Charities more often turning to side ventures
Published: Wednesday, January 29, 2003 at 6:01 a.m.
Last Modified: Wednesday, January 29, 2003 at 12:48 a.m.
PITTSBURGH - With donations increasingly tough to come by, more and more charities are setting up moneymaking sideline businesses.
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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 child-care 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 to employees.
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 as many as 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.
"I think that the future is going to be organizations that have a multiple revenue stream," said Strickland, who is also about to launch a moneymaking jazz recording studio that could be running by the fall.
Charities running their own 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.
The Greyston Foundation, which runs housing, health and education programs in Yonkers, N.Y., operates the Greyston Bakery, which makes brownies for Ben & Jerry's ice cream. It does about $4.5 million in business annually, providing as much as 7 percent of the foundation's roughly $10 million budget. It also offers job training.
"The myth out there in the marketplace is that Ben & Jerry's is paying some exorbitant price" because the bakery is tied to a charity, said foundation president Charles Lief "They beat us up over price just like anybody else. We have 100 percent of the same risks that any business has."
Ben & Jerry's also joins with nonprofit organizations willing to run ice cream shops, and has 12 such stores around the country. Besides getting to keep all the profits, the nonprofits are able to offer job training to poor people and the homeless.
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