Social Enterprise: Earned Revenue for Nonprofits

[Music] The Small Nonprofit podcast is brought to you by Further Together Fundraising, which is actually my company, where fractional fundraisers work with social justice nonprofits in Canada and the States. Typically organizations who have tried hiring wins or twice, but it hasn't worked out. We use community-centric fundraising to build sustainable revenue systems, and here's the key. We don't just strategize. We roll up our sleeves and do the work with you. Donor meetings, campaign execution, grant rating, all of it. If you're ready to stop doing fundraising alone, visit GoFrotherTogether.ca. Now that you're at the table and you have an opportunity to speak to them about the work that you do, using language that they would use in talking about their own businesses, whether they're accountants or small media enterprise business owners, all that kind of thing, you speak the same language. I think they always find it neat that you're achieving social outcomes using the same principles that they use to achieve their financial outcomes. Hi, friends. Ever wondered how you could turn your big ideas into results? Together, let's reimagine a better sector, tackle systemic issues, and yes, raise some serious cash. Welcome back to the Small Nonprofit, the podcast where your passion meets action. Hello, everyone. Welcome back to another episode of the Small Nonprofit Podcast, or if you're new here, welcome. And here with Tom, who is super awesome, but I'll just let him introduce himself. Hi, Tom. I'm Maria. Great to see you again. My name's Tom. I run a program in Guelph called The Seed. It's a project of the Guelph Community Health Center, and our mission and vision is a community where everyone has enough good food to eat, and we run programs and social enterprises that are meant to increase people's access to nutritious food. How long have you been there, Tom? Pretty much 10 years. It'll be 10 years in March. Time flies. Amazing. Okay. Wow. You've been there for a long time, which will he speak to quite a few about the work? So you have The Seed, which is a program of the Guelph Community Health Center. Can you tell us a little bit about what The Seed is and how it works? Yeah, for sure. So we got our initial start about 10 years ago now. The idea was that there was a lack of infrastructure in Guelph, particular for a number of different food access agencies that supply food to people of facial food insecurity. At the same time, I had a lot of things to say about their experience in going there. They're having to prove the fact that they were facing poverty in some way, whether it's showing rents to the sector or really just invasive stigmatizing things. So at those two things in mind, a group of agencies wanted to see some change happening in our community. We got together to see what can we do collectively to resolve the issue. And a lot of the partners were operating out of church basements, they were operating out portables. Still are in a lot of cases and places where there wasn't infrastructure to receive large scale donations or receive large amounts of food. But at the same time, they wanted to improve their services, wanted to improve the quality of the food that they were able to and quantity that they were able to give to participants. So one of the things that we got our initial start with was, "Okay, can we centralize the storage and distribution for this network of agencies?" So that each one of them has more access to nutritious food that they can then give to their participants. So that's where the seed got its start. It was to do that centralization of the storage and distribution. And that's where I got by start with the seed. I started as a consultant to basically look at the network, look at the opportunities that were available there, and basically operationalize this idea. So the seed as I know it is a social enterprise that it's start as a social enterprise or did it start as a program. It actually started as a social enterprise. So through that consulting work that I did, I was speaking to all of these agencies. And one of the things that I noted about their work was that a lot of them were buying food at retail cost. They had volunteers who were hunting the best bargains out there, but they were going to retail stores to do it. But the larger ones might have been buying from a wholesaler, that kind of thing. But I said, you're all purchasing food and you're all going to retail to do it. In addition to centralizing the distribution of donated food, we collectively buy food together. That way we can lower the cost of food for your programs. You can get more food as a result and everyone wins. But at the same time, I said, we can do this. We can centralize all of this. We can do this distribution work. But like the seeds grants at the time, we have like a window of 10 months that we had funding for. So I said, if the seed takes a margin on top of the sale of this food, and you're comfortable, they were still going to beat all those costs out there, and we could run this program much longer. So all of those initial partners of which there were probably eight to 10 said, yeah, let's go for it. So we've always had a margin on top of the food that we purchased for resale. And it's a program that we started. And our first delivery was in May 2016, and we're running that same program to the state. And it's been a foundational program for us in terms of being a Glee program that has allowed us to develop and get a bunch of grants and further funding to get all these resources in terms of space, vehicles, staffing, volunteerism upon which we built other programs