9 LESSONS LEARNED FROM A NONPROFIT-RUN SOCIAL ENTERPRISE
More than Just Business
When companies need to dispose of their office computers, certain that sensitive data is first wiped clean, they send those old PCs to ARC Broward I.T. Asset Recovery. In doing so, they’re not just protecting their client’s privacy; they’re also providing training and employment opportunities for people with learning and other disabilities.
In addition to data security (scrubbing digital info), this mission-based enterprise provides asset recovery — selling used I.T. equipment to vetted commercial buyers; and e-commerce, selling electronics through their online store. It also provides electronics recycling which, according to Julie Price, Vice President of Program Services, “really was the roots of where we started; we’ve grown into these other business lines because the industry has changed so much.”
I.T. Asset Recovery is one of three social enterprises spawned by ARC Broward since the umbrella organization was founded in the mid-1950s. That’s when families of children with disabilities formed the grassroots organization to keep their kids out of institutions and give them a good education.
Julie says, “As they grew older…we just continued to expand our service model and our service delivery so that we could continue to meet the employment, housing, social, recreational, medical, and other needs that individuals with disabilities have.” ARC Broward now operates in 10 locations providing 21 programs to more than 1200 individuals and their families throughout Broward County, Florida each year.
Today the organization encompasses ARC Broward Learning Institute and Culinary Institute as well as I.T. Asset Recovery, which was started in 2000. “Our mission and overarching purpose is to transform the community by providing opportunities for people with disabilities and other life challenges to realize their full potential,” Julie says.
Based on her 16-year journey establishing the I.T. Asset Recovery business under the ARC Broward nonprofit, Julie offers valuable lessons learned. “It really is about not letting the nonprofit culture get in the way of the business,” she says. “Any nonprofit that hopes to become entrepreneurial… really has to take a step back and undergo a radical set of changes.”
1. Be willing to take risks. While entrepreneurs are generally assumed to be risk takers, “That’s not how nonprofits and nonprofit boards of directors generally function,” Julie says. “They tend to be more risk averse, and for good reason: Because a board is the steward of scarce resources, primarily resources that are coming from donors, governmental entities, foundations and that kind of thing.” As a result, nonprofits shy away from initiatives until they can guarantee success, which, Julie says, is “completely opposite of entrepreneurship. Nonprofit entrepreneurs need to enter the game with a willingness to take risks and fail.” Julie likes to remind decision-makers of a quote by Ben & Jerry’s’ Ben Cohen: “To stumble is not to fail; it’s a way of moving ahead more quickly.”
2. Choose staff members wisely. “Running a nonprofit is very different than entrepreneurship, and not everyone understands that right away, so make decisions about who in your organization is really best to move this business forward. It may not always seem to be the most obvious person, but it needs to be someone who has a gut and a stomach for entrepreneurship,” says Julie. She recommends choosing staff with business knowledge such as marketing, sales and efficiencies of operations.
3. Relinquish control. “Too many layers just tend to bog things down and entrepreneurship moves quickly,” Julie says. “You’ve got to learn to be a little more nimble and flexible, and that’s hard for any organization, particularly a larger one that does have lots of layers.”
4. Understand your market. “Making sure you understand who your customers are, and thinking about customers in a business, is very different than thinking about customers in a social service context,” Julie says. She explains that donors who support their services for persons with disabilities are very different from customers who purchase computers. Another market-minded caution: “We tend to sell ourselves short [as] a nonprofit and we don’t price aggressively enough as for-profits do.”
5. Play well or don’t play at all. “When Jack Welch took over as CEO of General Electric in 1981, he asked Peter Drucker to tell him the single most important thing he could do to improve the company,” Julie says. “Drucker’s answer was really pretty simple: If your products or services are not number one or number two in the market, kill them. In other words, just stop trying to be all things to all people. He repeatedly urges nonprofits to do the same, and he refers to this as ‘organized abandonment.’
Although it’s not easy to stop doing some things — particularly those that are really important to board members, funders, and long term employees — you’ve got to stay the course and be in it, take risks, invest where you can, and be able to make some really hard decisions. That’s contrary to a lot of what and how [nonprofits] think.
6. Know your tax laws. To operate a mission-based enterprise under 501 (c)(3) nonprofit status, Julie says, “be really careful about ‘unrelated business activities.’ She explains that nonprofit organizations should develop business ventures that are “closely aligned with their core competencies, their strengths — really a derivative of their mission. From an IRS perspective, that’s tremendously important” so a nonprofit doesn’t “threaten or compromise the organization’s tax-exempt status.”
7. Don’t underestimate the amount of time and money you need to reach goals. “Depending on the type of enterprise, [profit] ebbs and flows,” Julie says. “This business in particular, I.T. asset recovery is a fickle business; it’s a fragile business. There are some years it goes better than others. You’ve got to stay the course, but you’ve got to have money to do it.”
Julie cites an MIT study which found that, for most companies, significant revenue doesn’t usually flow until the seventh year of operation.
We saw that in our world, she says. There are lots of market variables that hit us as social enterprises and you’ve got to just make sure you have the funds and the cash flow to do what you need to do.
8. Learn how to play in the sandbox with competitors. “In the nonprofit world, we don’t look at competitors, we look at collaborators — other organizations in our community who do the same or nearly the same types of things we do,” Julie says. “We’re friendly, and we share things so readily — and that’s not how a lot of business works. So it’s getting a different layer and thickness of skin that puts you in the game a little differently.”
9. Market and brand the business’ social mission. “The only other real tactical area that we learned the hard way to really address is the area of marketing, branding the business. That’s a very different way of thinking,” Julie says. “It took us a little while to get our messaging together. You’re not just a business; you’ve got a mission component.
Oftentimes I will say, ‘I work at ARC Broward,’ and they’ll ask me what my relationship is with the organization and I’ll explain it to them. And they’ll say, ‘that’s fantastic, our business just dropped off all our computers to you.’ Or ‘I purchased something from your retail operations’ — without any context to the fact that we serve and support people with disabilities.
“You walk away and you’re like, that’s fantastic. That was really cool that there was a different touch point in the community and more people know of us because of this enterprise. But what they don’t know is the core of what we do. And so you’re always, always sharpening your message, making sure you don’t have missed opportunities.
“Any business that’s working with us really should be working with us, because, number one, the quality of what we do is great, our pricing is competitive. But first and foremost it’s supporting an organization that is serving children and adults with disabilities and other life challenges. That really is the feather in the cap, in our mind.”
Read or listen to the full interview with Julie Price, including a success story about one of IT Asset Recovery’s trainees, at www.socialimpactuniverse.com/blog