September 22, 2020

Case Study: A Social Entrepreneur’s Quandary: Nonprofit or For-Profit?

By 2004, his vision had broadened and he started an organization, Student Movement for Real Change, to encourage entrepreneurship in third world communities. Through this organization, he sent students to live with local families, hunt for water sources, farm alongside villagers and absorb the day-to-day nuances of life in a developing country with the goal of building social businesses along with the local residents.

Over the last two years, Mr. Garlick and his team have produced some 50 such “microenterprises” — including one that finances water projects in Kenya, one that sells charcoal and stoves in Rwanda and a cocoa nursery in Ghana.

THE CHALLENGE By 2009, Mr. Garlick’s social enterprise, renamed ThinkImpact, was raising about $400,000 a year to support the cause. But along with running the enterprise, it had to raise funds, monitor and evaluate programs, and provide transparency. Its employees were paid below-market wages, the hours seemed endless and the organization would soon be missing payrolls.

“Nothing about that scenario was sustainable,” Mr. Garlick said. “And scale depended solely on fund-raising ability.” He was convinced there had to be a better way.

THE BACKGROUND In 2007, Mr. Garlick started taking a salary. He was 23, out of school and working full time for his organization — mostly to find supporters for the cause. The workload grew and he hired another recent graduate to run daily operations.

“I thought that was going to make everything easier, but it didn’t,” said Mr. Garlick, expressing a common frustration for nonprofits: the endless pressure to raise funds takes away from time spent doing the organization’s work. “Many of the aspirational young nonprofit employees become beggars. They are seeking a way out of a tortuous financial reality where they are building the plane while flying it.”

Adding to the pressure was the way Mr. Garlick and his team were encouraged to raise funds. They were advised not to “place all their eggs in one basket,” by relying on a sole funder or a single government agency. Instead, ThinkImpact diversified its reach and sought donations in smaller amounts.

Eventually, Mr. Garlick realized that trying to please hundreds of stakeholders was a rather chaotic way to raise money and run a business. “In actual fact, unless you’re running for president, or have a team that exists to raise small dollars, you can’t meet payroll that way,” he said. “People give $20 and think they own your decision-making.”

On the ground, ThinkImpact broadened its reach. More than 100 young people worked with the organization in Africa, primarily in South Africa and Kenya, where they established a strong presence. In addition to developing a curriculum for social enterprise educational experiences, they were adapting to local needs, providing health workshops that reached hundreds of villages in Kenya, and building more than 50 homegrown development projects with the participation of the local community.

But in 2010, after attending a weeklong workshop where he met fellow social entrepreneurs and investors, Mr. Garlick started asking serious questions about his own business model. The questions included: What is our specialty? What value do we produce in people’s lives? How big can we get? How do we arrange for sufficient financing to let us focus on our real work?

THE OPTIONS After missing a couple of payrolls in 2010, Mr. Garlick concluded he had three options.

Option 1: Remain a nonprofit. With contracts from two universities for about $50,000 and funds from donations, grants and foundations expected to bring in $25,000 to $100,000, Mr. Garlick felt constricted. To really grow, he estimated that he would need $200,000 to $250,000 more. But raising that money would be exceedingly difficult using traditional methods and would keep the company almost endlessly locked into fund-raising mode.

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Shortcuts: Fears, and Opportunities, On the Road to Retirement

On one hand, I’ve been hearing that life’s “second act” or “encore phase” (“golden years” is somewhat tarnished), is supposed to be a time of giving back to the community, of pursuing one’s passion — whether it be opening a bakery, building water projects in Africa or transforming from couch potato to marathoner.

On the flip side, there are endless stories about those 55 and older who are worried less about hang-gliding than about just hanging on. These are the people who don’t think they’ll ever have enough to retire, who fear the fraying of the twin safety nets of Social Security and Medicare, who have lost their jobs and worry they may never be hired again.

“There’s definitely a longevity paradox,” said Marc Freedman, author of “The Big Shift: Navigating the New Stage Beyond Midlife,” (PublicAffairs, 2011). “The doctor tells you to exercise and eat well, while the editorial pages tell of a long gray wave of greedy geezers who won’t move aside to let younger workers in.”

This year, the first of the Americans born from 1946 to 1964 turn 65. As a 2010 Pew Research Center study of this group put it, “Every day for the next 19 years, 10,000 more will cross that threshold.” By 2030, at least 18 percent of the population of the United States will be 65 or over, and the numbers are much higher in some European and Asian countries.

It is important to remember, Mr. Freedman said, that the concept of leisurely retirement years is a relatively new one, beginning around the 1950s and 1960s.

“Before that, people just worked until they dropped dead,” he said. “As people lived longer, there began an awkward phase that turned into the golden years and became a destination.”

Thus began retirement communities like Leisure World and travel programs like Elderhostel for older people, now renamed Road Scholar. Financial services firms, housing developers and others started marketing the idea of a “new American aristocrat — now leisure wasn’t just for the wealthy but for the middle class and even working class,” said Mr. Freedman, who is also the founder of Civic Ventures, a research organization that looks at “boomers, work and social purpose.”

The trouble is, those post-work years of playing golf and touring the country in a recreational vehicle weren’t supposed to last for 30 years. And just as the notion of golden years “made a virtue out of necessity, we need to do that again,” Mr. Freedman said, by starting a national debate on what this phase of life was going to look and be like.

There are also two other conflicting narratives, said Ellen Goodman, a retired columnist for The Boston Globe who wrote for years about social change and now sits on the board of Civic Ventures.

“It’s that those over 65 should retire and open up channels for young people, and that we should keep working longer so as not to be a drain on Social Security,” Ms. Goodman, 70, said.

Laura L. Carstensen, a professor of psychology at Stanford and founding director of the Stanford Center on Longevity, agreed.

“There is a current climate that you can’t win for losing: if you work, it’s bad for young people and if you don’t work, it’s bad for young people,” Professor Carstensen said.

She said she was also concerned that the new model of aging — of being vigorous and engaged and doing for others — “denies the reality of aging.”

“If there’s one thing great about getting older, there are certain things that are liberating,” Professor Carstensen said. Do we really want to put more societal pressure on people as they grow older to look and act ever younger, she asked.

One thing we need to do, Mr. Freedman said, is leave behind the notion of heroic reinvention after age 65 and instead focus on much more realistic solutions. And that includes developing better ways to finance the transition.

Mr. Freedman advocates thinking about ways to publicly and privately reallocate resources to create new ways that those over 65 can not only survive but successfully contribute to society without creating generational conflict.

“A lot of smart people are hitting this stage in life and are starting to think and write about it,” he said.


This article has been revised to reflect the following correction:

Correction: June 3, 2011

An earlier version of this article misstated the title of a book by Marc Freedman. It is  “The Big Shift: Navigating the New Stage Beyond Midlife,” not “The Big Shift: Navigating the New Strategies Beyond Midlife.”

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