Nonprofit organizations play an integral role in our lives and infuse our world with a conscience. But their impact on our well-being notwithstanding, they also comprise a significant economic force, providing services and products, and achieving success on the same playing field as those in the private sector. In fact, according to Statistics Canada, economic activity in the nonprofit sector, as measured by gross domestic product (GDP), outpaced that of the economy as a whole between 1997 and 2003. But with limited resources, staff and finances, can nonprofits really compete? Or will their respective challenges impede their ability to swing their bats with the big leagues, relegating them to the sidelines?

In the big leagues

If there’s anyone who knows about playing with the “Big Boys” it’s Janice Abbott, CEO of ATIRA Property Management Inc. Based in Vancouver, the social enterprise – in operation since 2002 – donates all of its profits to Atira Woman’s Resource Society, an organization dedicated to helping woman and children impacted by violence. On its website, the social enterprise sets its sights high: “ATIRA Property Management intends to be at the forefront of Property Management Development”. And why not? With Abbott’s unrelenting determination and a tirelessly committed team, why shouldn’t ATIRA compete – and succeed – in a world dominated by the private sector? “Nonprofits should have as much right to compete in the for-profit world as anyone else. That’s what capitalism is all about,” states Abbott matter-of-factly.

But what about restrictive resources and thin wallets? As long as you’re ready to work – and work hard – those factors shouldn’t get in the way, she says. “I assume there are lots of small businesses that start themselves up with limited financial resources, so I’m not sure how it’s any different.” Consultant Rob Ferguson of Knowledge Marketing Group, echoes her sentiment. “Some nonprofits demonstrate that they can compete very nicely against for-profits. It comes down to internal capabilities, imagination, creativity, willingness, political willpower, and perhaps a healthy dose of desperation.” Take the National Geographic Society and the lines of business they’ve created to support and extend their mission, he offers. Their outreach and brand building was actually more sophisticated than those of many for-profits. “You’d be hard pressed to know it’s a nonprofit organization.”

How hungry are you?

In order to compete in the private market, says Abbott, a nonprofit has to set itself up like any other small business and only then will it have the same opportunities and challenges. “It’s absolutely not easy,” says Abbott, “and in fact it’s damn hard; you have to have the appetite to enter the private market.” 

Some enter that elusive market on a much smaller scale and with different motivations, but their hunger is just as strong. The YMCA of Edmonton, for example, provides a range of similar services as their for-profit counterparts. But, rather than competing, the Y sees its position as fulfilling a civic duty. “I really believe people should have options in every community so that there shouldn’t just be not-for-profit or just for-profit,” explains president and CEO, Franco Savoia. Choice benefits everyone and the community is strengthened in the process.

Ferguson knows this attitude well. “Many nonprofits are quick to reject the notion that a social service sector organization should ‘compete’ in the first place, that the idea of competing against for-profit organizations will be hard to digest.” But Savoia stresses that at the end of the day it isn’t about how many people you get on the membership list. “The question is, did we change people’s lives; are they healthier in mind, body and soul?”

Similarly, with the goal of providing certified fair trade, fairly traded, and organic cotton clothing at fair prices, while advancing the goals of social justice, the Fair Trade Clothing Co-op opened its Toronto doors in 2006. Kate Sage, worker member and productions manager is unequivocal about the co-op’s decision to enter the private sector. “I definitely think it is worth it. We exist to provide a different example, to show that business can exist without a profit motive, without that goal being the bottom line.” After all, the co-op is not there to help itself, she explains. “We want to help the people who manufacture our clothing so they can have a better standard of living.”

The price of doing business

While the goal is certainly laudable, the co-op can’t escape the many challenges it faces in the world of private enterprise. Competitors such as American Apparel, Ten Thousand Villages [another nonprofit], and even various independent t-shirt vendors keep them on their toes. “It’s very hard,” admits Sage. “You can’t deny that money is a big issue, especially for us because we’re smaller and we have to buy smaller amounts and our costs are higher.” And though the profit motive may not be their raison d’être, money certainly helps them pursue their social mission – and their business. Bottom line, Sage explains, “until people are willing to pay more for better clothing, it’s going to be a challenge.”

Speaking of challenges, Abbott has a few of her own. If someone sets up a small business that doesn’t succeed, she explains, they can declare bankruptcy or start another venture. While those people will suffer a personal setback, the risks for Abbott are much more profound. “If the property management company fails, I have dragged down an entire organization that provides services to 7,000 women and children every year,” she states. With those potential consequences always weighing heavily on her mind, Abbott works even harder than most. And, she stresses, it is the hard work – and not some special competitive advantage of being a nonprofit – that has led to ATIRA’s success. “We’re competing in the private market just like everyone else. If you think you’re going to attract business simply because you’re a nonprofit, that’s, generally speaking, a mistake.”

But it can’t hurt…

Generally speaking that would be true. But for some, a unique social mission has, in fact, been advantageous. There are approximately 22,000 gym members at the four YMCA branches in Edmonton, and while 85% of revenues are derived from membership fees, about one in five members are assisted with their fees. Meanwhile, $100,000 a year is spent on promoting the YMCA. “We primarily depend on word of mouth,” states Savoia. That said, one can’t help but wonder how the Y continues to stay afloat especially in light of the private sector’s ever-growing offerings that rival its own. Without financial viability the Y would go out of business, Savoia admits.

The answer lies in its uniqueness. People come to the Y for very different reasons than those who go elsewhere. “They want to be part of a larger community,” says Savoia. With its family-friendly atmosphere and acceptance of anyone, regardless of economic status, the YMCA has carved out a niche all its own. And anyone in business knows that finding and fulfilling an underserved niche is half the battle. “Our challenge is to stay close to the people we’re serving and to make sure we’re giving them what they want. If we do, we will do well.” Proper management, not competition, he stresses, is what determines success. After all, even for-profits will fail if they are not managed properly or don’t fulfill the needs of their customers.

A similar approach can be found at the social enterprise run by Eva’s Phoenix, a transitional housing and training facility with a mission of delivering housing and employment-related opportunities for homeless and at-risk youth. Since 2002, the venture has been providing youth with a hands-on education in graphic communications while offering commercial print services to the public. With 72 customers in 2006, and 24 youth expected to take part in the course this year, the Printshop has began to carve a niche for itself in small format printing.

Social causes mean business too

Manager Andrew Macdonald acknowledges the social enterprise faces some challenges typical of a young business, such as lack of awareness and convincing prospective customers of the quality in their work. That said, Macdonald credits the mission of the social enterprise – its social cause – as its significant selling point. “It’s definitely a benefit,” he admits. “People say, ‘if I can get the same flyer for a comparable price and I know I’m making a contribution to this agency and this cause, then it’s almost a no-brainer’.”

Moreover, since the enterprise is young and thrives in a very small market, Macdonald sees it inhabiting less of a competitive model and more of a cooperative one. But as Eva’s Phoenix moves forward and contemplates its next steps – such as creating a storefront and providing photocopiers – Macdonald is acutely aware of how their perception and approach may have to evolve. “We would become closer to that model and be perceived more as competition so perhaps if asked again in five years, I may have a different response.” Perhaps, indeed.

Elisa Birnbaum is a freelance print and broadcast journalist living in Toronto.