earn the investment support you need.

Brian Smith
President and CEO
Th(INC), LLC
The Innovation Company
6999-02 Merrill Road
Suite 317
Jacksonville, Florida 32277

The Gospel According to Bubba

"When you are deluded and full of doubt, even a thousand books of scripture
are not enough.

"When you have realized understanding, even one word is too much."
~ Fen-Yang, Zen Master
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"Outside of a dog, a man's best friend is a book.

"Inside of a dog, it's very, very dark."
~ Groucho Marx, GonzoZen Master
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The Gospel According to Bubba
~A Parable on Giving~

Bubba Jones was a young man who had the great fortune and good sense to be born in the American South, where one of our cultural, recreational and spiritual activities is an event known as the Revival Meeting.

Revival Meetings are generally held in the late spring or summer, and feature all-day sermons that nourish your soul while testing your endurance.

Now, a famous E-vangelist (that's how it's pronounced down here) announced he was bringing a Revival Meeting to Bubba's corner of the world, and Bubba was determined not to miss it. His momma packed him a lunch of fried catfish and cornbread.

"Bubba," his momma said, "You take this here catfish and cornbread with you, I reckon you all gonna get mighty hungry before that preacher gets done."

Momma was a smart one, she had been to her share of Revival Meetings, and would have gone to this one if her lumbago hadn't been so bad. And if this preacher had been the healin' instead of the preachin' kind, she woulda gone anyhow.

Now, this preacher commenced his sermon in the morning, standing on top of a hill with a congregation of people spread out beneath him. He preached a powerful message that just kept getting more powerful. And it went on.

The sun was past noon and sliding down before the preacher paused to take a breath. By then, you could hear stomachs rumbling and growling throughout the crowd, and Bubba was sure glad his momma had packed him that lunch.

"Friends," the preacher shouted, "We're gonna break for a morsel of dinner. I plumb forgot to bring anything myself, and I know some of you out there are in the same shape. So, if there's anybody with a little something to share, why, bring it on up here and let God bless it."

Nobody moved. Nobody said a word.

Bubba looked around and thought, "Dang! I guess I'm the only one what brought something. Reckon what I oughta do?"

Now, Bubba had been raised right, and he knew what he had to do. So he steps forward and hollers, "Preacher! I got me some cornbread and catfish here! It ain't much, but everybody's welcome to share!"

Now, right now you might be thinking a miracle occurs and that catfish and cornbread multiplies. And you'd be right, but not exactly the way you think.

Right after Bubba announced he would share his lunch, and he started up the hill, there was a lot of whispering and mumbling among the assembled. People were nudging each other and saying, "If that Jones boy is willing to give up his lunch, we might had oughta, too."

So, they started opening up baskets and pails and pulling out ham and corn and what have you, and pretty soon there was a whole crowd of folk with food coming up the hill. And you know, there was so much food that everybody ate until they were full, and they still had food left over. So they took it over to the homeless shelter, and everybody there got fed as well. And it got to where they started making it a regular thing, that the folks would just cook up a little extra to take to those who needed it.

The miracle was, and is, that one person, one gift, can make a difference. That first gift inspires others to give, and the gift multiplies.

A lead gift is made by a leader. Leaders inspire, they motivate. Leaders are generous with their time, with their resources, with their knowledge and experience.

A leader is a gift, and a miracle.