Diversifying Your Revenue Streams with a Social Enterprise
Nonprofits exist to fulfill their missions, not make profits, yet many find themselves chasing grants, donations, and sponsorships that fluctuate year to year. In this time of uncertain funding and economic turmoil, finding diverse funding streams has become more important than ever.
A social enterprise may provide the diverse revenue stream that your nonprofit needs. A business venture operated by a nonprofit, social enterprises generate income while advancing your mission. In essence, you earn revenue while creating impact.
Integrating a social enterprise into your program model has three distinct advantages.
First, it diversifies your revenue. Instead of relying solely on grants or individual donations, when done right, a social enterprise offers a steady stream of earned income that helps your organization weather economic changes and shifts in funding priorities.
Second, it strengthens your mission. The most effective social enterprises directly connect to your mission. For example, Argrow’s House has a long history of making and selling bath and body products, Picket Fence Foundation runs a floral, gift and flower center, and Narratives plans to open a café next year, all tied to their workforce development programs and missions. Similarly, Autistic & Loved sells items that help autistic children regulate their emotions, again consistent with their mission to support children and families with autism. In every case, each sale funds their missions.
Finally, it elevates your credibility. Funders, donors, and partners increasingly value sustainability and innovation. Running a successful business shows that your organization can adapt, plan strategically, and deliver results. It also shows that you can sustain new programs launched using grant funds or philanthropic revenue.
Want to open a social enterprise? These tips can help you get started.
Define the Mission Connection: Start by identifying how a business idea directly supports your nonprofit’s mission. Avoid ventures that distract from your purpose just because they promise profit. Like selecting a funder that aligns with your work, you must ensure the enterprise aligns with your organization’s “why.”
Conduct a Market Analysis: Research thoroughly, just as you would for a for profit business to ensure a viable market. Who are your customers? What problem are you solving for them? Who are your competitors? What is an appropriate pricing model?
Develop a Business Plan: Treat your enterprise like any startup. Define your products or services, revenue model, costs, marketing strategies, and metrics for success. While your organization operates as a nonprofit, your business needs to generate a profit, or it will drain revenue rather than create it.
Plan to Integrate your Nonprofit and Social Enterprise: Specifically define how profits will return to the nonprofit’s mission and how much you will reinvest in the social enterprise. Use programmatic and financial data to guide these decisions.
Secure Start-Up Capital: Some nonprofits allocate reserves, others seek program-related investments, mission-aligned loans, or social venture grants. We have had luck securing grant funds for nonprofits to start or scale a social enterprise; it certainly makes the sustainability question easier to answer!
Establish Structure and Governance: Decide whether to operate the enterprise as a program within the nonprofit or as a separate LLC wholly owned by the nonprofit. Each structure carries tax and liability implications. Consult with an attorney and/or tax specialist to determine the best structure for your organization and circumstance and to ensure that the social enterprise does not jeopardize your 501c3 status. Include board oversight and transparent reporting.
Measure and Refine: Like any business, measure both financial performance and mission impact. Use this data to refine your operations and demonstrate its value to funders, stakeholders, and customers. Remember, success means more than profit; it means greater, sustained impact.
Launching a social enterprise takes courage, creativity, and discipline. It requires the same strategic thinking, mission clarity, sound planning, and rigorous evaluation that drives any strong nonprofit. When well executed, it transforms how a nonprofit sustains its mission and serves its client. Imagine the impact you can make if you could spend more time and energy serving your clients in unique ways rather than worrying about income.
