Profitable Non-Profits

My guest post today is from Randy Seitz, a 17 year veteran of community and economic development specializing in new industry attraction, local industry development, workforce development, and international trade.  Randy currently serves as the President and Chief Operating Officer of the Oil Region Alliance of Business, Industry & Tourism. Randy is taking the traditional approaches of ‘non-profits’ and turning them on their ear – challenging status quo in every aspect of his operations. I’m inspired by Randy’s innovative thoughts on turning a non-profit into a self-sustaining entity.  This is a fabulous example of defying Gravity for all of us.


I have recently finished the development of my agencies next five-year strategic plan.  Our 2 main goals were to become substantially more efficient in the way that we achieve our corporate mission and vision, and to become financially self sustaining in the next five-years.  The plan’s success is going to require that the organization adopt a change in the way they normally operate and to redefine how they generate and develop funds.  In other words, we have to challenge the status quo and defy gravity to achieve major success.  That is why I have recently purchased, for my entire management team, a new book by Rebel Brown called “Defy Gravity.” The book defies the status quo and provides practical advice to help corporate leaders avoid crash-and-burn strategies of yesterday.  I highly recommend this book to all CEOs struggling with change; change in how to implement new and unique ways to take organizations to new heights.

Rebel suggests that the way we’ve always done it may be limiting our success and I agree!

Status quo in the nonprofit world is fund development.

Traditional fund development is simply the acquisition of resources to advance the mission of an organization.  It is the process by which an organization uses fundraising to build capacity and sustainability and it is part of the strategic marketing of a nonprofit organization.  Fund development has two sides though; it is not only concerned with raising money, but also in developing reliable sources of income that will sustain the organization through the realization of its long-term mission and vision. Successful fund development requires a strategic plan that relates funding to the purpose and programs of the organization.  However, I contend that in these tough economic times nonprofit organizations must radically change its view and take the concept of fund development to a whole new level.  They must, as Rebel Brown teaches in her book, Defy Gravity… challenge the status quo!

It is my contention, in these tough economic times, that nonprofit organizations are becoming a burden on the business community.  It seems that individual businesses are being hit over and over and over again by local nonprofit agencies for donations and memberships in mass numbers. Everyone from chambers of commerce to the humane society is asking for small business support.  Now, these are all fantastic, mission driven organizations that are doing wonderful things to improve the quality of life in their respective communities, but unfortunately they rely heavily on donations from small business.  As the economy weakens there is less and less of this money available by small business to support these groups and the competition for these dollars among all of the nonprofits in a community is at an all time high. There is simply not enough money to go around and I am afraid that you will see many nonprofits closing their doors over the next several years unless they make a fundamental change in the way they operate. I believe that nonprofits just can’t continue to operate using the same old model.

The solution to this problem, which I have adopted and I am encouraging other nonprofit CEOs to also consider, is how we look at social entrepreneurialism.  Social entrepreneurialism needs to be looked at in a whole new way.  Social entrepreneurialism is typically the use of traditional entrepreneurial techniques to address a social issue or cause.  I want to challenge the status quo, defy gravity, by looking at social entrepreneurialism as a way for nonprofit organizations to develop new funding sources through for-profit means.  I want social entrepreneurialism to be defined as a nonprofit organization creating and operating a separate for-profit venture to support their nonprofit mission.  In other words, any profit from the new venture would go to support the long-term mission and vision of the nonprofit.  Therefore, the nonprofit would require less money in private contributions.  For example, the humane society can market and sell a private-label brand of dog food in grocery stores nationally.  The YMCA could market and sell exercise videos in the United States.  An economic development group could develop and sell commercial and residential real estate. By adopting a new way of operating, there would be the potential to generate millions of dollars in revenue for these groups that could go towards the long-term financial sustainability of the nonprofit.

The organization that I serve, serves the entire community through the creation of new jobs and investment in the region and the promotion of the area’s assets to attract tourists that spend money with local merchants.  For the most part, we are considered a member-based organization.  The funds that we raise come primarily from among the members themselves and are used for the purpose of sustaining the organization’s needs.  For example, the money required for our programs and operations is collected in the form of fees paid to belong to the organization, or in the form of donations.  There is a high degree of correlation though between the economy and membership.  Therefore, if the economy is bad, we can expect membership to be lower.  Simply, the organization requires funding to maintain its service to the community year after year.  So, there is no way that we can rely completely on membership dollars and still survive long into the future.

In addition to membership dollars, we must also rely on a small base of government support for specific tourism and heritage preservation programs.  And, the fact of the matter is, that often we must raise funds from a variety of sources just to maintain our budget. That is why I feel it is so important and crucial to create a fund development strategy that allows the organization to generate new revenue through for-profit means.  You can see how, as an organization, it would make sense for us to develop and sell commercial real estate as a way to generate new revenue.  The more money we can generate on our own, the less money we will require from the community.  This is a new and radical way to look at nonprofit fund development, as well as, social entrepreneurialism, and is definitely not the status quo, but is, none the less, necessary if the nonprofit wants to survive in this new economy.  This is a way for the nonprofit to take their destiny into their own hands; to become less of a burden on society, and to gain long-term sustainability in tough economic times.

Thank you Rebel for confirming our strategy and giving us the tools we need to execute this plan and move our agency forward; far into the future!