Jay Hair, GreaterGood.com
| Brief
Biography |
Tom Lattimore, Local Initiatives Support Corporation
| Brief
Biography |
Susan Alexander Bond, Moderator
| Brief
Biography |
To what extent do non-profits partner with for profit entities as their peril?
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Non-profits don't always know what value they bring to partnership (financial, visibility, NP advantage)
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Non-profits need to have a clearly defined role in partnership and to understand their commitment (money and human resources)
How can they best take advantage of such partnerships while still honoring their initial missions?
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In community development, partnerships related to the non-profit's mission is more straightforward.
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The board needs to understand that not all partnerships will be consistent with their mission but don't let opportunities slip by.
Tom Lattimore--
Local Initiatives Support Corp (LISC) deals with community development world
- Why partner with for profits?
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There is a need for additional and specific expertise
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Access to capital
- Joint financial partners can bring existing lines of credit, knowledge of the market, reputation, debt or equity expertise in project management, construction
- Non-profits don't always clearly know what they are bringing to the table, nor do they know the value of what they bring.
- Non-profit's political good will at the table as part of the partnership could help expedite permits.
- How do you measure non-profits value in the partnership deal?
See if the non-profit brings equity or equity equivalents in the development of the deal.
- Value non-profits equity at or near what other investors would value.
- Define non-profit's role within partnerships
Clearly define time, energy, resources, political capital.
Understood your commitment (i.e. time, money, etc) and price it accordingly.
- What do you look for in for-profit partners?
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Know their financial statements
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Do they have adequate net worth?
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Talk to their customers and investors
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Look at their other projects (i.e. development)
- Does the non-profit trust that potential partner?
This may be intangible but important nonetheless.
- Use the return on investment to further your mission.
Example:
Sout East Effective Development developed 110,000 square feet shopping center in Rainier Valley.
What SEED brought:
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SEED had political good will
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Site control of land
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Able to get below market financing
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HUD grant
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Able to speed up permitting
SEED got preferred return in the deal - 39% yield over 2 years.
Doubled the initial equity investment.
Jay Hair--
GreaterGood.com - shopping villages over the internet
Former CEO of National Wildlife Federation
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raised $1.3 billion, much through partnerships
- Partnerships are not a new idea (Girl Scouts selling cookies for decades)
- There is a distinction between "non-profit" meaning "bankrupt" and not-for-profit meaning an organization committed to nonprofit mission.
Leaders, boards, and staff must understand the distinction because it is their responsibility to have the organization be profitable / sustainable.
4 Principles for having a profitable / sustainable non-for-profit:
- Mission based - constituency driven
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Integration v. isolation of program function
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Program functions need to be integrated
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Helps to differentiate brand or organization
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Balancing recognizing individual supporters and institutional support (foundations, private sector partners)
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A creative internet strategy is essential
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The internet provides the single greatest opportunity to create communities, efficacy, & speed
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Real-time communication
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Content
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Community
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Commerce (i.e. online donations)
Potential for cause-related marketing
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National Wildlife Federation decided not to take money from the corporate world to support their advocacy.
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They would take corporate money for education
Develop guidelines for partnerships!
- National Wildlife Federation had the 2nd affinity credit card in the U.S.
- Ranger Rick, a magazine - conservation/education:
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joined with corporate partners
- certified preschool education program
- used existing product (magazine)
- Leveraged it into a bigger partnership, then went to Dannon yogurt and partnered.
What Jay has learned:
- Competition - there are 650,000 + non-profits
Must do competitor analysis
- Are partnerships and the partner concept compatible with the particular non-profit?
- Is the board on board?
- What is the impact of the partnership on non-profit's resources (money or human)
- Develop sophisticated business planning process
- What is reason for doing a partnership?
For visibility or money
- What are options for investment capital?
- Have a nondisclosure agreement ready for when you talk to potential partners - so they don't take your idea.
- Have a license agreement saying what you are agreeing to allow your partner to do, exclusivity, time period, exit clause
- Quality control:
It is the non-profit's name/trademark.
Be sure to agree to terms of agreement.
Questions:
How does a non-profit without great name recognition approach a potential partner?
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What is the organization's target?
- Is there a specific niche, a local celebrity who can help? Look for high profile partners.
- Be sure the organization is in good shape.
- Understand the organization's value.
Please describe shopping villages: (Jay)
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types aimed at 3 different age groups.
- At no expense to non-profit
- GreaterGood hosts shopping village
- Non-profit receives 50% of referral fees or other profits.
What is the need for mission congruency?
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(Tom) In community development it is more straightforward.
i.e. project either delivers affordable housing or employment opportunities not questionable when a for-profit sets up a non-profit
or takes advantage
- Pressure in community development is not whether to enter into a deal, but how the deal is transacted.
- (Jay) The Board needs to understand that not all partnerships are going to be in line with the mission; you want the project to be consistent in general, but don't let opportunities slip by.
- (Tom) One can also consider setting up a for-profit subsidiary.
What kinds of board development should happen to help them decide if a non-profit should go into partnership?
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(Tom) Have a business plan, make sure the board is involved and understands profit centers / cost centers
- (Jay) Use board training and development handbooks
- Consultants can talk to the board to help them understand.
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