Sandra Dickinson

(Dear Ivan, this is it -- "from the top")

SElearninggames creates a Web2.0 space for social entrepreneurs to make an elearning game together that solves the mystery of nonprofit earned income venture profitability.

Nonprofit Earned Income Ventures: The Problem

Earned income venturing is a strategy for nonprofit sustainability. A significant, and increasing, majority (65%) of nonprofit social entrepreneurs in the US are operating (or wish to operate) an earned income venture. An earned income venture is a business activity operated by a nonprofit for the purpose of making some of its own money to support its social mission.

The problem is: most earned income ventures do not fulfill their purpose. Less than half of ventures are profitable. That means, most ventures do not make more money than it costs to operate the venture. Then, there is no money left over to contribute to the support of the social mission. Many ventures are not even self-sustaining. That means, many ventures do not even make an amount of money equal to the cost of operation. Then, the nonprofit must continually fundraise to subsidize the venture.

This problem matters to the nonprofit sector as a whole because more and more nonprofits are starting up ventures and pursuing earned income as a sustainability strategy. The promise is great. The problem is worth solving.

SElearninggames: The Solution

SElearninggames believes that – together -- nonprofit social entrepreneurs themselves can solve the problem of earned income venture profitability. Nonprofit social entrepreneurs have built up a vast reservoir of collective intelligence grounded in the past 10 years of collective experience. We just don’t yet know what we know.

SElearningames believes that we can use gaming, learning, and Web2.0 technologies to harness our collective intelligence. We can use these tools to make an elearning game together. The process of making the game together is a way for us to discover and apply the strategic meta-pattern solutions to our common profitability problems.

Making-the-game-together Game Goals

1. Discover the patterns of our common questions and our common answers
2. Apply what we learn in the game to our-real world ventures 3.
3. Increase individual nonprofit earned income venture profitability

Pattern Premise

Patterns of Commonality:

Emerge from sharing the real-life questions each one of us faces day-to-day sharing the answers we have come up with.

We discover:

• What questions and answers do profitable ventures have in common with each other?
• What questions and answers do unprofitable ventures have in common with each other?
• What questions and answers do profitable and unprofitable ventures have in common?

Patterns of Relationship:

Emerge from patterns of commonality

We discover:

• Solutions to the problem that have proven effective over and over again
• When most of us do “x”; then, most of the time – “y” happens

Application:

• When my venture matches those other ventures on key elements of commonality
• If I do “x”; then, I can expect – “y” will probably happen

Threaded example

to illustrate how the pattern premises in this game might play out

High-level patterns observed (gleaned from research reports, survey results, individual case studies, anecdote, and 10 years personal professional experience)

Highest level patterns observed, as mentioned:

1. a majority of nonprofits operate or wish to operate an earned income venture
2. most earned income ventures are not profitable.

Next level patterns:

1. Nonprofit ventures balance both money and mission goals (double bottomline):

• Money goals (indirectly serving mission, by contributing financial support)
• Mission goals (directly serving mission, by contributing to furtherance of the nonprofit’s exempt purpose)

1. Common Venture Type:

• employment/job training/job placement for nonprofit’s client population

1. Common Venture Business Model: two revenue streams

• 3d party payer revenues
• direct sales revenues

1. nonprofit makes some of its own money to support its social mission
2. decrease dependence upon traditional nonprofit sources of revenue, i.e., grants and contributions
3. increase independence and control over revenues: earned income revenue is completely “unrestricted”: nonprofit can use the money it makes from its venture in any area where the organization needs it most (especially those areas which grants often won’t support, such as administrative overhead or outcomes evaluation)
4. diversify revenue streams to improve long-term nonprofit organization sustainability
5. Money Bottomline goal: make more money than it costs to operate the venture, so you have money left over to accomplish the above goals

