Most non-profits should NOT start social businesses but if they do, they must take themselves through four key questions before embarking on their adventure.
Almost entrepreneur is a term I’ve heard over the years. It means a person who lacks just one or two of the essentials of a successful entrepreneur.
What I forgot – dangerously given my coaching of non-profits who are looking at social enterprise – is that there are more “almost entrepreneurs” than there are successful entrepreneurs.
Social Businesses beware.
This thought jolted me on the fourth day of meetings last week.
Day 1….We were coaching International Partners in Mission www.ipmconnect.org whom we helped develop a revenue stream called Immersion Experiences almost ten years ago.
The meeting was on the development of a new revenue stream called Global Citizens Program, which we piloted successfully with them this year.
IPM supports 70+ projects serving the poorest of the poor in Africa, India and Central America. These immersion trips now generate some 50% or so of their annual budget. Global Citizens Program invites corporations to sponsor trips and projects. This year’s pilot succeeded so now they’re taking it to the next level.
Day 2….Our team attended a luncheon featuring Father Greg Boyle who invented Home Boy Industries www.homeboy-industries.org in 1992 to provide jobs for ex-gang members in Los Angeles.
Boyle’s success is legend. Home Boy Industries is a $15 million group of social businesses. Using a theme of “nothing stops a bullet like a job”, HBI has used this revenue to help thousands of poor, young criminals find a more fulfilling path.
I’ll feature Boyle’s book “Tattoos on the Heart; the Power of Boundless Compassion” in next month’s book shelf and newsletter.
Days 3 & 4….I followed my social business hero, Rick Aubry, through two days of meetings with a dozen or so of our partners who are working on creating social enterprises for their non-profits.
Rick is my hero because he was doing social business before it was “cool.” He created (what is now) $20 million of social enterprise businesses in the San Francisco bay area (Richmond, CA) over the last 23 years. All benefits of Rubicon Bakery, Rubicon Landscaping and Rubicon Housing accrue to the benefit of the homeless.
He is now starting a social business titled New Foundry www.newfoundry.org which proposes that “if social enterprise is to have a significant impact on poverty and jobs in America, it must be re-imagined on a much greater scale.”
So, with all this inspiration, why is this article titled “almost” entrepreneurs?
That’s because Rick asked the first group we convened to answer four questions he says every non-profit must ask themselves and their boards before embarking on doing business:
- How long are you willing to wait until your business turns a profit?
- How much are you willing to lose while you wait?
- How much will it cost to bring in a CEO to run your social business (and how will that salary fit your culture)?
- At what size will you deem the enterprise successful?
Our partners’ answers to these questions immediately opened their eyes.
(As Collins notes in “Good to Great”, start with the brutal facts.)
One partner noted that their board would not be willing to wait more than a year for the business to become self-sustaining. Rick said, “Don’t do it then; that’s not enough time.”
Another group with a great (and scalable) business idea said they think they can talk their board into losing up to $100,000 before panicking. Again, Rick’s advice: “Don’t do it then. You’ll just be losing $100,000 of your hard-earned money.”
On the third question, I watched one executive director pale when he realized he’d have to pay a social business CEO more than his board pays him.
At this point of the fourth day, I felt like I’d been getting a drink of water from a fire hose.
Haven’t I been touting social business as a source of “non-ask based” revenue for a couple years now?
Haven’t I read about a lot of success in social business and even participated a few myself?
And yet, I am now breaking into a sweat thinking “what am I doing?!”
Until I realized again that the answer is, as always, in the middle.
Many, if not most, non-profit organizations, should NOT do social business ventures.
Many, those who can build value for their customers, should.
In either event, we should take the process seriously and proceed cautiously.
As the Captain would say after giving out all the assignments at the beginning of the “Hill Street Blues” TV show:
“Let’s be careful out there.”