Nonprofits tweak the ‘non’
By Mary Shedden
Tampa Tribune (Florida)
Copyright 2006 The Tribune Co. Publishes The Tampa Tribune
TAMPA — More than 30,000 times a year, a TransCare ambulance responds to a call for help.
The emergency medical technicians who respond don’t think about how or whether this 10-year-old business makes money. They’re on the job to transport people to local hospitals, getting them to the help they need.
The fact is, TransCare’s medical transportation services turn a profit - last year, to the tune of $600,000. That money translates into something even more vital: a significant financial contribution to the programs at the nonprofit Crisis Center of Tampa Bay.
The ambulance service is like a growing number of similar for-profit operations in the Tampa Bay area that are owned by nonprofit organizations that can’t rely on grants and sponsors if they want to survive. In a nation where more than 40,000 new nonprofit groups appear each year to fight for donor support, more and more of these do-good groups are looking to turn a profit in the traditional business world.
“You have hundreds, thousands of causes in this area alone. How can you say, ‘Give to us and not them?’” asked Karen Ryals, president of Achieve Tampa Bay, a support agency for the disabled that operates a for-profit management services company.
“To just rely on traditional fundraising is to me not being proactive.”
Today, most hospitals operate as nonprofit organizations, as do zoos, orchestras and universities. Increasingly, however, human service nonprofit groups better known for meager budgets and dependence on volunteers are finding they must shift to running a nonprofit business efficiently to survive financially.
“I don’t think it’s a dirty word,” Ryals said of the ventures that operate as support organizations of the nonprofit groups. “There is a return on investment from a social standpoint. There’s a return on investment from a business standpoint.”
In an environment where there are more groups than ever, boards and nonprofit groups’ leaders are refocusing their strategies for financing their causes.
‘Business With A Heart’
This concept of social enterprise is nothing new. Goodwill Industries has been selling used goods for income for much of its 100-plus-year history. The popular thrift stores today produce much of the revenue needed to maintain the organization’s job training programs.
The 19 Tampa Bay area retail stores last year earned $23.1 million for Goodwill Industries-Suncoast, more than half its total budget.
“It’s a business, but it’s a business with a heart,” said Chris Ward, spokeswoman for the region’s Goodwill, which serves a 10-county area.
There’s no specific evidence showing how many of the nearly 1 million American nonprofit groups operate for-profit business. The Internal Revenue Service, however, showed more than 35,000 nonprofit groups filed tax returns in 2002 for taxable, unrelated business income. A decade earlier, the number reporting taxable income was a little more than 31,000. Traditionally, nonprofit groups are exempt from paying taxes on money tied directly to the program’s purpose.
“It’s always been about survival. What do we have to do to keep the mission going?” said Margaret Linnane, executive director of the Philanthropy and Nonprofit Leadership center at Rollins College in Winter Park.
Not All Succeed
Tampa’s Bolesta Center training program for hearing-impaired children hopes it reaches more clients - and turns a profit with its online store that sells instructional books and DVDs for families and professionals, Executive Director Kim Hanna said.
Bolesta’s for-profit branch - the Auditory-Verbal Learning Institute - developed these products several years ago when Bolesta leaders learned about social enterprise. Now, thanks to a $20,000 Innovative Business Plan Award from the Children’s Board of Hillsborough County, the products are being marketed with the hopes of turning a profit.
“It just opened up this world of thinking,” Hanna said of her group’s decision to explore social enterprise.
In the past several years, nearly two dozen local nonprofit groups have explored social enterprise through the Children’s Board’s social entrepreneur program, said Cindy Kane, a consultant who helps the groups develop business opportunities.
About 10 have operating businesses today, serving as a reminder that not all ventures - even ones with good intentions - will succeed, said Kane, of the GW Group.
“Don’t have expectations that you’re going to have a net profit right away,” she said. “It’s no different that any other for-profit business.”
More Accountability
Similar national groups, such as the National Center for Social Entrepreneurs or the Social Enterprise Alliance, have been around more than 15 years, promoting business innovation for nonprofit groups.
Linnane said there has been an evolution to this business approach. Donors - and charity watchdog groups - increasingly are insisting on more accountability from local and national nonprofit organizations. A handful of high-profile scandals in the 1990s sparked skepticism among donors, Linnane said.
Charitynavigator.org, for example, considers financial self-sufficiency and diverse sources of revenue a sign of a well-run organization, spokeswoman Sandra Miniutti said. The businesses, however, should be related in some way to the nonprofit group’s mission, she said.
Creating a related for-profit business made perfect sense to the leaders of Success 4 Kids & Families Inc., a year-old Tampa nonprofit agency providing counseling assistance to needy families, Executive Director Clara Reynolds said.
As a young organization with little name recognition and a staff too small to undertake a huge fundraising campaign, it opted to look at the for-profit route, Reynolds said. A $30,000 Children’s Board award will allow it to establish a counseling service aimed at private school students and families.
“Launching a new business fit in perfectly,” Reynolds said. “We’re in the mental health business.”
Plenty Of Competition
An estimated 40,000 new nonprofit groups appear in the United States each year, adding to already heavy competition for donations that totaled $260 billion in 2005. Miniutti said breast cancer alone is tied to 700 different charities in the United States.
“There’s just so many teeny tiny charities, and it’s becoming increasingly more competitive. … And a charity in Seattle could be seeking donations in Tampa,” she said.
Despite the growing interest, Kane said about half the nonprofit groups who hire her to talk about business ventures are hesitant to plunge into free enterprise. The risk is the same as any traditional business, Reynolds said.
“Whether you’re a for-profit or nonprofit, you can’t operate in the red,” she said.
(CHART) SOCIAL ENTREPRENEURS
An increasing number of nonprofit groups in the Tampa Bay area operate for-profit ventures. Income from these businesses goes directly to operating the nonprofit missions. Examples include:
The Charity: The Crisis Center of Tampa Bay. Crisis and suicide intervention and community resource referral.
The Business: TransCare Medical Transportation Services. Nonemergency ambulance transport.
The Charity: Success 4 Kids & Families. Mental health and counseling assessment service for low-income children and their families.
The Business: Successful Futures. Mental health counseling referral service for child and families at private schools.
The Charity: The Bolesta Center. Therapeutic and educational programs for children with hearing impairments.
The Business: The Auditory-Verbal Learning Institute sells materials for parents and professionals to help hearing-impaired children communicate.
(CHART) LANGUAGE OF SOCIAL ENTERPRISE
Nonprofit groups creating for-profit opportunities speak a language that once wasn’t associated with service groups.
Earned income: Primary source of funding for a nonprofit. Makes philanthropy and government subsidy welcome but not essential to group’s sufficiency.
Earned-income strategy: Opportunity to earn income from within existing structure - way to help cover program costs. No real expectation of profit.
Business venture: Exploit a specific opportunity for the purpose of growth and profitability. Most emerge directly from a nonprofit’s core mission or purpose.
Affirmative business: A for-profit venture also aimed at creating jobs for the disadvantaged.
Mission-driven product or service: A for-profit venture that still has a mission-driven outcome, such as training DVDs for the disabled or a day care center.