1. venture employs the hard-to-employ client population the nonprofit serves (homeless, recovering substance abusers, living with HIV/AIDS, physically/mentally/emotionally-challenged…)
2. venture provides specialized on-the-job training for the client population the nonprofit serves
3. surround client employees/trainees with support services (practice coming to work on time every day; crisis intervention/prevention…)
4. Mission bottomline goal: improve independence and self-esteem for nonprofit client population

1. 3d party employer pays for venture services that benefit both the employer and the nonprofit’s client population
2. employers pay fee for job training/recruitment/placement of qualified employees
3. sales of venture products/services to commercial market customers (the venture market may be in any industry: bakery, bookstore, landscape services, doggie day care…)

1. social costs of doing business
2. ventures in services industries predominate (40-74%)
3. 40% spin off the venture into a for-profit subsidiary controlled by the nonprofit parent

Some things we don’t yet know that we know:

These are the deeper, multi-dimensional, level of pattern recognition things that Selearninggames seeks to address.

1. Relationship between social costs of doing business and profitability

• Prevalent assumption: social costs of doing business are higher for a nonprofit earned income venture
• Concomitant assumption: profits are lower

1. Relationship between operating in a service industry and being profitable

• some service ventures are profitable; others are not b.
• What’s the underlying key pattern of commonality and relationship to profitability?

1. Relationship between operating as a spin-off for-profit sub and being profitable

• again, some spun-off ventures are, some are not
• What’s the underlying key pattern of commonality and relationship to profitability?

Hypothetically, we may discover:

Social cost of doing business:

• some or all of the cost of the wrap around crisis intervention/prevention services I provide can be accounted for as “employee benefits;”
• if I account for these costs as indirect costs covered by insurance, I can be more profitable

Service venture:

• otherwise hard-to-employ persons are capable of managing labor time (labor time is the highest direct cost for a service business);
• if I delegate control over and reward my employees for optimally efficient use of labor time, I can be more profitable

Spin off venture:

• management of a for-profit subsidiary is free to make just-in-time, market-driven decisions;
• if I spin off my venture, it can be more profitable

Something else altogether

Sandra Dickinson

Thank you for your comments and questions, quixotic. This is the kind of feedback I was hoping to receive. I will edit my proposal based on your comments.

In the meantime, my definition:

An earned income venture is a business activity operated by a nonprofit for the purpose of making some of its own money to support its social mission.

Nonprofits who operate earned income ventures care about profitability because – when your venture is profitable -- you are making more money than it costs you to operate the venture. When your venture is profitable, you have money left over to contribute to the support of your mission. When the venture is not profitable, it’s not serving its purpose.

Here are some more elaborate definitions that ground the SElearninggames project (These definitions come from the lexicon provided by the Social Enterprise Alliance - the only membership organization dedicated to nonprofit earned income venturing.):

Earned Income: Payments received in direct exchange for a product, service or privilege. [Earned income for a nonprofit includes such elements as tuition and fees for service, commercial products or services, government contracts, consulting fees, membership dues (when dues purchase tangible benefits), sale of intellectual property, agreement to use the nonprofit’s identity, property rentals, etc. Earned income does not include such sources as corporate, foundation or government grants or subsidies, contributions from individuals, or in-kind donation of products or services.]

Earned Income Strategies: Attempts to capitalize on the earned income potential of a program or other organizational asset (property, intellectual capital, reputation, etc.) in order to cover part or all of the program’s costs or to offset a portion of the organization’s overall expenses.

Social Enterprise: An organization or venture that advances its social mission through entrepreneurial, earned income strategies.

Social Entrepreneurship: The art of persistently and creatively leveraging resources to capitalize upon marketplace opportunities in order to achieve sustainable social change.

As a founding SEA board member, I know how controversial definitions are in this arena. Definitions were controversial several years ago, and still are today. (You may have seen the article in the Spring issue of Stanford Social Innovation Review, calling for a more rigorous definition of social entrepreneurship.) So, you are right on when you ask me to clarify my definition.