Thomas Heath
Thomas Heath
Columnist

Value Added: Nonprofit First Book steals a page from the business world

Sarah L. Voisin/The Washington Post - Kyle Zimmer created First Book, a Washington-based charity that buys and receives millions of dollars in books from big publishing houses and sells them at cheap prices to schools and institutions around the U.S. that serve underprivileged children.

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Kyle Zimmer has found a way to accomplish her nonprofit’s mission — delivering quality books to disadvantaged children — in a very profitable way.

She runs her 20-year-old organization, called First Book, with a financial self-reliance that minimizes corporate handouts and keeps government off the page.

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First Book, based in downtown Washington, is healthy.

It has $3 million in the bank, pays a $67,000 average salary to its 65 full-time employees (they are recruiting for 10 more), has zero debt and turned a surplus (“profit” is a no-no in the nonprofit sector) just shy of $2 million last year.

Over the past two decades, it has delivered 100 million books — from Dr. Seuss to college entry prep to nonfiction such as “Hand in Hand: Ten Black Men Who Changed America” — to schools, churches and institutions across North America that serve disadvantaged kids.

First Book says it has tapped into a “book starved” audience of 32 million children and young adults who live in poverty.

Zimmer, 52, an attorney-turned-do-gooder, doesn’t apologize for her unsentimental capitalism. It is the engine that powers her mission.

“I don’t criticize profits,” she said. “We need new models of enterprises focused on social issues that are robust and that are market-driven so that they become permanent.”

There are two parts to her business. One part, the First Book book bank, takes unsold, excess books donated by publishers and finds a home for them through a North American network of 50,000 churches, schools and organizations serving kids with special needs. First Book gets a 45-cent-per-book handling fee, but everything else is free.

The real driver at First Book is called First Book Marketplace, which allows qualified subscribers from low-income families or disadvantaged schools to buy first-rate books below what you might pay at retail or on Amazon.com.

I went to First Book’s Marketplace Web site and found Dr. Seuss’s “The Cat in the Hat” for $3.30. A visit to Amazon.com showed the hardcover priced at $5.28. The price difference really adds up when books are purchased in batches — like for 30 kids in a classroom.

Last year, Marketplace sold $7.5 million worth of books, which was the biggest part of the nonprofit’s $12.6 million in revenue. About $3.5 million was donated by corporations such as Disney, Barclays, KPMG and General Mills and from philanthropist/cosmetics heiress Aerin Lauder. Another $800,000 came from handling fees in the book bank.

Most of the revenue pays for books, leases, some travel and other expenses. After salaries (Zimmer’s is $180,000), benefits (a 401k match, health care and “a little bit” of a pension), rent and other costs, the net last year was about $1.9 million.

Zimmer is not in it for the money.

She grew up loving books, newspapers and magazines in Zanesville, Ohio, where the New York Times thumped onto the doorstep every morning. Her father ran a glass factory, while her mother, a homemaker, instilled in her a strong belief that education was the ticket upward.

Her favorite books are “The Good Earth” by Pearl S. Buck and “The Hobbit” by J.R.R. Tolkien.

Zimmer attended the University of Iowa and graduated from George Washington University law school. She worked in corporate law in Washington for several years but ached to work on social issues.

The magic moment occurred when she was sitting in a downtown Washington restaurant with two fellow attorneys around 1990.

She had been tutoring children for Martha’s Table, the charity that provides clothing, food, day care and other services for poor families.

“I started imagining a system, a supply pipeline if you will, that will provide the highest quality books and resources for schools and places where kids in need gather,” she said.

She filed federal and local documents in May 1992 to incorporate First Book as a not-for-profit.

Then she went about the unglamorous task of building it.

“There is a myth that entrepreneurs are born. [The idea] that these things just fall on you like a Steinway is not true,” Zimmer said. “The best entrepreneurs have an idea of where they want to go, are open to pulling people in and sifting through their information and getting the best advice from a range of smart people. They are really disciplined.”

So the next thing she did was make a list of 10 smart people, a ritual that carries to this day when she problem-solves.

Bill Shore’s Share Our Strength, which fights childhood hunger, gave her $50,000 in seed money. Attorney Peter Gold gave her office space and thought up the name, First Book. Then Zimmer started cold-calling anyone having to do with literacy and libraries.

She latched onto a business model that would aggregate a large audience of readers. With a scalable audience, she could provide publishers with a one-stop solution to excess books, which were headed for the dump or recycle bin. The rationale for the publishers was it gave them a outlet for their unused books, while also providing a tax deduction.

“We found a way to allow the publishers access to millions of kids who wanted them but couldn’t get them in a way that made business sense,” Zimmer said.

But Zimmer wanted something that would expand First Book’s revenue while reaching more kids in need.

Zimmer cooked up a new business that won the grand prize for best business plan at the 2005 Yale School of Management competition.

It came with a $100,000 prize from the Goldman Sachs Foundation.

The award was for a pilot program called Marketplace. The publishers could sell to new customers who were not previously buying books. The classrooms and institutions loved it because they would have access to affordable, high-quality books.

First Book used the $100,000 to get the program off the ground and ran a pilot program for three years to see if it worked.

It worked. Marketplace blew through its sales projections, turning surpluses and boosting the number of titles it sold from 100 to 600. A $1.5 million loan was paid off early, saving $80,000 in interest payments.

Next up is a goal to earn or raise from donors nearly $15 million over the next several years, which Zimmer will use to tackle some big goals, including taking her book mission global. She wants to start in India and Brazil.

Naturally, she bought a book about the developing world.

The name of the book is “Poor Economics,” and she bought it at Barnes & Noble, the for-profit chain.

For previous columns, go to washingtonpost.com/business.

 
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