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Not For Profit

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“There are huge markets where people have needs — for food, shelter, education and more — but can’t afford to pay money out of their own pockets to have their needs met.

In the United States, the government created the 501 (c) (3) nonprofit corporation to help address this situation. Technically speaking, a 501(c)(3) is a tax-exempt legal structure that can receive charitable donations from individuals, businesses, government agencies, and philanthropic foundations. Examples of well-known not-for-profits include: the Boys and Girls Clubs, the YMCA and the Sierra Club. People who donate money to these charitable organizations benefit by deducting the contributions from their taxable income.

In the United States, over one million organizations qualified for 501(c)(3) status in 2009 compared to 600,000 in 1993. Charitable donations have declined: in 2008, $315.08 billion were invested in the not-for-profit sector, compared to $303.75 billion in 2009. Competition for resources has increased, making it more difficult for nonprofits to grow or even exist.

Like any business, a not-for-profit needs to generate revenue to cover its expenses. It needs to identify a target market and figure out how it will deliver its products and services to that market. Some key differences and considerations exist, however, and you should be aware of them before you choose this legal structure:”

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Social entrepreneurs who want to start a new venture quickly confront an important question: What type of legal structure should I create? Should I start a traditional nonprofit, a for-profit, or something in between? This is not a simple question to answer, and it is in some ways becoming more difficult with the proliferation of new legal structures like the B corporation that are intended to allow entrepreneurs to meet financial, social, and environmental bottom lines.

I have started successful and unsuccessful for-profit and nonprofit ventures. My goal in writing this article is to help other social entrepreneurs navigate these waters. I am not, however, a lawyer, and I cannot offer legal advice about creating a venture. Rather, I want to guide you through the issues that you need to consider before you even begin to think about choosing an attorney or getting help structuring your social venture.

The first thing to remember is that the legal structure is simply a tool for accomplishing your goals. Deciding structure first may lock you into a direction that won’t get you where you want to go. It is important to take the time to explore your idea first; then answering the legal structure question will be easier.

Selecting a legal structure is not a question of moral purity. I am structure agnostic: I believe that for-profit and nonprofit structures can both be good vehicles for improving society. You should look seriously at both as part of your toolkit as you’re creating your new social venture.

If personal wealth is a primary motivation and changing the world for the better is a nice benefit but not fundamental, it is pretty clear that you should create a for-profit structure. Being a for-profit typically gives you more flexibility and control, especially if you’re the sole or controlling shareholder. This flexibility gives you the freedom to completely change your business if you spot a new and more lucrative opportunity. And you can still create an ethical and responsible for-profit. If giving away money or providing services at below cost and feeling good about it is your primary or only motivation, then your answer is similarly easy. The U.S. 501(c)(3) nonprofit structure was created to serve this purpose. If your ideas fall somewhere between making lots of money and giving most of it away, there are many ways to structure a venture to accomplish these goals. read more/a>

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Not For Profit

am convinced that skill at fundraising and governance alone do not an excellent board member make. Nor do such skills alone ensure that a nonprofit organization maintains a durable, deep connection to the wider community it serves.

A third skill—I call it civic reach—distinguishes a great board member from a merely adequate one, a world-class nonprofit from one that is simply functioning. Take a couple of examples: Back in 2005, Rochester Area Community Foundation’s (RACF) smart, highly engaged board had few well-known civic leaders. With the guidance of Jennifer Leonard, the foundation’s president and executive director, RACF aimed to become greater Rochester, N.Y.’s “catalyst for community change” and realized that movers and shakers could extend the institution’s influence. RACF added to its board the CEO of the city’s chamber of commerce, the CEO of a leading advertising company, the area’s school board president, a noted venture capitalist, a former United Way campaign chair, and the head of Rochester’s downtown development group. In just one of the positive outcomes, the chamber incorporated RACF’s recommendations into its annual state advocacy platform, resulting in $7.8 million in restored child care subsidies, plus crucial support for after-school funding.

In another example, the board of directors of Make-A-Wish Foundation International, a nonprofit devoted to granting the wishes of children with life-threatening medical conditions, shifted its composition to achieve a worldwide leadership profile. Previously, the organization was governed by chapter affiliate representatives from various counties, a decidedly internal focus. The new board boasts a powerful cadre of business leaders with the prestige, power, and contacts to open doors worldwide. Two board members illustrate this new heft. Jim Fielding, president of Disney Stores Worldwide, connects Make-A-Wish to Europe, Asia, and North America, prime markets for both Disney merchandising and Make-A-Wish civic engagement. Tim Kilpin, general manager and senior vice president for Mattel Brands, provides Make-A-Wish with cash contributions from the company’s toy sales and facilitates business relationships through its worldwide network. Savvy, connected players like Fielding and Kilpin—people with profound civic reach—serve as global thinkers for charities while they tend to their own business interests. As a result of its new board, Make-A-Wish more expertly navigates its corporate and individual relationships, ties its work to corporate social responsibility efforts, attracts a wider range of corporate sponsorship dollars, and manages its wish granting on a worldwide scale. read more

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Talk about competition for attention: There are 1.5 million registered nonprofit groups in the U.S. Beyond the well-known names like the American Red Cross and the American Cancer Society, the struggle to stand out is enormous. That’s where Jumo comes in, said Chris Hughes, Jumo’s founder and executive director and a cofounder of Facebook. The company is a Facebook-based social network for nonprofits. “We enable organizations to have a dynamic and social presence on the web for free,” Hughes said.

But in its next phase, look for Jumo to bring in large corporations who want to highlight particular nonprofits they support, Hughes told me last week during a break at the Global Philanthropy Forum conference in Redwood City, Calif.

