Giving Compass' Take:

• There is a growing trend for nonprofits to acquire for-profit organizations, which will strengthen the social and charitable sector. 

• What are the main differences between social enterprises, for-profit organizations, and nonprofits? 

• Read about the competitive advantage of social enterprises. 

Much has been written about mergers and acquisitions within the nonprofit and charitable sectors. Many have explored these mergers’ pros and cons, and there are toolkits to guide leaders who are considering whether to merge their organization with another nonprofit. However, with few exceptions, much less has been written about acquisitions of for-profits by nonprofits and charities. Given recent trends in demography, business turnover, and the movement for a more social enterprise, the time is ripe to consider this option. This sort of acquisition can open up much-needed opportunities for small businesses across North America to become enduring assets for our communities while strengthening the charitable sector.

Creating a social enterprise most often means launching a new business. Making that business profitable can be a long and challenging process—if it succeeds at all. In Canada, where both authors are based, around 85 percent of businesses survive their first year, but fully one in two will have failed within five years. Importantly, failure rates decline as businesses mature. So rather than go through the process of building a new business with the intent to generate profits to support a social mission, why not consider a pathway that leapfrogs the start-up stages? By acquiring established, operating businesses from owners looking for succession, nonprofits across North America can acquire cash-flow-positive businesses with established processes and pre-existing customers.

By supporting a vision of small businesses throughout our communities owned by and strengthening the non-profit sector, we can ensure that these businesses, often the heartbeat of main street, continue to strengthen their communities for decades to come.

Read the full article about social enterprises by Lars Boggild & Andrew Greer at Stanford Social Innovation Review.