This week's readings were like a nice recap of last year's Intro to Accounting course at Tepper. Income Statements, Balance Sheets, Cash Flow Statements...these are all certainly important for any enterprise, including social ventures. I know that under the guise 'Social Venture' as explained by Prof. Zak at the beginning of the semester, our ventures are expected to be financially sustainable, if not profitable. But in reality, the road to profitability for any venture can be long and windy and it is important to realize & remember that we do have the other options of seed funding, grants and donations available for at least the start-up phase (I say this from my biased perspective as a former Development Associate who's major task was to seek corporate sponsorships and grants for Echoing Green's fellowship grants and operations). Partnerships and in-kind donations are also oft-overlooked sources of capital and other assets for start-up social ventures.
A good example of how real-life social ventures seek to balance earned income and funding is GTECH Strategies, the local community development organization that was created by two Heinz alum a few years ago (Andrew Butcher and Chris Koch), which is registered as a 501(c)3 nonprofit and currently earns about 30% of its revenue. It is trying to ramp up its income-generating activities as well as its local individual donor base in order to depend less on grants. An organization's revenue mix not only effects long term financial sustainability but immediate cash flows as earned revenue, foundation grants and individual giving tend to follow different schedules and are vulnerable to different kinds of risk and market volatility. Just something to keep in mind when making forecasts and financial plans for social ventures that will, at some point, depend on more than earned income.
Interestingly, Echoing Green has seen a surge in applicants building social ventures with a nonprofit and for-profit 'hybrid' model that captures the best of both worlds (tax benefits and earned income). Find out more about this here from Echoing Green's Finance Director: http://www.davidblerner.com/david_b_lerner/2012/04/john-walker-of-echoing-green-on-seed-money-for-social-entrepreneurs.html
A good example of how real-life social ventures seek to balance earned income and funding is GTECH Strategies, the local community development organization that was created by two Heinz alum a few years ago (Andrew Butcher and Chris Koch), which is registered as a 501(c)3 nonprofit and currently earns about 30% of its revenue. It is trying to ramp up its income-generating activities as well as its local individual donor base in order to depend less on grants. An organization's revenue mix not only effects long term financial sustainability but immediate cash flows as earned revenue, foundation grants and individual giving tend to follow different schedules and are vulnerable to different kinds of risk and market volatility. Just something to keep in mind when making forecasts and financial plans for social ventures that will, at some point, depend on more than earned income.
Interestingly, Echoing Green has seen a surge in applicants building social ventures with a nonprofit and for-profit 'hybrid' model that captures the best of both worlds (tax benefits and earned income). Find out more about this here from Echoing Green's Finance Director: http://www.davidblerner.com/david_b_lerner/2012/04/john-walker-of-echoing-green-on-seed-money-for-social-entrepreneurs.html
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