One of the biggest challenges in conceptualizing a profitable business by a nonprofit is the distinction between wants and needs.
One motive for the creation of the “nonprofit” 501c3 charitable category of business was to address community needs that the “for-profit” business sector would not provide. To no surprise, this oftentimes means providing services that we perceive as “needed” at little or no cost to the recipient and regardless of whether or not they “want” it enough to pay for it rather than get it for free.
When we look to support those “needs” by developing a new area of activity intended to be profitable we enter the world of “what will people pay for.” People generally pay for what they “want” and this is not necessarily what the provider may think people “need.” Yes, the customer rules when it comes to pricing a good or service above the cost of providing it.
So here is my dilemma of want versus need. We formed the Center for Social Enterprise Development in part because we felt that nonprofits “needed” to develop new sources of earned revenues. We expected that most of our effort would be devoted to nonprofits which would want help in starting new ventures (what I call social enterprises). So we have expended a tremendous amount of effort in outreach and advocacy to encourage nonprofits to diversify their revenues through starting a social enterprise.
Well…..nonprofits are not the bulk of the entrepreneurs who approach the Center for help in starting a social enterprise. Most who approach us are individuals who want to start a new business that is focused on creating impact without being dependent on grants to create that impact. (Look at our online directory of social enterprises and see how many you can find that are operated by nonprofits.)
We spend a lot of time leading nonprofits to the “water” of revenue diversification but relatively few are drinking. They “need” help but do they really “want” help?
The Center is a nonprofit. Should we persist in trying to draw more and more nonprofits into social enterprise? Or should we focus on those who most want our help, the newbies starting a socially-focused business and the entrepreneurs who have already launched a social enterprise?
Lean against the wind or go with the flow? Does our 501c3 status argue for us to persist in converting nonprofits to social enterprise — a high effort, low return activity? Or would we still be addressing our mission if we shifted our focus to those who want help — where the effort creates the greatest return?
This is the dilemma of want versus need and how having 501c3 status makes resolution of this dilemma not straightforward.
What do you think?
Allen Proctor, President & CEO
Center for Social Enterprise Development