Right now, “our sweet spot is small and medium sized nonprofits that can’t pay for a consulting firm to create a website that integrates Facebook and Twitter. On Jumo, these groups can create their own stories,” Hughes explained. And they can create connections within the 600 million Facebook users worldwide. Since Jumo launched in late November 2010, he said 15,000 nonprofits and non-governmental organizations (NGOs) have created pages on Jumo. Any group that has a social mission is free to create a Jumo page. Read More

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2. Social Entrepreneurs Don’t Need Profit For Success

Not For Profit

A term I’m hearing more and more these days is “social entrepreneur.” In the simplest of terms, these are people who seek to generate “social value”, rather than profits, and use traditional business principles to create and manage a venture to make social change.
On the surface, this sounds like entrepreneurs who want to build a non-profit organization. Yet the term seems to be more often associated with people whose work is targeted toward long-term socio-economic change. Think Margaret Sanger (birth control) or Mahatma Gandhi (non-violent), as opposed to the leaders of the Cancer Society or Goodwill Industries.
Whether the objective is to generate profits or social capital, the common element for all entrepreneurs is the recognition that there is a problem which needs solving, or there is an opportunity to improve the status quo.
The vision is always to be a change agent, to invent and popularize new approaches, and to persuade people to take a leap forward. In every case this requires a committed ultimate realist with the determination to persist in the face of daunting odds. Read More

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Are myths about online volunteering preventing your organization from tapping into this valuable resource? In the following article, which first appeared on the website Coyote Communications, consultant Jayne Cravens dispels some common misconceptions about finding and working with online volunteers.

Online volunteering means unpaid service that is given via the Internet, either via a computer or a handheld device (smartphone, cell phone, PDA, or iPad). It’s a method of volunteering I have been using, studying, documenting, and promoting since 1995, first independently, then with the Virtual Volunteering Project, and then with the United Nation’s (UN) Online Volunteering service. It’s also known as virtual volunteering, online mentoring, ementoring, evolunteering, cyber volunteering, cyber service, telementoring, micro-volunteering, crowd-sourcing and on and on.

Now, 15 years on, I’m stunned at how many myths are still out there about the concept. Here is a list of 17 of the most common myths, and my attempt at countering them:

1. Online volunteering is great for people who don’t have time to volunteer.
False. This is probably the biggest and most annoying myth out there about the practice. Online volunteering requires real time, not “virtual” time. If you don’t have time to volunteer offline, you probably don’t have time to volunteer online either. Online volunteering should never be promoted as an alternative volunteering method for people who don’t have time to volunteer face-to-face. Rather, the appeal of online volunteering for individuals is that:

It’s a way for someone who cannot volunteer onsite because, while they have time to volunteer, they cannot leave their home or work place to do so.
It’s another way for a person to help an organization they are already helping in face-to-face settings.
It allows a way for people with disabilities who have problems with mobility, or people no way of traveling easy, to volunteer.
It can allow a person to help an organization that serves a cause or issue of great importance to the person but for which there are no onsite opportunities in his or her area.
It can allow a person to help a geographic area that he or she cannot travel to. Read More

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Did you see the 60 Minutes story about Greg Mortenson, his book, Three Cups of Tea, and his charity, the Central Asia Institute? If not, you can get the gist of the expose with this AP article or Monday’s New York Time’s article about it.

The 60 Minutes report was pretty damning, alleging misrepresentation of the facts in Mortenson’s wildy popular book, suspicious financial arrangements at the charity, and testimony from some credible third parties that something is not right at the charity.

It’s too early to tell yet who is right and who is wrong in this situation, much less how the negative publicity will affect the charity’s fundraising and its cause. But it is certainly a good example of what not to do when the media comes calling.

Here are some lessons from the way Mortenson and his charity mishandled this situation:

Get out in front of any damaging media coverage. The organization and Mortenson knew CBS was investigating but apparently did not respond to earlier requests for contact from the network.
Never run away from an unexpected visit from the media. A 60 Minutes reporter approached Mortenson at a book signing before an event (apparently because they had been unsuccessful in making contact earlier) and Mortenson looked like the typical deer in the headlights, caught in the act guilty person who was caught red-handed. His “people” called in the hotel security forces to t ry to evict the reporter and camera crew. They promised to send someone to meet 60 Minutes in the lobby later but sent no one. Mortenson “escaped” out the back door after cancelling the event. Whew…can’t get any worse than that. Read More

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While the publishing industry waited to see whether it faced the embarrassment of yet another partly fabricated memoir, Greg Mortenson, the co-author of the best-selling “Three Cups of Tea,” a book popular with the Pentagon for its inspirational lessons on Afghanistan and Pakistan, forcefully countered a CBS News report on Sunday that questioned the facts of his book and the management of his charitable organization.

The report could puncture a hole in the uplifting narrative of “Three Cups of Tea,” which has fed a charity run by Mr. Mortenson, the Central Asia Institute. The institute has built schools, mostly for girls, in Afghanistan and Pakistan.

The report has also revived a chronic concern in the publishing industry over the accuracy of nonfiction memoirs, which are typically only lightly fact-checked by publishers, if at all.

Viking, the imprint of Penguin Group USA that published “Three Cups of Tea,” declined to comment on the book or answer questions about how it was vetted.

The CBS News report questioned, in particular, a central anecdote of the book that was as dramatic as it was inspirational: in 1993, Mr. Mortenson was retreating after failing to reach the summit of K2, the world’s second highest mountain, when, lost and dehydrated, he stumbled across the small village of Korphe in northeast Pakistan. After the villagers there nursed him back to health, he vowed to return and build a school Read More

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