Blueprint Fundraising

Beware the $90 bottle of salad dressing

Business in Vancouver is one of my favourite publications and the best part is always Peter Ladner’s column. I agree with just about everything he says and love that he comments on so many important community issues in a business forum. This week’s “Profitable ventures are rare in the non-profit world” presents an issue that many nonprofits toy with — running a for-profit business to provide perpetual funding for their work.

His column refers to a February 2005 Harvard Business Review article. The authors studied for-profit businesses run by nonprofits. Pressure to raise money and be entrepreneurial leads a (relatively small) number of charities into this arena. Once there, they underestimate the complexities and expenses of the businesses, fail to make a profit, and often undermine their charitable work.

For example, a youth services organization that had received funding
to launch a food products enterprise hired young people and began
making salad dressing. The nonprofit believed it spent $3.15 to produce
each bottle of dressing that was sold for $3.50. But when expenses such
as unused ingredients and managers’ salaries were factored in, the cost
per bottle reached a staggering $90.

The authors discovered a “pattern of unwarranted optimism.” Luckily I don’t suffer this terrible affliction myself, but I know many who do.

The most common manifestations that I see… believing that your Board of Directors will raise all the money and believing that your fundraising event is truly a net money-maker.