Listen Up Nonprofit Leaders: Profit Is Not a Dirty Word

On Monday, September 24th, Marty Schwartz led a session on social enterprise at the Social Enterprise Alliance’s Mid-Atlantic Summit. See coverage of the presentation here. In the article below, Marty talks about social enterprise, which refers to business models, for both nonprofit and for-profit organizations, whose main purpose is the common good:No doubt this economy has hit everyone hard. Nonprofit organizations are getting it from both sides: not only are there more people finding themselves in need and reaching out to the nonprofit world for assistance, but government and foundation funding is dwindling. Nonprofits have to pay attention to the bottom line. A nonprofit that cannot stay in business cannot do good for anyone.

Vehicles for Change was established, in 1999, on the premise that it was a nonprofit “business.” It was our intention to build a sustainable business that provided a valuable service to low-income families. Consequently, the approach to every new endeavor we’ve had has been: what is the value to our customers and mission, and how can we generate income or reduce costs?

In 2006, Freedom Wheels, a used car business that’s open to the general public, was opened to provide financial support to the VFC program. Today, Freedom Wheels generates 30 percent of the total VFC revenue. Freedom Wheels cars are generally priced from $3,500 to $6,500. Many of its customers are low-income families who do not qualify for a car through the regular Vehicles for Change program.

So. while Freedom Wheels is generating a major funding source for VFC it is also furthering the VFC mission of providing transportation to low income families. Thanks to the funding from Freedom Wheels, VFC has been able to increase car awards to low-income families from 300 awards to 500 awards per year in just 5 years.

Nonprofits need to think more like for-profit businesses if they are going to survive and grow. Executive Directors have to focus on the “business opportunities” available to them and have a Board who will support them in exploring and implementing the opportunities that make sense, further the mission of the organization and generate non-restricted funding for the organization.