Fee Income and Commercial Ventures

James, Estelle & Young, Dennis, (2007) “Chapter 5: Fee Income and Commercial Ventures,” in Financing Nonprofits: Putting Theory into Practice (Ed. Dennis Young), Maryland: Altamira

Develops a firm theoretical foundation for the appropriate place of fee income in nonprofit finance. Focuses on two broad components of such revenue – fees derived from private payments associated with the delivery of mission-related goods and services, and revenues developed from profitable commerical ventures that may or may not have a close connection with the mission.

Reviews present patterns and trends in nonprofit fees and revenues, and examines variations of current fee practices in different parts of the sector. Analyzes the conceptual foundation for non-profit fee and commercial income. Identifies further research needed to verify the hypothesized relationships and connect the conceptual framework to management practices. Offers series of diagnostic questions for nonprofit managers seeking to enhance their fees and commercial revenues in pursuit of an expanded financial basde for their mission-related activities.

Reading List: 11/9

On the Menu du jour… 

Foster, William & Bradach, Jeffrey (2005), “Should Nonprofits Seek Profits?” Harvard Business Review, Boston: Feb 2005. Vol. 83, Iss. 2; pg. 92

Nonprofits increasingly feel compelled to launch earned-income ventures – not only to appear more disciplined and businesslike to stakeholders but also to reduce their reliance on fundraising. There’s plenty of hype about the value of earned-income ventures in the nonprofit world, but such projects account for only a small share of funding in most nonprofit domains, and few of the ventures make money. Moreover, when the authors examined how nonprofits evaluate potential enterprises, they discovered a pattern of unwarranted optimism. The potential financial returns are often exaggerated, and the challenges of running a successful business are routinely discounted. But the biggest downside of such ventures is that they can distract nonprofits’ managers from their core social missions and, in some cases, even subvert those missions. Earned-income ventures do have a role in the nonprofit sector, but unrealistic expectations are distorting managers’ decisions, wasting precious resources, and leaving important social needs unmet.

Toepler, Stefan, “Caveat Venditor? Museum Merchandising, Nonprofit Commercialization, and the Case of the Metropolitan Museum in New York,” Voluntas, 2006-06, Vol. 17, Issue 2

This paper reviews some of the underpinnings of the current commercialization debate in the nonprofit sector, based on an analysis of Metropolitan Museum of Art data from 1960 to 2002. The case suggests at least two avenues for additional research: First, while analysts tend to see the origins of the commercialization phenomenon in the fiscal setbacks of the 1980s, the economic crisis of the 1970s and the resulting erosion of endowment funds may also have been an as of yet unexplored driving force behind the commercialization trend. Second, current conceptual frameworks of the phenomenon adequately explain the motivations behind the observable rise of the museum’s commercial activities. However, the changing rationales as well as economic fortunes of commercial activities in this case highlight the need for a better understanding of the long-term effects and consequences of commercial activity by nonprofit organizations, particularly in light of the current push for increased entrepreneurialism.

Robinson, Andy, (2002) “Selling social change (without selling out): earned income strategies for nonprofits”, San Francisco: Jossey-Bass

Marrying Business and Charity, eh?

Canada’s national newspaper The Globe and Mail recently featured this article on social enterprise, titled “Marry business and charity, Martin says”. Apparently, after 12 years of inaction in this area as finance minister, our former Prime Minister – the Rt. Honourable Paul Martin – is finally sold on the promise of social enterprise. The article falls in the typical traps of recent media coverage on the subject: it extols the potential of social enterprise and explains how public policy could better support hybrid organizations, but rarely questions whether ‘marrying business and charity’ itself is necessarily a good thing…

Martin’s speech, titled “Unleashing the Power of Social Enterprise”, is taking place, as I type, at the University of Toronto’s Munk Centre for International Studies. Event details are here, if any of you readers from the 416 area are interested.

Building a Solid Foundation for Social Entrepreneurship

Anderson, Beth & Dees, Gregory (2006), “Rhetoric, Reality, and Research: Building a Solid Foundation for the Practice of Social Entrepreneurship”, from Social Entrepreneurship (ed. Alex Nicholls), New York: OUP

This is a great piece – one which I felt I should have read earlier. Specifically, this essay raises a number of research questions typically overlooked by social entrepreneurship curriculums and practitioners when assessing the ‘effectiveness’ of earned income ventures. (Not surprisingly, these questions make great areas of inquiry for my thesis!) These include:

‘Self-Sufficiency’: What does it mean for an organization to be self-sufficient? Is it fair to describe organizations that depend on earned income as self-sufficient and those that rely on other sources as ‘dependent’? What are the value judgments that underlie the promotion of earned income?

“Dependency is generally regarded as bad – a sign of weakness and vulnerability. Self-sufficiency is regarded as unequivocally good – a sign of strength. What are the values implicit in the use of these terms? … Of course, the term earned income itself is value laden, seemingly implying that the donations, grants, and government support that social sector leaders work so hard to attract and use for important social services are not ‘earned’“

‘Sustainability’: Is earned income inherently more ’sustainable ‘ than other forms of income for social entrepreneurs? Under what conditions is it most likely to be sustainable? Is ’sustainability’ the right measure for assessing financial strategies?

Reading List: 11/3-11/5

Van Til, Jon (2000), “When the Business of Nonprofits is Increasingly Business” from Growing Civil Society: From Nonprofit Sector to Third Space, Bloomington: Indiana University Press

Chapter focuses on the role of nonprofit organizations in health care and education. Asks: for these enormously important social institutions, what difference does it make if one is for-profit or non-profit?

