Many of today’s nonprofit organizations are navigating an environment of financial uncertainty. Grants they once relied on may be delayed or terminated, funding priorities may shift, and broader economic conditions are changing influence donor behavior. These combined pressures can lead to budget shortfalls.
On the other hand, some nonprofits are innovating to explore hybrid social enterprise approaches that can help boost their financial stability. These groups utilize their strengths and expertise to develop revenue-generating strategies that support their core mission. Hybrid models can help nonprofits reduce their dependence on traditional donor fundraising by generating additional income as a byproduct of their mission.
Examples of Nonprofits Building Successful Revenue Streams
The most successful social enterprise strategies are firmly built on the organization’s core mission. These hybrid approaches seek to leverage the expertise or unique abilities the nonprofit can bring to a community when developing a separate revenue stream.
Larger nonprofits such as Goodwill Industries and Habitat for Humanity stand as solid examples of this approach. But even smaller, more locally focused groups are turning to social enterprise endeavors to further their missions.
Goodwill Industries Incorporated: Goodwill Industries provides job training, work placement services and other programs for people facing barriers to employment. Their large network of thrift stores is a cornerstone of those efforts and the jobs provided through those stores directly support their social mission. In 2024 alone, Goodwill helped over 140,000 employees overcome challenges and change their lives, while generating over $5.5 billion in sales.
Habitat For Humanity: This national nonprofit works to build affordable housing using a hybrid funding approach that leverages donations, revenue from their ReStores, and in-kind donations to help keep costs down on their home-building projects. ReStores accept donations of home goods such as furniture, appliances, cabinets, hardware, and building materials and are then sold at a profit. Some estimates have placed the income of ReStores at up to 2/3 of a Habitat for Humanity affiliate’s revenue.
Cafes such as A Special Blend and Oaks Coffee: Even smaller nonprofits can leverage social enterprise models to generate revenue for their mission. A Special Blend and Oaks Coffee are two nonprofit coffee shops that support special causes, create local jobs and give customers an opportunity to make a difference with each purchase.
A Special Blend supports adults with intellectual disabilities by providing them with job opportunities and training in its coffee cafes. This North Carolina nonprofit specializes in high-quality coffees, teas and bagels while supporting an inclusive environment that offers jobs to the 82% of unemployed adults with intellectual disabilities. Their efforts have been so successful that they recently opened a second coffee café branch.
Oaks Coffee donates 100% of profits to local charities and ministries. By building a strong focus on giving back to their local community, this Tennessee-based nonprofit has donated more than $150,000 to local causes.
Key Considerations When Developing a Social Enterprise Revenue Stream
The concept of generating income that’s not tied to donors or fundraising efforts can be especially attractive in today’s challenging economy. But building a clear strategy that delineates nonprofit activities from social enterprise endeavors is critical. Be sure to think through these four considerations as you build out a revenue-generating program for your nonprofit.
Mission Alignment: Even if your organization could make money running a coffee shop, for instance, how does that align with your group’s core mission? If there’s not a strong correlation, consider other options.
As an example, let’s say your organization specializes in helping low-income seniors navigate available social services. Your staff are likely experts in the programs and funding available to older community residents. You could develop a senior consultation service for other community members which charges a modest fee for helping families navigate senior living situations as their family members grow older.
External Expertise: Your staff may be extremely knowledgeable when it comes to the challenges and solutions available within your core mission. But launching a social enterprise often brings unique considerations.
It may be helpful to work with local experts to gather insights into the additional staffing, marketing and operational concerns your group will need to work through when setting up your revenue-generating enterprise. Consider working with these local experts on a short-term consulting basis or invite them to be long-term members of your nonprofit’s advisory group.
Transparent Communication: Launching a revenue-generating social enterprise can certainly provide opportunities for confusion. Developing a clear mission statement, an explanation of how the social enterprise aligns with the nonprofit mission, and communication bullet points can help your team stay focused as they talk about your organization’s new endeavor.
It’s important to be clear in your communications with staff members, stakeholders, and your local community to avoid misunderstandings as you roll out your new social enterprise.
Legal Considerations: As a nonprofit, you’re required to follow specific regulations in terms of tax reporting and keeping finances between your nonprofit activities and the social enterprise endeavor separate. Always consult with an accounting professional as you start to set up your new revenue-generating activities. It’s much easier to set things up correctly from the beginning than to sort through everything later when the IRS wants a clear accounting of expenses and income.
Avoiding Mission Drift Caused by Your Social Enterprise
Developing revenue streams outside of donors and fundraising can certainly be attractive. But at the same time, it’s important to set up guardrails against “mission drift.” Mission drift happens when the revenue-generating enterprise starts to compromise your nonprofit’s mission to help boost revenue.
Maintaining an independent and balanced board can help your nonprofit stay focused on your mission rather than yielding to the temptation of “numbers” over social impact. Significant mission drift could even result in the loss of your nonprofit’s 501(c)(3) status if the IRS finds that your social enterprise is not sufficiently tied to your mission.
SOURCES:
2024 Goodwill Industries Inc. Annual Report
“Nonprofit Coffee Shops: How A Special Blend and Oaks Are Creating Positive Change,” tryperdiem.com
“What Are The Most Successful Social Enterprise Models Around The World?”, fundsforNGOs.com
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