and social enterprises. I know that there's so many nonprofits who look at social enterprise and they're like, oh my god, that's my golden ticket. Like I can do that somehow, but they don't know how to go from point A to point B. I'm wondering if you can walk us through how that decision was made and where were those initial considerations and steps? The great question. So I described our wholesale work just now, but that did form a foundation upon which we could build other things as well. Because anyone who's involved in food access work knows if there's a considerable gap between the amount of food access services offered and the need that's out there. So there's plenty of gaps that can be filled in terms of trying to get more food to people facing food insecurity. So knowing that food insecurity is an income-based issue. And people's incomes are on a spectrum. We knew that there would be other ways to attempt to solve this gap, at least in some small part. We looked at ways of creating a market that might be a way again to buy and resell food that could increase people's access to food. So like the real question was, can we buy and resell and how it makes sense for people who are facing some degree of poverty? And then again, knowing the fact that there is an income-based challenge, we felt like the answer was yes, we can solve this gap for some people. So we developed a program called Seat Markets that are a market where we're selling food on a sliding scale, which means that you can buy food anywhere from the landed cost to the cost we pay for it, up to retail, and then that allows people to pay according to their income with no questions asked. We felt like this was a great approach because it involves the community at large in the solution. So people of different socioeconomic backgrounds can all come together in the same place. So going back to your initial question, we basically asked ourselves a question, can we solve this gap through social enterprise? And once we felt like the answer was yes, then that's where we start to do a step-wise development process. So what does it look like from a financial forecasting perspective for us to delve into this? What kind of sales might we need to sustain our program? Can we sell enough at the retail cost to help set all of our operating costs? Can you just ask yourself all these questions that are financial-based? All at the same time, never losing sight of your mission so that when you're asking these questions, you'll have some answers that are hypothetical that you can then test. Then the next step would be let's deploy that some smaller scale. And if it starts to look like it might work, then try to build it out a little bit further from there. I feel like there's so many directions to take. So I want to ask, do you currently do B2Bs, Business Abusiness and B2C, and how do that evolve? So I guess we look at our wholesale work as B2B in a sense, because we're selling at large quantities and in case quantities to fellow nonprofits and to schools as well. So we also sell to elementary and high schools and support a student nutrition program. So in a sense, there is that B2B business approach to that work. But as of now, we don't sell anything to a restaurant or to institutions outside of schools. We have checked in with the CRA to make sure that we wouldn't be outside of our mission. And they told us that we wouldn't be outside of it as long as all of the revenue earned is being filtered back into our mission. So really, from that point, it just becomes a question of does the effort put into selling B2B take away from our effort in achieving our mission? Or would the net benefit from a financial perspective feed enough revenue back in that actually allows us to hire more or purchase more vehicles and expand our impact that way? What kind of leaders do you think would be most successful at launching a social enterprise? Because I feel like you have to have your nonprofit brain, but also your business owner brain, like your founder brain. So I wonder what you think about that? Yeah, I think there could be anyone with any drive that sees an opportunity and wants to learn as they go. Because I think in my experience, at least, like I don't have a business background. My background is in agriculture and geography, studying local boot systems, and starting business whatsoever. But I also feel like there's this mystique, there's this impression that there's some esoteric knowledge out there about business that probably would prevent people from even trying in the first place. Where if you just stick to the fundamentals when you're starting, that's enough to get you going. And of course, over time, you can layer in layer, but your knowledge about things, they have this forecasting work, how can they make it more accurate? There's all sorts of layers that you can add later on, but fundamental principles are all there. So like sell the thing for more than you paid to do it. I feel like another concern of nonprofit leaders may be like, oh, I don't want to cannibalize my donors. I don't want to. want them to only start purchasing my service rather than donating. Have you seen that happen or how do those two audiences interact? Yeah, I guess like in my experience, the way I view things is that selling a product from a non-profit perspective to somebody with the means to make other decisions around food just to go to the grocery store or go to the farmer's market and buy their food through those avenues. They have a choice to go anywhere they want because they have the financial needs to do so. When they choose to shop with us, there's that demonstration of values. They want to support