Providing For Your Nonprofit: The Hybrid Business Model
Jessica Melton of Software’s Advice’s article on hybrid business models gives great tips on how to get your board’s organization “on board” with a for-profit venture. We thought it could give you good insight on how to introduce a hybrid business model to your organization. In fact, even Imagination for People considers itself a hybrid organization. Clouds is a company specially designed to help finance the non-profit I4P. How? By answering its client’s needs with two services: citizen consulting (sourcing of experts citizens for consulting projects) and the use of their own collective intelligence software in the context of consulting mandates for governments and businesses. Use the tips below to help transition your organization to a hybrid business model!
In a Nonprofit Finance Fund survey, 41 percent of NPOs reported running a deficit in 2012. Staying operational when donations are low is a challenge many nonprofits face. To combat this issue, many are establishing a hybrid business model by adding a for-profit venture. In fact, over 50 percent of nonprofit organizations currently operate as a hybrid.
Janna Finch, an analyst at Software Advice, nonprofit technology reviewer, spoke with a few nonprofits that experienced this transition to learn more. They offered tips and advice on how to address your NPO’s board with your for-profit venture, including:
Choose a Complementary Venture: When considering a for-profit addition to your nonprofit, ensure the venture matches the mission of your current organization. Your NPO’s board is responsible for making decisions that align with your nonprofit’s purpose. Opening a for-profit bakery for a nonprofit focused on forest conservation doesn’t make sense. However, opening a used car business to support a vehicle donation nonprofit, like Freedom Wheels, makes perfect sense.
Show the Risks and Costs of Your For-Profit: To gain your board’s approval, it’s important to present solid financial information that forecasts risks, costs and how and when the for-profit will make financial contributions to your organization. Maureen Beauregard, president of Families in Transition, wanted to open a for-profit thrift store to benefit her NPO. Her board was wary of committing to anything that would cause their organization to gain debt, so Beauregard researched and planned to ensure this wouldn’t be an issue. Through her detailed planning, she was able to save $60,000 each year to cover business costs through a social entrepreneurship grant and purchasing a property to build a thrift store (versus renting one).
Create a “Killer” For-Profit Team: Martin Schwartz (founder and president of Freedom Wheels’ NPO, Vehicles for Change) encourages nonprofits to organize a qualified team to lead the venture. “Many nonprofits are run by program people who don’t necessarily understand the business side of things,” Schwartz said. “Someone who has startup experience, who understands the dedication and persistence required to successfully launch a for-profit business, is a good choice.”
Remember, be pragmatic in your approach when presenting your for-profit idea to your board. Choose a venture that furthers your NPO’s mission. By showing the board how your plan will support the organization’s cause, you’re more likely to earn their approval!