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A Nonprofit Group Teaches Charities How to Sell Themselves

By Jennifer C. Berkshire
The Chronicle of Philanthropy
October 16, 2003

Residents of Brooklyn's East New York neighborhood welcomed an experimental venture this summer: Fresh Ground, a fruit-and-vegetable stand operated by local high-school students. Every Saturday for six weeks, customers could purchase a variety of locally grown produce. The stand's owner, a Brooklyn nonprofit organization called Groundwork, got a chance to further its mission of preparing young people for the adult job market. Meanwhile, employees were able to collect data about what kinds of food neighborhood residents want most, information that will prove invaluable when Fresh Ground upgrades from a stand to a store next summer.

Groundwork used survey data to determine what the neighborhood needed -- low-cost fresh food -- and designed a business that could be staffed by high-school students entering the work force for the first time. In its pilot phase, Fresh Ground did something that any business, with or without a social purpose, might envy: It broke even. "We steadily increased sales every Saturday," says Richard Souto, Groundwork's associate executive director.

Fresh Ground has had more than beginner's luck on its side. From its first days as an idea to this summer's trial run, the business has been nurtured by Seedco, a nonprofit organization in New York that helps charities start social-purpose enterprises. "Seedco has developed an ideal model for nonprofits that are looking to start an enterprise," says Mr. Souto. "They've acknowledged that there are plenty of smart people in the nonprofit world with an entrepreneurial sense, but who still require training, advisement, etc."

The Brooklyn produce stand is one of a growing number of efforts by nonprofit groups to run businesses that earn revenue while staying true to a charity's mission, says Diane Baillargeon, president of Seedco. "We call it the double bottom line," she says.

Seedco has offered guidance and support to Mr. Souto and his team of high-school students for the past two years through its Nonprofit Venture Network, helping them hone a business concept and plot marketing strategy. The Fresh Ground team attended a series of workshops and training sessions and took the project for a trial run this summer. Now, the conclusion of the process is near. With the pro bono assistance of a high-profile New York management consulting company, Cap Gemini Ernst & Young, Fresh Ground is putting the finishing touches on a business plan. "Having a detailed business plan will enable us to go and raise the funds from venture philanthropists, social-venture funders, even small-business loans," says Mr. Souto. When its store opens for business next summer as planned, he says, Fresh Ground could provide employment for up to 20 young people.

Starting UP

Social-purpose businesses are nothing new. The Salvation Army, for example, has been operating thrift stores for more than 100 years, feeding the proceeds from used clothing and furniture back into its social-services mission. Today, with many charities reeling from the one-two punch of government budget cuts and a dip in foundation grants, the idea of starting a small business has increased appeal.

Seedco itself has a lengthy history of guiding social-purpose enterprises, one of a number of groups that help charities develop businesses. The organization has been doing this work since its creation in 1986. Seedco is currently advising 21 such enterprises in New York and Tampa, Fla., and hopes to expand its services to three other cities spread across the country. Its clients include Recycle a Bicycle, which teaches youths how to repair bikes and sell them through a retail business in New York's East Village, and Harlem Textile Works, a project that trains young Harlem residents to create and market designs for hand-painted fabrics.

Seedco is also seeking to make its expertise available to a wider range of charities by offering a rigorous entrepreneurial training program. For the past two years, the group has provided start-up expertise to between five and seven nonprofit organizations that are seeking a future in sales. Phase one of Seedco's education of interested charities: a series of free workshops dealing with the rewards and challenges of starting a business.

"We offer groups a bit of a reality check," says Jaycee Pribulsky, senior program manager in Seedco's Office of Economic Development. "Starting a business can be extremely challenging. A large percentage fail in their first year."

And even if a specific charity opts not to start a business, she notes, nonprofit organizations can benefit mightily from learning to become more entrepreneurial.

"Learning business skills can help you do your job better, support your clients better, and market your organization better," she says. "It's a different approach to nonprofit management."

Once they have made it through the initial series of workshops, the charities get a rude introduction to another reality of the business world: competition. Organizations that still want to pursue their business ideas must compete for a limited number of grants offered through Seedco's entrepreneurial assistance fund. "It's a very competitive process," says Ms. Pribulsky. "We assess the business idea, the management team, and the fit between the business idea and the group's mission."

Organizations that are accepted receive a grant of between $5,000 and $10,000 and a year of hands-on supervision by Seedco experts along with outside management consultants. (Seedco's Nonprofit Venture Network receives its support from the Ford Foundation, the MetLife Foundation, and the United Way of New York City, among others.) By the end of the year, the organizations are expected to have solid business plans in hand and to move toward the final stage of the process: carrying out the plan. Ms. Pribulsky acknowledges that both the time frame and the agenda are challenging; of the six organizations selected, only two have graduated.

Moving On

Brooklyn Moves, a moving company created by the Fifth Avenue Committee, a social-justice group in New York, is currently in the middle of the training process, working with Seedco to formulate a business plan. And once the enterprise gets off the ground, the company will be moving more than furniture -- it will be helping people who are returning home from prison move into new lives, says Julian Brown, assistant director of the committee's Developing Justice Project. "Our goal is to provide this population with transitional work that can be a steppingstone," he says. "We want people to be self-sufficient."

The Fifth Avenue Committee is an old hand when it comes to starting social-purpose businesses; Brooklyn Moves is the organization's third such venture. The group also operates two other Brooklyn businesses: Eco-Mat, an environmentally friendly laundromat, and FirstSource Staffing, a job-placement company that seeks to move low-income individuals into permanent work. Mr. Brown anticipates that FirstSource will help Brooklyn Moves fill some of its 15 to 25 positions.

But for the real heavy lifting -- lining up financing -- Brooklyn Moves is relying on Seedco. "They're really a guiding light," Mr. Brown says, noting that Seedco has helped his team articulate their desired results, formulate a budget, and develop marketing strategies. "Seedco has provided us with invaluable services and support."

Whether the enterprise can secure the financing it needs remains to be seen, though. Mr. Brown says that in the search for funds, Brooklyn Moves has yet to find the right match. One complication: negative perceptions. Commercial and residential clients aren't always unabashedly enthusiastic about the prospect of convicted felons moving their furniture. "We're not really going to announce it," says Mr. Brown, "but we'll be forthright. We'll definitely be cognizant of who we hire and what role they play in the company."

Mission: Sales

In the coming months, Seedco plans to expand its training operation; a workshop series will begin in Tampa, this fall, with the help of financing from the Eckert Family Foundation. The group is hoping to begin similar programs in Boston, Chicago, and San Francisco, and is currently seeking local grant makers to support its efforts. In determining where to go next, Seedco is looking for a few key ingredients necessary for social-purpose businesses to thrive. Eager charities are one part of the equation, but Seedco is also recruiting partners at consulting firms and university business schools to assist novice entrepreneurs as they formulate business plans and hatch marketing strategies.

And even as Seedco staff members like Ms. Pribulsky are encouraged by the surge of interest in social-purpose businesses, they recognize that not every charity has a future in sales. "Starting a business isn't for everyone," she notes. "For some groups, this is a way to extend their programmatic mission and serve their social mission at the same time."

To know if a social enterprise is right for a particular organization, that charity's leaders first need to determine if they have something to sell, says Ms. Baillargeon. "It makes the most sense for nonprofits that are focused on helping people enter the work force," she says. "These businesses can provide training opportunities and generate revenue for the organization. They can make great good sense."

Has your organization started a social-purpose business? Tell what you've learned about such ventures in the Fund Raisers online forum.

Copyright ©2003 The Chronicle of Philanthropy

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