Cover Story : Safety Line

For-profit ventures help nonprofits shore up the funding they need to maintain and expand their programs — even in stormy economic times.

June 2009 By Abny Santicola

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What do a nonprofit organization that helps low-income families and a used-car lot have in common? In most cases, not much.

But that’s not the case with Vehicles for Change, a community initiative founded in 1999 that repairs donated cars and sells them for $700 to low-income families in Maryland, Virginia and Washington, D.C.

In its first few years, the nonprofit would take newer or luxury donated vehicles to auction to try to turn a profit. But it quickly realized it wasn’t getting the best bang for its buck, and President Martin Schwartz and his team saw a unique opportunity to generate more funds. Though a little off the beaten nonprofit path, the solution was a no-brainer: set up a for-profit used-car lot.

In 2005, Vehicles for Change launched Freedom Wheels, where it sells donated vehicles (that are deemed to be in good shape) at market rate to benefit its programs. Today, Freedom Wheels accounts for $1.3 million a year, just less than 30 percent of Vehicles for Change’s total annual operating revenue. Without it, Schwartz says, the organization would no longer exist.

Vehicles for Change isn’t the only nonprofit crossing into for-profit territory in search of a way to supplement more traditional fundraising efforts. Far from it. Whether traditional fundraising methods aren’t filling the coffers the way they used to or an organization is expanding and needs a way to support new programs and services, more and more charitable organizations are carving out space within their missions for revenue-generating programs.

And in a time when dwindling government and foundation support, decreased corporate giving, and unsteady individual giving are causing budget shortfalls throughout the nonprofit sector, a fresh, viable revenue source isn’t something to turn your back on.

“Right now in our current economy, I think it’s imperative that charitable organizations look at other avenues to generate money,” Schwartz says. “And the beauty of it is that once you get the venture up and running, you can count on it on a regular basis — as opposed to fundraising, where in a poor economy like today, donations wither and foundation and government funds get tighter and tighter. If you’re only relying on those avenues for funding, you could be in big trouble.”

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