The Line Between Philanthropy and Business

By Megan Bradley —

Some nonprofit organizations are becoming more product-focused rather than offering various services. The shift to offering products can be one way that nonprofits are able to ensure a steady stream of profit, which they are increasingly pressured to generate.

Nonprofit organizations market themselves by offering products, events and other things that will entice consumers to donate. Nonprofits acting in order to generate revenue for their businesses is a recent phenomenon that has been studied extensively.

In an article written by Partners in Philanthropy, Michael Maude said that nonprofits have recently begun to act more like money-making corporations in order to continue operations.

“This powerful trend has three primary causes: the decrease in funding from the public sector, the increase in competition for funds among an expanding number of not-for-profit organizations, and the rise in funder pressure for not-for-profits to operate in a ‘businesslike’ manner,” Maude wrote.

The National Center for Social Entrepreneurs is an organization that aids nonprofits in the process of becoming less dependent on things such as government funding and charitable contributions.

The concept of a nonprofit not relying on gaining funds through charitable contributions is a unique idea that the National Center for Social Entrepreneurs helps to support.

“It (The National Center for Social Entrepreneurs) encourages organizations to build on their own core competencies and earn revenue through, among other things, service fees, product sales, consulting contracts, and training and education courses.”

Nonprofits, such as the Individual Advocacy Group, have made the transition towards operating more like a business by using its abilities and mission to generate and sell products.

The Individual Advocacy Group works to help individuals with special needs to pursue their life goals and live self-directed lives. This mission is achieved through various support programs, living arrangement support, behavioral services and developmental training.

The Individual Advocacy Group enlisted Students Consulting for Nonprofit Organizations (SCNO) to help develop a way for the nonprofit to sell greeting cards that would feature art made by some of the participants with disabilities.

The project has been successful for the Individual Advocacy Group because of their connections in the community.

“They (the Individual Advocacy Group) already had so many connections and so many people who were going to print the greeting cards and who were going to help sell them already. So they had a lot of connections that made it easier for them,” Xochitl Menchaca, the SCNO project manager for the Individual Advocacy Group said.

Menchaca said one of the important things for a nonprofit to consider before they shift to selling a product is where the revenue will go because nonprofits need to ensure the money is going back towards helping the organization achieve its mission, not towards paying employees or generating profit.

For the Individual Advocacy Group, the owner was planning to use the money to implement different projects and to invest in a van to transport clients.

Additionally, the product must be relevant to the organization’s mission.

“For them it helped for their mission because their idea was to raise awareness and get funding and it ended up being good for both of that, especially raising awareness,” Menchaca said, adding that one of the recommendations for the Individual Advocacy Group was to personalize the artwork by including information about the artist.

Although some nonprofits have shifted to selling physical products, an article by Nonprofit Hub argues that nonprofit organizations, whether they offer products or not, are participating in the business of selling. In the article, Marc Koenig said that persuading people is selling.

In this business model, nonprofits may sell products or their overall mission.

“Your most important work is transforming lives: changing people and helping them achieve dignity,” Koenig wrote.

The Individual Advocacy Group pursues its work in order to transform lives, no matter what the organization is selling. The most important thing for any nonprofit that is selling a product is to continue to maintain their vision and mission with the products.

Maude said that nonprofits typically have stronger visions than for-profit businesses and that they should draw on this strength in order to secure funding.

In the case of the Individual Advocacy Group, SCNO recommended selling greeting cards in places such as hospitals, religious institutions and assisted living homes. Each of these places has some alignment with the Individual Advocacy Group’s mission to help people lead better lives. Therefore, it makes sense for the greeting cards to be sold in these places.

The challenges a nonprofit may experience by shifting to selling a product include initial marketing and targeting of who will purchase the offered product.

The Individual Advocacy project final deliverable included recommendations about creating a website to sell the cards from, which the organization is still implementing, as well as keeping a Facebook page for the cards. Each of these initiatives helped the organization spread awareness about their cards and their mission.

“It ended up being a really good idea, especially because one of the main things they wanted to do was raise awareness for themselves and their cause. So, the people buying the cards got to see their logo on the back of the card and then every single person they send the cards to sees the logo as well,” Menchaca said.

These challenges can be overcome by social media usage to promote the product as well as partnerships with relevant organizations.

SCNO’s final deliverable for the Individual Advocacy Group recommended using a Facebook page to promote the cards, frequently posting new products and responding to comments. In this way, the Individual Advocacy Group would be able to update and interact with their audiences.

The realization that marketing efforts happen differently for nonprofits and that they are really in the business of selling things can give nonprofits the opportunity to maximize the money they can make in support of their vision.

 

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