"Nonprofit managers who develop social purpose ventures to generate revenues to support a social mission have limited opportunities to share their experiences with others in the field or to learn from the experiences of others. Many nonprofit managers also have modest business backgrounds. Yet, despite these challenges, the movement toward income generation by nonprofits continues to grow. Some of these ventures succeed, yet many more fail to meet either their social or financial goals. Clearly, the field lacks well-defined criteria, standards, and strategies for achieving success in this area. The potential payoff from the diffusion of learning appears to be substantial. This paper offers a first step in the process.

Much has been written in the past twenty years about nonprofit organizations’ attempts to look beyond traditional funding sources and initiate earned-income ventures. At the same time, there is little data available that formally documents either the incidence or the character of these ventures. Perhaps most unfortunately, we know little about what constitutes success-and failure-for a nonprofit enterprise. To address some of these questions, in the fall of 2000, The Pew Charitable Trusts commissioned the authors to survey the landscape of enterprise in the nonprofit sector. This paper summarizes what we have learned from the survey data and interviews with experts in the field. It is intended to provide a first blush perspective on trends in the field of nonprofit enterprise, to help us begin to identify lessons learned, and to set the stage for our future efforts to support nonprofit organizations’ business activities.

Taken in the aggregate, the survey results highlight a number of important trends in nonprofit enterprise activity:

• A significant number of nonprofits that responded to the survey are already operating business ventures, or say they wish to initiate an earned-income venture.
  
• Arts and culture organizations are more likely to operate earned-income ventures than other types of organizations.
  
• Service-related ventures are the predominant type of earned-income ventures operated by the nonprofit organizations responding to the survey.
  
• Nonprofit organizations operating ventures tend to be older, more experienced nonprofits.
  
• Nonprofit organizations operating business ventures are staffed with greater numbers of employees.
  
• Budget size is an important factor for organizations operating earned-income ventures.
  
• The majority of organizations tie their ventures to the mission of the parent nonprofit.
  
• Nonprofits operating earned-income ventures have been operational for an average of 6.45 years.
  
• Nonprofit organizations operating ventures tend to view themselves as more entrepreneurial than those who have never ventured.
  
• Top management is a critical force in initiating and championing the venture. 
  
• Nonprofit organizations operating ventures see a bottom-line benefit.
  
• More than half of the nonprofit organizations operating businesses are at break-even or generating surplus.
  
• Budget size, the number of employees in a nonprofit running an earned-income venture, and the age of the organization appear to be important factors that influence the financial success of a venture.
  
• A greater percentage of nonprofits that are renting or leasing properties are generating a surplus than those that are running service-related, product-related, or cause-marketing ventures.
  
• Nonprofits do not wait for complete financing to launch their ventures.
  
• However, the survey results demonstrate that the level of financing plays an important role in the financial success of the venture.
  
• Financial return-be it generating income for programs, moving toward greater self-sufficiency or diversifying revenue streams-is the primary reason more than half of the nonprofits launch profit-making ventures.
  
• But financial return is not the only motivation.
  
• Operating a for-profit business has an impact on the nonprofit that goes beyond the bottom line.
  
• Social impact is a critical component of the value proposition for nonprofit business ventures.
  
• Many nonprofits aspire to see their ventures grow and replicate.
  
• However, more often than not, nonprofit organizations do not apply standard business protocols for initiating a business venture.
  
• Yet business planning can have a significant impact on the success and mission of a nonprofit organization.
  
• Nonprofit organizations say that targeted business planning analysis and assistance is a critical support mechanism that will help them implement and sustain their earned-income ventures.
  
• Lack of financial resources and trained personnel are roadblocks to nonprofits that seek to initiate business ventures.

Although some nonprofits have the potential to plan, create, and manage profitable business ventures, most of them cannot accomplish these tasks on their own. To succeed, nonprofits need a marketplace that provides three types of services:

• Human and organizational capacity development—opportunities for building capacity in leadership, organizational structure, operations, financial systems, accountability, and planning.
  
• Structured and accessible venues for learning—opportunities for obtaining existing information on business venturing among nonprofits, learning from the experiences of others, and initiating new research and dialogue.
  
• Tools and models that serve as market standards—lopportunities for identifying capital options and accessing and leveraging capital, as well as coordinated deal-making opportunities for funding and co-investment partnerships.

This report may be available online at: http://ventures.yale.edu/factsfigures.asp

CONTENTS—
Paper Overview.
Line of Inquiry.
Profile of Survey Respondents.
Research Findings.
Table 1. Venturing Status by Program Area.
Table 2. Venturing Status by Number of Years Operating Parent Nonprofit.
Table 3. Venturing Status by Number of Full-Time Equivalent Staff Employed in Parent Nonprofit.
Table 4. Venturing Status by Annual Budget of Parent Nonprofit.
Table 5. Profitability of Venture by Size of Annual Budget of Parent Nonprofit.
Table 6. Profitability of Venture by Number of Full-Time Equivalent Staff Employed in Parent Nonprofit.
Table 7. Profitablility of Venture by Number of Years Operating Parent Nonprofit.
Table 8. Profitability of Venture by Type of Earned-Income Venture.
Table 9. Profitability of Venture by Level of Financing the Venture has Secured.
Table 10. Top Reasons for Venturing.
Table 11. Venturing Status by Whether Organization has Written a Business Plan.
Table 12. Impact of Whether Organization has a Written Business Plan.
Table 13. Type of Support and Assistance Most Valuable to Implement and Sustain Venture or Parent Nonprofit (if not venturing).
Lessons for the Field.
Supporting Nonprofit Enterprise: Yale School of Management-The Goldman Sachs Foundation Partnership on Nonprofit Ventures.
Notes.

"Nonprofit managers who develop social purpose ventures to generate revenues to support a social mission have limited opportunities to share their experiences with others in the field or to learn from the experiences of others. Many nonprofit managers also have modest business backgrounds. Yet, despite these challenges, the movement toward income generation by nonprofits continues to grow. Some of these ventures succeed, yet many more fail to meet either their social or financial goals. Clearly, the field lacks well-defined criteria, standards, and strategies for achieving success in this area. The potential payoff from the diffusion of learning appears to be substantial. This paper offers a first step in the process.