Letter to the editor – Social enterprise takes root

To the editor:

Can we move beyond cynicism and tired formulas, please?

Mr. Beckmann’s views of the political process and the illusion of free markets do little to help nonprofits respond to major cuts in public spending.

Nor does Mr. Krizack’s proposal hold much promise: Let those who really know how to make money (i.e. businesses) do so, tax them thoroughly, and then “give the money to those who know how best to spend it — the nonprofit organizations.”

Let’s be careful not to allow political machinations or the traditional dependency of nonprofits to hide the reality and benefit of free markets at the local level where most nonprofits operate.

The trick is to identify those markets, not deny their existence or nonprofits’ ability to exploit them.

Is there an active and genuine market for some of the social services provided by nonprofits?

Perhaps not, but that’s hardly the end of the story. The assets and productive capabilities of most nonprofits provide a doorway to increased self-sufficiency.

It’s regrettable that Mr. Krizack’s personal observations of social enterprise — a nonprofit’s generation of revenues through social-purpose business ventures — have left him disillusioned.

Yes, it’s true some nonprofits should avoid competing in this arena.  Some are ill-equipped technically or culturally to compete in an arena that often cares more about price, quality and delivery than the halo over your head.

And, yes, in rare circumstances success can bring unwelcome attention from for-profit firms trained to smell a dollar from a mile away. They have better access to capital, they can play rough when they want to, and they have the one thing nonprofits lack most – excess capacity.

But the door swings both ways for nonprofits with the vision and determination to chart their own course and lessen their long-term dependency on public and private largesse.

Once business acumen is in place — more easily imported than grown in some cases — systems are developed and integrated, and core competencies are aligned with genuine market demand for goods or service, nonprofits hardly need shrink from competition.

On the contrary, add a dose of community goodwill to the attributes above and for-profits are the first to voice concerns about “unfair” markets.

OK, let’s be realistic. Can nonprofits eliminate grant-funding overnight through the practice of social enterprise?

No. Earned income activities may generate no more than 10 percent to 15 percent of a nonprofit’s revenues after three years.

Would that be of any real help?

Ask your readers.

Does the dual responsibility of bottom-line performance and adherence to mission create an extra burden?

You bet.

Is it manageable?

Absolutely. There are just too many successful social enterprises at home and abroad to think otherwise. The membership of the Social Enterprise Alliance is filled with them.

The suggestion that those who are attracted to the nonprofit world tend not to be business people — and by inference would do well to avoid social enterprise — overlooks the rigors of managing a nonprofit corporation year after year with scarce resources.

Match that determination with a willingness to acquire new skills and an organizational epiphany regarding the role of earned income in fulfilling a charitable mission, and watch out.

Nonprofits that follow this strategy can grow faster, serve more and decrease their vulnerability to the evolving priorities of government and grantmakers.

Isn’t that a goal worthy of our collective support and encouragement?

Jim McClurg, Partner, Social Enterprise Alliance, Seattle Office

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