Enterprise. It's a common term in business circles, but it's relatively foreign to the nomenclature used by nonprofit organizations.
If for no other reason than mere survival, "enterprise" is destined to become part of the nonprofit vocabulary, according to a couple of "nonprofit business managers."
The "enterprise" plan--as explained by James C. Crimmins and Mary Keil in their book "Enterprise in the Nonprofit Sector"--is relatively straightforward: it would allow nonprofit organizations to make a profit from some of their nonprofit activities. For example, a psychologist employed by a nonprofit group periodically might consult with private companies on the organization's time. The nonprofit group is then paid for the consultation.
But before most nonprofit organizations can engage in profit-making activities, the authors point out that changes will have to be made in the tax code as well as in the operations of the nonprofit organizations themselves.
Crimmins and Keil call the idea "a greenhouse, a complete extension of the institution." With broad cutbacks in government funding and heightened competition for community, corporate and foundation assistance, they see entrepreneurial activities--such as merchandise sales, real estate development, partnerships with local businesses and the hiring out of staff expertise and in-house profit centers--as a source of dependable in-house revenue. With tax changes and an aggressive business eye, they say many funding problems can be eased.
"The possibilities depend strictly on the wit of the institutions to see what they have and develop it," Crimmins said Friday at a press conference hosted by the book's publishers, Partners for Livable Places and the Rockefeller Brothers Fund. "However, the sector is terribly afraid of being profit-making. It's a very deep and very tangible, real fear that the careers and institutions to which they have devoted their lives--academic, artistic, philanthropic--will be corrupted by moneymaking."
He hastened to add that there are nonprofit organizations that will remain totally dependent on outside contributions because of the attitudes of board members, senior staff and the nature of the work.
Key to nonprofit enterprise ventures is a proposed new tax classification that will permit the establishment of profit-making ventures by nonprofit institutions.
The new classification would allow "enterprising" nonprofit groups to earn up to 80 percent of their operating funds from for-profit operations.
But unlike the typical for-profit enterprise that pays business taxes, the "taxes" the nonprofit organization would otherwise pay on their profits would go directly to the parent nonprofit group for program-related expenses, as a substitute for lost outside funding.
Crimmins and Keil acknowledge there might be disadvantages for small businesses that compete with nonprofit enterprises, because the nonprofits will have relatively low operating costs. They report that nonprofit enterprises constitute a risk for the business community in three ways: as market competitors, as donors and as competitors for personnel. However, the more cooperation that takes place between for-profit and nonprofit enterprises, the fewer the incidents of unfair compeition that are likely to occur, the authors said.
To insure that enterprising nonprofits continue to get community support and to comply with the proposed new tax classification, a nonprofit would have to raise at least 20 percent of its revenues from the community.
The authors also propose a national "nonprofit enterprise development corporation" that would provide capital and managerial expertise to nonprofits launching or expanding enterprise activities.
"Some state and local laws prohibit nonprofit enterprise," Keil said. "In our research, we uncovered nonprofit self-support activities in the state of Colorado which would be illegal in the state of Virginia."
National patterns of nonprofit entrepreneurship were striking, the authors said. They found that more industrial cities lacked the entrepreneurship of nonprofit activities in the Southwest and the West.