us through their purchase. So you know, right then and there, if they're doing that act that they likely have some interest in your mission, envision if they have vision and mission, that's an opportunity to speak to them about it and it could be an opportunity for you down the line in some very natural way just to have conversations about the fact that yes, we are a non-profit and yes, we are running a social enterprise. At the same time, our social enterprises are self-sustaining. We're selling food at a cost and at retail and it costs money to do that. The revenue earned doesn't offset all of our costs. So we need private foundations. We need private donors. We need government grants to support our work ongoing and you can start to have those conversations. So it's really just an avenue in for a new audience that may not have known of your work otherwise may not have been interested in, but you're there now and they've been marketed to. They've interacted as you're chance to talking about the rest of your work. Interesting. So your social enterprise isn't fully fund. It's operation. That's right. Social enterprise is that we run and none of them offset all of their operating costs. Like our wholesale program, for instance, probably about a third of our operating costs are covered through the margin we have on a sale of food. So we do need private donations. We do need foundation funds, United Way funds, government grants to help which capital investments is a fact. Picture in kind donations. Tons of volunteerism as well. Of course, never want to get that. And that goes for each one of our programs to the varying degrees they offset their costs somewhat. And what is the reaction of donors? Like are they excited to give to a social enterprise? What did they say to you? Yeah, I think it creates an audience for us that maybe we wouldn't have had otherwise. So one example would be being invited to a business networking meeting because the person who's interacted with you is really enthralled by the fact that you're running social enterprises. And it really speaks to them and the way they think social outcomes can happen or environment to lock them. So now that you're at the table and you have an opportunity to speak to them about the work that you do using language that they would use in talking about their own businesses whether they're accountants or small media enterprise business owners all that kind of thing. He's speak the same language. And I think they always find it neat that you're achieving social outcomes using the same principles that they use to achieve their financial outcomes. One of my clients also runs the social enterprise. I think you're in touch with them. They're north of your Carbis food bay. And one of their donors was like so excited about what they were doing because like at least you're trying to be self-sustaining right so you're not only relying on like the whims of government or donors but you have a plan in place to fill that need. Yeah exactly. And I think it speaks to other funders as well. At the same time like you you don't want to oversell the idea it's part of the story right. We wouldn't say to a funder we're running a social enterprise and we need this grant because if we get it we're going to be completely self-sustaining two years from now because we probably won't be but what we can say is there might be others out there who are able to achieve that but my experience we haven't but you could say to them if we have the startup funds hope you to achieve these outcomes that are in alignment with what you're trying to achieve. And two years from now will also be in a position where we're covering some of our operating costs and that reduces our reliance on external funding. It doesn't eliminate the the minds on external funding but it does reduce it. And there are ways that others could run social enterprises whether they're non-profit or B-corp's where they can charge higher rates for the service or product that they have and they completely self-sustaining for these plenty of examples out there if that but I think where we're coming from these in my experience working with the seed is we're trying to sell things for much lower than they're traditionally sold for. We're trying to beat retail prices by 30 to 50%. Now we're never going to be self-sustaining for doing that right? Yeah you can't really break even off the backs of people experiencing poverty if that's your target audience that you're looking to help. Could you tell us a little bit about your total cost? How much is actually coming in and the number of people that you're helping? Yeah in our first year we moved about $60,000 of food and that felt like a pretty good outcome for a wall-scale project about nature and if you fast forward now and years later after having started that program in 2024 we moved to about $800,000 in purchase and result food and $2.2 million in donated food. But again there was that nine-year period of development that led from that starting point to where we are now and then those are our big picture numbers for that wholesale program but we have 40 different partner agencies that are ordering the donated food for free online. We're packing it all up for them to come pick up from us. There's about 40 partners there throughout Wilk Wilk, Wellington and surrounding area and then we have about 45 different schools that are purchasing for us as well. So those are all part of connective peace in terms of us moving large volumes out to people who are simply consuming it. Then we have our grocery program as well. So again we're selling food on a sliding scale just like our market that I described and