Subject: Funding help for new social enterprise

Hello Dominic,

The Foundation Center is a U.S.-based nonprofit organization that offers services to nonprofits and individual grantseekers. We have a searchable database of U.S. grantmakers and their grants called Foundation Directory Online (http://foundationcenter.org/findfunders/fundingsources/fdo.html). This database is available free to the public at our locations in the U.S. (http://foundationcenter.org/about/locations.html) or by subscription. If you are starting an organization outside the U.S., you may want to see the International Visitors section (http://foundationcenter.org/getstarted/international/) of our web site. You can also find a great deal of tips and guidance on funding at our web site (see the FAQs or Reference Guides) or contact us through our Ask Us service (http://foundationcenter.org/getstarted/askus/) if you have any questions.

Hello Dominic

I know you asked your question quite a long time ago, but assuming you still need some pointers...

First of all, not for profit doesn’t mean that you aren’t going to make a profit or operational surplus.  As a social enterprise, it is actually part of the intent of the structure that the organisation can and should be able to make a financial profit from its activities. 

The crucial point to make is that any surplus goes back into the organisation to fund its work, or to build a reasonable level of reserves to be used to fund activities that don’t attract external funding, or to provide the necessary cashflow when ‘gaps’ occur in grant funding or other income streams. 

In contrast ‘for profit’ organisations are traditionally run to make a financial surplus which, although some is used to continue to finance the business, is usually used to pay dividends to its shareholders or directors.

As such, all ‘not for profit’ organisations need to be developed and run as ‘successful’ businesses.  They need to be able to prove to potential funders that the organisation is viable, through the provision of appropriate financial forecasts and business plans.  The more ‘profit’ you make, the more services you can deliver and/or the less reliant the organisation is on the vagaries of fundraised income or government grants. 

Many social enterprises actually try to measure their success and ‘profits’ against a “triple bottom line” – financial, social and environmental. 

Sustainability isn’t just about environmental impact.  Charities (and other not for profits) who do not generate sufficient ‘surplus’ income over and above their expenditure (i.e. profit) to deal with unexpected delays in grant payments or unsuccessful fundraising appeals often have to cut staff and services – not an attractive proposition for a funder.

Obviously too much money held in reserves is equally unattractive to funders, but that’s a whole other conversation.

So, if you haven’t done so already, I’m afraid that yes you do need a business plan and financial forecasts that show a profit at the end of the year – which of course is reinvested in your services to enable you to do more and better things next year.

J

thanks jane