Notable Passages: “Over the past two decades, nonprofit organizations have been hectored to become increasingly businesslike. For-profit subsidiaries are created, and unrelated income increasingly comes to be earned. Increasingly, one confronts the worry: has the nonprofit sector become home to too many organizations which act essentially as tax-exempt businesses?”(113); “Kuttner argues that the process by which a community based non profit hospital becomes transformed into a chain-bought for-profit entity negates the fundamental legal criterion for a nonprofit organization: the non-distribution constraint” (114); “The concept of the ‘third space’ suggests that the third sector may not primarily be about organizational structures – nonprofits instead of corporations or governments. Rather, the special contribution of this realm of human activity may rest in a particular combination of spirit and organization.” (125)

Progress Report (11/2)

Firstly, a word of thanks to my friend Emma Hall (UPenn ‘08), who recommended Third Sector Development: Making Up for the Market by Christopher Gunn for my reading list — thanks Emma! =)

Then, several questions I encountered today while researching:

• Since there is no agreed upon definition of ’social entrepreneurship/enterprise’ in the current literature, what will my definition of ’social enterprise’ include?
• For example, should my thesis be limited to a certain organizational model of social enterprise over another? (i.e. a nonprofit with a for-profit subsidiary vs. a socially responsible business)
• What are the other senior theses out there that are related to my topic?

FYI, a couple friends and I will be driving up to Massachusetts for the weekend. That means thesis research -and this blog- will be on vacation as well. =) In the meantime, could anyone recommend any good & recent books-on-tape? (and it doesn’t have to be related to social enterprise)

Reading List: Fall Break (10/30-11/4)

Mair, Johanna et al. (ed.) (2006), Social Entrepreneurship, New York: Palgrave MacMillan

Contents include: ‘Perspectives & Agenda for Research’, ‘Opportunities and Intentions’, ‘Strategy, Structure, & Outcome’, & ‘Integrating Sustainability & the Environment’; Contains helpful abstracts of each article in ‘Introduction’ along with table of definitions of ’social entrepreneurship’ from authors; Chapter 4: ‘A Critical Appraisal’ by Albert Cho provides interesting critique of discourse of social enterprise

Nicholls, Alex (ed.) (2006), Social Entrepreneurship: New Models of Sustainable Social Change, New York: Oxford University Press

Contents vaguely include: ‘New Perspectives’, ‘New Theories’, ‘New Models’, & ‘New Directions’, written by such heavy hitters as Muhammad Yunus, Jeff Skoll, Bill Drayton, & Jed Emerson; Articles of interest include ‘3: For What it is Worth: Social Value & the Future of Social Entrepreneurship’ by Rowena Young, ‘4: Cultivating the Other Invisible Hand of Social Entrepreneurship: Comparative Advantage, Public Policy, & Future Research Priorities’ by Geoff Mulgan, ‘Social Entrepreneurship: the Promise & the Perils’ by Jerr Borschee, & ‘Moving Ahead Together: Implications of a Blended Value Framework for the Future of Social Entrepreneurship’ by Jed Emerson

What I’ve Read So Far… (Summer – October)

Alessandrini, Megan, “A fourth sector: The impact of neo-liberalism on non-profit organisations,” School of Government, University of Tasmania, Refereed paper presented to the Jubilee conference of the Australasian Political Studies Association at Australian National University, Canberra, October 2002

Billitteri, Thomas J., “Mixing Mission and Business: Does Social Enterprise Need a New Legal Approach? Highlights from an Aspen Institute Roundtable,” Nonprofit Sector Research Fund, January 2007, Available Online at:

Brink, Ben, “Strategic Alliances Between Businesses and Nonprofit Organizations for Increasing Impact of Philanthropic Work: Economic, Sociological, and Cultural-Anthropological Perspectives,” DEKKA, 2002, Available Online at:

Burrows, Gideon, “In Whose Interest?” The New Statesman, 9 Feb 2004

A Sneak Preview

The following is a rough copy-and-paste job from my ‘WWS Thesis Proposal Form’, which was signed and submitted in early October. I hope it gives you a better idea of my topic and where I’m planning on taking it.

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Provide a brief thesis topic (in no more than 10 words).

Social Enterprise in the United States: Possibilities, Prognosis, & Policy

Briefly describe the topic:

Though lacking a precise definition, ‘social enterprise’ refers to any mission-driven organization which trades in goods and services or uses market-based strategies to advance a social purpose. Social enterprise exists at the intersection of the for-profit and non-profit sectors, and promises to address society’s most pressing problems by harnessing the advantages of both those sectors.My thesis will take a critical look at the social enterprise movement in the United States, assess its current and future impact on American civil society, and determine the forms that an appropriate policy response / regulatory environment for social enterprise could take.

An Enterprising Idea

It’s fall break here in Princeton. The air is crisp, the leaves are even crisper, and thesis season is in full bloom. =)

Enterprising Ideas is a blog for my senior thesis. Some might also call it an experiment. So far, I’ve been researching for my thesis for a few months now, and frankly, there’s got to be a better way to synthesize my research, catalogue my sources, storyboard chapters, solicit feedback from friends, keep myself accountable, and keep my adviser updated — all at the same time! After much consideration, I have decided upon a blog format, and precisely for those reasons. Here’s the top 10:

(1) Blog posts make for great summaries/abstracts/memos of what I’ve read and digested

(2) Tagwords make it easy to sift through all those memos later on

(3) Having everything on cyberspace means I don’t have to bring my flash drive every time I go to a computer cluster, or put all my eggs on the H: drive