It is the morning of a two-day conference and, eager to start on a positive note,
I strike up a conversation with a slight man sitting next to me.
“What do you do?” I ask.
Not wanting to be put off by his quick and dismissive answer I pursue:
“Right! And how long have you been doing that for?”
“That’s a long time to be in any industry. You must find it very fulfilling.”
The answers continue to be short and straight to the point, none of the questions engaging him in the slightest.
“What do you do outside of work?” I ask, expecting another one word answer.
His eyes light up, his attention finally on me. “Well. Trains. I make model trains.” After some more – but not much – investigation it turns out this unassuming man was the president of the National Model Trains Association – some 12,000 members strong. He whips out his phone to show me the entire lower story of his house packed from wall to wall with an incredible landscape of rural Australia and a complex, multi-railed, model train network weaved throughout. He talked me through all the facets involved in getting this structure together and how it all works.
It was unexpectedly inspiring.
Ever had a hobby that consumes your spare time? You daydream about it at work. You even think about quitting – if only briefly – because what want you really want to do is design, build and drive your train models all day, every day. But that’s not sustainable. You wouldn’t be able to support yourself – let alone your hobby. It’s not a sound business model. You also don’t want to rely on handouts to keep you going. You need that other source of income, your day job, to enable you to pursue your passion.
Let’s forget about train models for a moment (if you can) and apply the same thinking to the NFP sector. If an NFP is struggling to sustain itself, what can be the day job that supports it?
A For-Profit business
More and more NFPs are adopting the idea of creating a spin-off business to support and enable them to achieve their social mission. It’s another dot on the ever expanding spectrum of the social sector, somewhere between social enterprise and social business. It is two separate businesses under the same roof – one for-profit and one non-for-profit.
First business provides high-quality services that cannot be operated profitably. It is evaluated by its social impact. The second business runs profitable activities, and reinvests those profits into both businesses. It is evaluated by its profitability. Exceedingly more NFPs are starting to take on this hybrid model and there are a variety of initiatives across the board.
At the lower end of the scale we have Latrobe Life Skills, a NFP that provides training programs for disabled persons. They have not 1 but 6 business enterprises that further engage the beneficiaries and are all for-profit. One examples of this is a furniture restoration business, entirely for-profit and providing on-the-job training and skills for the disabled.
At the other end of the spectrum is a large mental health NFP that we’re working with to produce an R&D and technology initiative. We can’t go into too much detail but it’s set to launch globally and will generate 10’s of millions in revenue.
Although the 2 examples are at either end of the scale they both produce same outcome – A NFP being supported by for-profit subsidiary. Enabling NFPs to be self-sufficient and effectual in their social mission.
Because they are legally separate entities you get to eat your cake and save the whales, too. The non-profit remains tax exempt and eligible for foundation grants. The for-profit can raise unrestricted funds from VC or angels whilst making tax-deductible donations to its NFP partner.
It’s time to start thinking about sustainable ways to produce that social impact and enable you keep those train models driving change.