The Business of Non-Profit Social Enterprise
Hello! This blog is being brought to you by a new team leader. Jake, the CEO and former team leader, has handed over responsibilities on the ground in Kenya to me so that he can concentrate on his CEO duties and expansion plans.
So, without further ado…
Question: How do you make a non-profit profitable?
That is the challenge being tackled by Chairman Philip, our new Chief Accountant Julius Gentanyi, me, and the income-generating activities (IGA) team. As a non-profit social enterprise, Nuru Kenya aims to be financially independent and self-sustaining by 2014/2015. This means we need to generate enough revenues to pay for programs, support costs, and future expansions. All without relying on funding from donors.
Starting in the fourth quarter of 2011, we have separated out the income-generation activities from the rest of the organization into their own unified group, and we have identified those programs that will be working towards self-sustainability in contrast to those programs that are not expected to contribute to the revenue stream.
In other words, Nuru Kenya now has two distinct faces: the social face, and the enterprise face.
Theoretically, the main advantage to this specialization of tasks is that the programs are now free to do what they need to do to help the local communities, while the business side of the organization is now free to concentrate on making money. This is not akin to the “Chinese wall” concept in business/finance, however. Because we have a double bottom line mandate, the two sides must always take the other into consideration – and, indeed, collaborate. This is true especially of the business side.
So, what are those businesses?
Nuru Kenya has three: agribusiness, a dairy farm, and commodities sales. For now I’ll summarize the activities of these businesses; in future blogs I’ll go into more details about each one.
Agribusiness buys and sells maize. It buys maize from local farmers at a slightly above-market price. It then sells this maize to big buyers at a high margin. The differential, we believe, will earn enough revenues to eventually help pay for the expenses of the entire organization. Agricultural commodities buying/selling is a risky business, particularly in Africa, to be sure. Thus, while we expect it to be our biggest revenue earner, we also need to diversify our portfolio.
In an area with few dairy cows, and where imported milk is often watered down, the market is ripe for someone who can supply quality milk at a reasonable price. After months of conducting research (thanks to the Education Program), the team is ready to begin operations at the end of October, starting with the delivery of eight pregnant cows from a breeding facility in Eldoret. We expect the dairy farm to earn a steady stream of income immediately, though nowhere near the scale of agribusiness.
Finally, commodities sales currently sells only health-related products. The unit is restructuring and next month (at time of writing) we will begin an internal discussion on how to dramatically improve sales. At the moment sales are anemic, due to a variety of factors, both internal and external, that we are beginning to identify. The objective is that by the first or second quarter of next year, we will have revamped our commodities business model so that it will be much more profitable.
That’s it for now. In my next update, I’ll dive into greater details about the agribusiness model. We’ll examine the challenges of this business, as well as the benefits to both the communities and to Nuru Kenya.
Kwaheri. (Goodbye.)