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updated: 12/13/2019 2:38 PM

Five factors to ensure your social enterprise soars to success

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Anyone deeply involved with a nonprofit has heard the term "social enterprise," a growing nonprofit trend, but certainly not a new concept. In 1902, Goodwill Industries grasped the idea of matching a population in need of employment with an untapped market for resold goods.

"Social enterprise" applies commercial strategies to maximize improvements in financial, social and environmental well-being. It marries business principles with nonprofit motives or outcomes. It sits at the intersection of business and philanthropy.

I have been privileged to work with two nonprofit organizations that have successfully employed a social enterprise model: Spark Ventures and now Restoration Ministries.

Spark Ventures, co-founded by Rich Johnson in 2007, envisioned providing a consistent source of local funding for Hope Ministries in Zambia. Rich's goal was to incorporate social enterprise and after three years, Spark Ventures built a successful locally owned/operated poultry farm.

In contrast, Restoration Ministries' (RMI) involvement in social enterprise was not part of the original vision but grew naturally out of a local opportunity. RMI was founded in 1988 with the mission of helping men in the south suburb of Harvey, struggling with drug addiction. RMI offers a free, 18-month faith-based approach to recovery and one that prepares program residents for a productive future -- reconciling broken relationships along the way.

RMI's founder, John Sullivan, created a board that contained savvy businesspeople. As RMI's programs grew, we recognized a need to address job training for the men and women in our program. The growing resale market was the perfect opportunity to do so, while at the same time creating an additional funding source. In 1994, Restoration Ministries Thrift Store opened as a way of providing job training (retail sales, warehousing, scheduling, logistics, transport) to the men in our program. Today, with revenue approaching $2 million, it also provides a consistent source of 40% of RMI's operating budget.

The balance between business and nonprofit isn't easy to achieve. What was it about these ventures that made them successful?

1. Valid Business Model:

Restoration Ministries satisfied a legitimate demand at a competitive price. Social enterprise needs to be based on solid business principals -- demand for the product and competitive pricing strategy. While mission-driven consumers will support even a nonrational business model for a period, it is critical to reach past this smaller contingent to the larger group of consumers that need the product and recognizes the value.

2. Logical connection between business and mission: .

A resale shop needs a workforce and the men and women in our recovery programs need job training. We weren't putting square pegs in round holes -- the symbiotic relationship made sense

3. Start small and pivot when necessary:.

Spark Ventures avoided common pitfalls. The design of the poultry farm was scalable -- allowing for minimal phase 1 investment to prove itself before moving forward with phase 2. This meant the size of the investment didn't dominate their balance sheet and minimized organization risk.

4. Local "buy-in" from beneficiaries:.

RMI's resale shops could not operate without the support of former and current program participants. This aspect keeps the nonprofit and the social enterprise connected. Restoration Ministries Thrift Stores are all managed by former addicts who have come through the program and much of the staff in the stores are current program participants.

5. Board leaders providing sound judgment:.

Experience is critical. Spark Ventures was founded with social enterprise as the centerpiece, the Board was formed primarily of socially-minded, experienced business people.

•Todd Schultz is president and CEO of Restoration Ministries, which operates Thrift Stores in South Holland and Harvey.

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