Charities turning to for-profit ventures
By Dan Nephin
PITTSBURGH With donations increasingly tough to come by, more charities are setting up moneymaking sideline businesses.
In Pittsburgh, for example, one charity plans to grow and sell orchids. An organization in Yonkers, N.Y., operates a bakery whose customers include Ben & Jerry's. And a childcare center for poor families in the Washington area uses its kitchen to run a catering service.
The for-profit businesses generate income and also allow the charities to provide job training.
The concept isn't new think of thrift stores run by nonprofit groups but it is becoming more sophisticated, and the number of such operations is expected to grow, especially with the economic downturn and the drop-off on Wall Street hurting donations.
"That whole way of thinking and that discipline is what's new," said Evan Hochberg, director of Community Wealth Ventures, a Washington consulting firm that advises charities on establishing businesses.
William Strickland Jr., president and chief executive of Pittsburgh's Manchester Craftsmen's Guild and the Bidwell Training Center, which provide arts and vocational training to poor children and adults, said the poor economy helped him decide recently to build a greenhouse as a moneymaking venture. Inner-city schoolchildren will grow orchids, which will be sold to a supermarket chain, to a flower broker and through stores this spring.
Strickland said the project will create up to 18 jobs at the end of two years. By the end of five years, he hopes to be bringing in $100,000 in profits annually.
Charities running businesses benefit because they can use the money with more freedom. Government and foundation grants can come with restrictions; for example, sometimes such grants cannot be used to pay for increases in staff salaries or an upgrading of technology.
Hochberg said a charity that runs a for-profit business generally will not endanger the tax-exempt status of its charitable operations if the moneymaking venture is related to the organization's overall mission.