February 11, 2017; 83 Degrees Media (Tampa Bay, FL)

The Community Foundation of Tampa Bay is encouraging social enterprise as a revenue producer for nonprofits through sponsoring a second round of its Big Idea Grant competition. The competition provides up to $50,000 to nonprofits who have a viable plan for a new social enterprise or to expand an existing effort.

Why is this not thrilling to someone like myself, who believes that earned revenue efforts are nonprofit-traditional and entirely compatible with nonprofit activities? Because the equation laid out as the rationale for investment just does not hold much water on its face.

First, the programs are being touted as potentially able to produce enough profit to essentially act as cash cows. Not only is this a long shot, but we have to assume that many of the costs are hidden and assumed by the nonprofits themselves because $50,000 is relatively modest as far as capital needed by a new business goes. This creates real danger for nonprofits in terms of getting in over their heads on programs that are difficult to measure true costs on. One only need look at the FEGS disaster to remember this.

And, second, we are not talking about just any business, but a business with a partner organization—because the program requires that nonprofits collaborate with others “that are similar to their own in mission and work together to create a business plan with a clear road to sustained profitability.” That alone might be worth the $50,000 when divided by two.

Thankfully, the foundation has one thing very right in its requirement that the social enterprise effort be tightly aligned with mission.

Matt Spence, CFTB’s VP of Community Impact, says that one of the key ingredients that comprises nonprofit success is allowing a nonprofit to concentrate on what they are already doing well. In partnering with other groups that are doing a similar service but may have more experience with a different aspect of the same mission, these collaborations mean bigger and better results for all involved.

The foundation points to one of last year’s winners in a collaboration called Mobile Market that provides pop-up groceries for neighborhoods where access to fresh affordable foods may be limited.

“Feeding Tampa Bay understands food and nutrition and distribution and they do those things extremely well,” says Spence. “What they don’t have experience with, and what Goodwill brought to the table, was in the job training aspect of it, so Goodwill was working with their adult clients to help build job skills and those are the people who man the trucks, who drive it, who sell the food. Those are all Goodwill employees. It’s a way to connect to different areas of expertise while still allowing the nonprofits do what they do well.”

Of course, this means that the whole effort, as described, is dependent on using the low-cost labor provided by Goodwill trainee employees…but that’s another story.

In the end, our major observation is that this type of program should be encouraged to have reasonable expectations for ongoing capital needs and support over the first few years of development, ensuring that they turn the profitability corner while adhering to reasonable and socially sustainable business and employment practices. This would provide longer-term models for what kinds of investments by funders work and do not work over time.—Ruth McCambridge