that's having an impact on roughly 150 households in any given week and people are again using sliding scale but with this program all the donated food that's coming in we're assessing it for quality. We upload that information to the store as well for people select from. So one of those interesting things that you can do with social enterprises like basically do what you want from an income perspective if you're able to and we made the choice partway through the development of this program to make a true sliding scale so zero dollars up to the retail cost rather than simply our mated cost up to retail. I would have had a huge impact on people's ability to select what it is they want, participate on a weekly basis and really have dignified access to food through their own selection of what they want. So we have another of other different programs as well that are having that broad impact and I'm always mindful of the fact that like food insecurity is such a pervasive problem that when we're talking about these big numbers that we're achieving I always want to say and couch it in the fact that it's such a small percentage of what the need is out there. So in Kweilf Wellington right now the rate of food insecurity is 23% and the number of people that we're reaching through our program is a small percentage of that right. I use any platform that I have to talk about the root causes because I think if you get too tied up in programs and social enterprises and the great outcomes that you're achieving do you're all you can lose sight of the root causes. So I still talk about income-based solutions encouraging elected officials to look at increasing social assistance rates increasing living wages for employers that are able to do so anything that will give people more money or basic necessities. So the programs like ours don't necessarily need to exist in the first place. You know you're preaching to the choir here. Yeah absolutely. I still think what you have done is amazing and even though it's addressing the immediate need and it's more of a band-aid solution it's so huge for those hundreds of households. Yeah and that's something that we can't lose sight of either because I gave a demonstration of how we went from $60,000 with our wholesale program and year one to three million dollars of food whether it was paid or donated food and I think that's something to be proud of. It's a big accomplishment and when we compare that against the increase in the rate of food insecurity you can feel the scourge by that. When we're having discussions as a team I'm always like okay we have a sphere of influence here and there are people who are accessing a program they're benefiting from a program. We know their names they share their stories with us. We're always doing this work for them regardless of the fact that we can't reach everyone so let's keep doing this work for those people and let's try to scale up in a way that is mindful of our old health and wellbeing so we're not doing any scaling on the backs of ourselves. If we can do it well to it in terms of ensuring we maintain work by balance that scale a bit and we'll have more people coming into that circle to benefit. Thank you so much for being here today Tom. But people want to continue the conversation. How can they get in touch with you? So they can find me on LinkedIn just Tom Irmitage on LinkedIn they can find a seed in general with our tag on Facebook and Instagram they're both at C-QALF they can go to the C-QALP.CA as well and my emails listed on the C-QALP.CA if they want to find you personally. Nice thank you again for sharing all your knowledge. I know it's so inspiring to lot of nonprofits where try and do things differently and I love that you touch on the systemic need as well like we can't just focus on what we're doing well but also on the Gavsett nonprofit has failed to fill just yet. For sure yeah it is an undertaking and I think there's things that if a nonprofit is considering starting a social enterprise there would be things to consider before doing that because I think it's easy enough to think oh we have this service and we can charge for it but there's a bunch of considerations that you should consider before leaping into that so if you're worried about your bottom line if you're worried about the longevity of your program can you look at your fund development strategy first? Are you doing everything you can there to sustain a program? Are you considering your current participants within the program as well and how it might impact their ability to access your programs if you were to start charging for your service? There's a whole host of questions that I think you should ask yourself before diving in if you're already learning a program and considering a switch over. You're not enrich yourself off the back when people experiencing poverty what we're saying at a minimum. At a minimum. Thank you, Tom. and thank you everyone for tuning into another episode of the small non-profit. I will definitely put all those links in the show notes at Tom mentioned and I will also link to another episode where we talked about social enterprise. So if that's something that you're interested in doing, let us know. We would love to hear how you apply these tips. And as always, if you want to watch this episode on YouTube and see our lovely faces, you can do so there. But until next time, that's it for today. Bye for now. Thank you for listening to another episode of the small non-profit. If you want to continue the conversation, feel free to connect with our guests directly or find Yon LinkedIn. Let's keep moving money to mission and prioritizing our well-being. Bye for now.