For some nonprofits, revenue-generating ventures boost the mission
PHOTO/SAM BONACCI
Douglas Cregar, of Innovative Digital Imaging, digitizes a book at the American Antiquarian Society in Worcester.
PHOTO/SAM BONACCI
Kelvin “Coco” Huertas, works at Straight Up Café in the Main South section of Worcester.
In a back room of the American Antiquarian Society in Worcester, teams work at cataloging and digitizing the organization's collection of American printed artifacts. This project, while digitally preserving important pieces of the country's history, also contributes $1.5 million a year to the organization's budget.
It's just one example of a group of Central Massachusetts nonprofits that use business ventures to round out grant and foundational funds as part of their revenue mix.
The American Antiquarian Society (AAS) has been leasing rights to the use of documents in its collection of pre-1876 historical items to outside companies since the 1950s. The documents, which include historical diaries and out-of-print books, are then made available to academic libraries for a price. With the advent of digitization, AAS President Ellen Dunlap saw an opportunity to dive deeper into a model that preserves a delicate collection, with digital copies coming under AAS ownership after a lease expires, while bringing in revenue.
In 2006, she brought in a consultant to help establish contracts and negotiate deals with publishers. “I realized that aggressive negotiations of contracts, licenses and business deals was not what I was put on earth to do,” Dunlap said. “It shouldn't be underemphasized that it takes work to make money. It isn't just falling out of the sky for free.”
The society now brings in roughly $1.5 million a year in royalties from these contracts, out of a $5 million operating budget.
While many nonprofits still rely heavily on grants and donations, these funds focus on specific projects, leaving nonprofits to look elsewhere to pay for staffing, heating and other overhead, said Heidi Charlebois, director of development at Habitat for Humanity Greater Worcester.
“We do like our foundations and our grants and those relationships, but it's the unrestricted funds that we really do need,” she said.
The region's Habitat branch has used “corporate build days” to raise this money, charging $2,500 to $25,000 for different team-building events at its home-building sites. The organization also decided to build children's playhouses — which are donated to the children of veterans — to its offerings last year. These builds bring the volunteer event right to the business while contributing to the general needs of the organization. The local group is only the second in the country to use this model after it was pioneered in California's Silicon Valley.
Café serves a broader purpose
While these ventures can provide a boost to the nonprofits, they can take years to become profitable. In Worcester's Main South neighborhood, Straight Up Café serves up lunch and coffee to area residents. However, the café and adjacent thrift shop have a deeper mission: These are businesses run by Straight Ahead Ministries as a training ground for recently incarcerated 14- to 24-year-olds. The businesses allow these employees the space to make mistakes while they keep their jobs.
“We only work with kids who have been locked up at some point, have charges pending or are gang-involved youth,” said Robb Zarges, executive director of Straight Ahead Ministries, who explained that many of these youths don't know how to work. “We did not get into the business of selling paninis because we like selling (the sandwiches). We got into the business of selling paninis as a context of working with the young people who are saying they need help with getting on in life.”
It's partially because of that employment model that the two businesses are not profitable yet, he said. A new catering business, which has more predictable overhead, has turned a profit and is expanding to help buoy the two storefront businesses. However, Zarges understands that profitability will be harder to achieve because it's part of the nonprofit's broader mission. .
“The reality is that these cannot function without making some money too,” Zarges said. “The money we make (in catering) will go back into the areas that are still not performing on the financial level.”
Lifting the disabled
GAAHMA, based in Gardner, recently reached profitability with its Coleman Assembly and Packaging business. Since 1967, GAAHMA has been providing services, including job placement and training, for adults with developmental disabilities. For more than 14 years, the business had been doing assembly work and creating packaging while hiring disabled workers as part of the nonprofit's mission. In the last year, the organization's new CEO, Tracy Hutchinson, revamped the program to include a mix of non-disabled workers and added contracts that have transformed the program into a moneymaker.
“It allows the people we serve to be employed in all programs that we offer,” she said. “The profits of the organization do go directly back to GAMHA to support renovations to the business.”
Hutchinson grew profits by bringing in a new management team that secured additional clients and expanded to different manufacturing using a new room with controlled humidity, and still wanted to maintain the operation as part of GAAMHA's programming.
What's important to any nonprofit's enterprise ventures is ensuring they mesh with the overall mission. There are legal reasons for that, with taxes being applied to business ventures that stray too far from the mission. A business activity must directly contribute to the organization's purpose for it to remain exempt, according to the IRS. “(Organizations) are taking advantage of everything they can as long as it's not too much of a distraction,” Dunlap said.
Legal limitations
It's also a matter of ensuring that a nonprofit's message is not diluted. While Habitat for Humanity has a clear goal that many understand, Charlebois said, many of the smaller nonprofits throughout Central Massachusetts are less known. If an organization steers too far away from its mission, it can lead to confusion when the organization begins to market itself, she said.
At its worst, Zarges said, a venture that veers too far from the organization's mission can be a distraction. If he were operating the café to make the biggest profit possible, the cafe would not be able to help those working there. Ultimately, it's the mission of the charitable organization to make an impact, not a profit, he said.
Kelvin “Coco” Huertas, who is three months into working at Straight Up, explained that it has been invaluable to him in getting on a different track. By developing his work ethic, he has been able to take a step forward and out of a life that landed him in jail. Although he wanted to move on with his life, he didn't see a path out until he started working at the café.
“I want to be somebody else. I don't want to be that kid in the underworld anymore,” he said. “It has been important because (work) is the way you eat, that is how you pay your rent. That is how I can feed my kids.”
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