Nonprofit leaders and board members face a familiar challenge: securing funding in today’s competitive environment feels like an uphill battle. To achieve long-term sustainability and maximize your organization’s impact, innovative strategies that go beyond traditional fundraising are essential.
For organizations considering social enterprise development as a way to bring in new revenue while supporting their mission and objectives, business acquisition can be a powerful solution. This article explores the benefits of this new approach and outlines a clear, six-step process as a pathway to successful acquisition for nonprofits.
The Case for Consideration
While most nonprofits pursue the startup pathway when considering social enterprise development, purchasing an existing business and transforming it into a social enterprise can often present a more efficient and viable alternative.
Ask yourself: “What type of business would my organization ideally own or operate?” Many social enterprises run by nonprofits resemble existing businesses—cafes, grocery stores, laundromats, and more. If your idea aligns with a traditional business model or if you’re looking to create an additional revenue stream, consider buying a business instead of starting from scratch.
Acquisition vs. Startup: Weighing the Pros
Starting from scratch is risky and requires significant planning, resources, and time to become profitable. Acquiring an established business reduces these risks because you inherit an existing customer base, revenue streams, and operational systems.
Challenges and Considerations
While acquisition offers significant benefits, it also presents challenges. Nonprofits need to secure sufficient upfront capital, manage cultural integration, and dedicate time to due diligence. However, careful planning, thorough assessment, and strategic investment can mitigate these challenges.
Business acquisition as a pathway to social enterprise is a complex but rewarding strategy that requires long-term commitment, dedicated resources, and a willingness to adapt. Legal and governance considerations are crucial, as social enterprises can take various forms depending on regional regulations. Understanding these nuances will help organizations navigate the acquisition process more effectively.
The Six-Step Acquisition Process
Acquiring an existing enterprise might seem daunting, but this six-step process from our Thriving Non-Profits Learning Lab course on social enterprise acquisition and accompanying workbook simplifies this complex journey into a manageable and achievable opportunity:
- Plan: Planning is a critical first step, where nonprofits lay the groundwork for a successful business acquisition and transition. In this step, organizations create a detailed roadmap outlining their acquisition goals, ensuring alignment with their mission, objectives, and values. It involves evaluating internal capacity, securing buy-in from the Board and staff, and conducting a thorough risk assessment to anticipate potential challenges.
Through careful planning, nonprofits can set clear objectives and strategies, ensuring that the acquisition supports both financial resilience and their mission and objectives. Thoughtful preparation in this step helps minimize risks and positions the organization and the acquisition for long-term success.
- Search: Once planning is complete, nonprofits actively seek out the right business to purchase. During this phase, organizations focus on identifying potential businesses that align with their mission, objectives, and values.
This involves setting clear criteria for the type of business they want to acquire, and includes conducting market research, networking with business brokers, and leveraging community connections to find opportunities.
- Assess: Onceapotential business has been identified, a thorough assessment is required to ensure the acquired enterprise not only complements the nonprofit’s mission but also has the potential to grow sustainably and generate revenue.
This step involves performing due diligence, including reviewing financial documents, assessing the business’s operational health, and understanding its market position. It’s important to identify any risks or red flags and ensure the acquisition is a sound investment that will support both an organization’s financial resilience and desired community outcomes.
- Invest: When the assessment is complete, it’s time to invest. This means securing the necessary financial resources to make the purchase and transition the business.
This step involves exploring the right financing options, which may include loans, grants, or a mix of traditional and non-traditional funding sources. Creating a solid financial plan that covers both the purchase cost and the capital required for the business’s initial operation and growth is essential for ensuring the ability to not only acquire the business but also to sustain and scale it over time.
- Launch: Once the purchase is completed, the nonprofit officially takes ownership of the acquired business and begins its operations as a social enterprise. This phase focuses on executing a well-prepared transition plan, ensuring that both the organization and business staff are aligned with the new goals and mission. This step is critical for ensuring a smooth transition, building momentum, and positioning the enterprise for early success, growth, and long-term sustainability.
- Sustain: The final step in the acquisition process is about ensuring the long-term success and growth of the newly acquired social enterprise. In this step, nonprofits focus on refining operations, monitoring financial performance, and aligning the business with their mission and objectives.
It involves setting up systems to track revenue, improve efficiency, and measure impact. This step also emphasizes adapting to market changes and leveraging the business’s success to strengthen the organization’s overall financial stability and ability to support its mission and objectives. With sustainable growth, nonprofits can ensure that their social enterprise continues to generate revenue and expand its impact over time.
Social Enterprise Acquisition for Your Organization
If you’re interested in learning more about whether this approach might work for your nonprofit’s social enterprise goals, our online course on business acquisition for nonprofits is a great place to start. The course has been designed specifically for organizations that are interested in exploring business acquisition as a pathway to social enterprise development.
Quick course Highlights:
- FREE First Module: Try the first module for FREE to determine if business acquisition is the right fit for your nonprofit’s capacity, mission, and objectives.
- Step-by-Step Guidance: Get a clear roadmap for business acquisition from planning to sustaining your social enterprise.
- Practical Tools: Utilize the accompanying workbook, checklists, exercises, and templates to facilitate each stage of the acquisition process.
- Real-World Examples: Learn from case studies and examples of successful social enterprise acquisitions.
- Expert Guidance: Includes three months of FREE access to the Thriving Non-Profits Community, where you can connect with peers, share resources, and get ongoing support from program coaches and experts.
Embrace new strategies to create financial sustainability and increased impact with Thriving Non-Profits Learning Lab courses. Start your journey today and get access to the knowledge, tools, and support you need to create the impact you want to see. Visit Thriving Non-Profits Learning Lab to learn more.
The original version of this article appeared on the Thriving Non-Profits website.
