Nonprofits apply business tactics to support budget, mission
Creating successful social enterprise models is an increasingly popular goal of Colorado nonprofits
From animal shelters offering yoga classes amid adoptable felines to a library friends’ group that transformed traditional fundraisers into a year-round used bookstore, business-based efforts are burgeoning in support of tight budgets at Colorado nonprofits.
“Raising revenue that doesn’t come from foundations or grants has always been the holy grail for nonprofits,” says Joanne Kelley, CEO of Philanthropy Colorado, a nonprofit that helps build connections and collaborations in the sector.
Creating these successful social enterprise models — where nonprofit organizations use the power of the marketplace to advance their mission and, hopefully, buttress their budgets — is an increasingly popular goal of Colorado nonprofits. Challenging funding times for the growing number of nonprofits in the state has inspired organizations to get creative to capitalize on everything from coffee carts to client-created art cards.
“We have seen an increase in the number of nonprofits that are interested in creating a revenue-generating for-profit business that will help them accomplish multiple goals,” says Patrick Horvath, Denver Foundation director of economic opportunity. “Having a business that could earn income helps to stabilize philanthropic revenues that could otherwise be subject to investment downturns and changes in funding priorities.”
Renny Fagan, president of the Colorado Nonprofit Association, says nonprofits are trying to serve increasing needs and handle the growth of different populations. Secretary of State records show the number of licensed charities that have filed to solicit donations has more than doubled since the 2008 recession, growing to 15,339 in 2018 from 7,329 in 2009.
“Nonprofits are in a very dynamic economic and funding environment, and demands for services are changing too, and that is creating a new need for diversification of revenues,” Fagan says.
Social enterprises should not be considered a financial cure-all, but the business-based initiatives can be successful if the work is tightly tied to a nonprofit’s mission, experts say.
Artists gather at the opening of "Shifting Outlines: A Collaboration between Artists of the Gathering Place and the Art Students League of Denver" at Leon Gallery.
“We encourage organizations to start out by defining what they want to get out of it, both from a mission and a money perspective,” says Caryn Capriccioso at interSector Partners in Longmont, which advises nonprofits.
Capriccioso co-founded interSector in 2009 as a L3C, or a limited liability company that puts mission before profits, when she observed growth in social enterprises. The consultant says effective enterprises work diligently to intertwine the business with the organization’s internal culture, test as they go, and innovate by listening to what the market wants.
A variety of social enterprise support mechanisms have developed on the Front Range, from the Colorado Nonprofit Social Enterprise Exchange education and development program at the Community Resource Center in Denver to Philanthropy Colorado’s quarterly peer-learning forum for funders who want to learn more about impact investing.
In addition to the increase in Colorado nonprofits, Kelley points out other challenges that have added pressure on nonprofits to raise money elsewhere: waning governmental support for services that nonprofits also deliver, changes to income tax laws in 2017 and donation decreases after the 2008 recession, along with donor fears of a possible new recession.
“Nonprofits have taken a hit now that the vast majority of people no longer have a tax incentive to give to charity,” Kelley says. “In 2018, about 90 percent of tax filers qualified to take the much higher standard deduction, effectively eliminating the charitable deduction that has encouraged giving for the past century. The drop in individual giving in the year after the new tax law passed was the first annual decline in five years and a reversal from the healthy increase the year earlier.”
Social enterprises vary widely from straightforward fee for service to storefront businesses. Nonprofits find their efforts may attract new avenues of funding such as foundations seeking out social enterprise models instead of offering traditional grants, says Sara Hazel, director of development at Girls Inc. of Metro Denver.
Last year Bold Beans generated $95,000 in sales, providing work experience and pay for 21 teenage girls and college-age women.
The Strong, Smart & Bold Beans coffee business of Girls Inc. started small in summer 2014 when young students from the financial literacy classes wanted to test their skills. They bought a $50 espresso machine and sold coffee drinks to parents picking up and dropping off girls at the center. The entrepreneurial enterprise grew to a coffee cart at a nearby library in spring 2015 to the Bold Beans café at STEAM on the Platte in fall 2017.
The enterprise now offers online product sales from mugs to T-shirts and opened a mobile coffee truck this summer. Last fiscal year, Bold Beans recorded $95,000 in gross sales while providing work experience for 21 teenage girls and college-age women who earned $32,000 in wages and $10,000 in tips, Hazel says.
“It’s a powerful opportunity, and it’s really fun,” she says. “The opportunities are broad in what you can do with social enterprise to involve the people you serve.”