Posted by Joy McBrien, Founder of Fair Anita on March 07, 2017
As a mission-based organization, one of the most common misconceptions is that we are a non-profit organization. Our incorporation as a for-profit, mission-based business was very intentional. We are proud of this, so I wanted to share a bit more about the details and thought process behind this decision.
Public Benefit Corporation: what it is and what it isn't.
In January 2015, we incorporated as one of the first Public Benefit Corporations (PBC) in the state of Minnesota. This means that, legally, we're an organization that's both for-profit and mission-driven (for-profit and for-good, as we like to say!). When we incorporated, we had to state our mission, and every year, we have to release an Annual Benefit Report which measures our success in achieving our mission over the last year. This is all public information and monitored by our state government. Look for our 2nd Annual Benefit Report, coming soon!
There are zero tax incentives to incorporate as a PBC. For us, there are two incentives:
1. Proving to our customers that our mission is what we're all about, even if we're bringing in revenue.
2. If we decide to take on investors in the future, there is a level of protection for our artisans. If future investors want us to be more profitable, they can say "you need to sell more," but not, "you can make more money by cutting costs to artisans." Since providing fair wages and sustainable jobs to women around the world is our mission, it's important to us to have this layer of legal protection.
Our mission is at the core of everything we do.
We started Fair Anita because of the need we saw for economic opportunity for women around the world. Providing jobs to women is what we do best. It's why we exist. I can say whole-heartedly that I wouldn't be running this business if it were just another jewelry company. We are driven to grow our business because selling more products means providing more fair trade jobs to women around the world. Pretty simple. If you want to know more of the backstory here, please watch our About Us video or listen to our podcast with the Social Entrepreneur.
One example of this is how we sell our products. We sell online, at pop-up shops/craft fairs, and to existing retailers. When we sell to existing retailers, our business hardly makes any money-- the boutiques and businesses that sell directly to you get that cut. If we were solely about profitability, we would either raise our prices significantly, or we would not sell to existing retailers. However, we exist to provide fair trade jobs to women, and the more products that sell, the more jobs we're able to provide. Therefore, existing retailers help us to achieve this mission by getting our products to new markets, and our affordable price points keep our customers coming back-- meaning our artisans are always busy making more product... and that's the goal!
We believe for-profit business can be more sustainable.
We love non-profit organizations. We really do. There are some organizations out there doing phenomenal work that we certainly admire. However, as someone who has worked at multiple nonprofit organizations, I have also seen the hardships that nonprofits face: the need to chase down grants in order to fulfill your mission.
I am a stubborn person. I also consider myself to be very efficient. I don't like doing unnecessary work, and I don't like spending my time doing things that I don't think I should have to do. I started to see a lot of this in the nonprofit world-- brilliant ideas, great intentions, and amazing people motivated to change the world... but then their actions would be stalled by the reality of needing funding before being able to achieve their mission. Instead of fully focusing on their mission, they'd need to spend their time chasing down grants, and occasionally changing their vision to match funders' requests. Or in some sad situations, programming stops altogether because a donor is no longer providing funding.
We are not a charity. We're not giving handouts to women around the world (well, we sometimes do, but it's certainly not the core of who we are). We aim to provide sustainable, well-paying jobs for women so they can pull themselves out of the cycle of poverty through financial security. By selling our products, we're able to easily achieve this mission. When we focus on creating sales channels in the US, we're achieving this mission. When we work with our artisan partners on design, we're achieving this mission. I'm lucky to say that we're able to fully-focus on this one single mission every day.
That being said, I also realize that this isn't an option for all organizations. Our business structure is such that we could easily be a non-profit or a for-profit. Not all mission-driven organizations have the option to make self-generated revenue their main source of income. While I'm certainly an advocate for all non-profit organizations to seek revenue-generating activities, I know that grants are a vital part of how many organizations operate.
The downsides, as we see them.
For the most part, we love our Public Benefit Corporation status. There are a few potential downsides that to share, just to keep in mind if you're thinking of starting a mission-based organization. First, as a for-profit organization, we can't offer tax-deductible donations or apply for grants. It's not a big deal to us, but it can be to others.
Second, our new incorporation status can be scary to potential investors, as it means we value our mission just as much as we value profitability. If an investor is just looking for a top-dollar payout, they might not be interested. While at Fair Anita we currently don't have any investors, we know that if we decide to pursue this in the future, we'll be looking for investors that want the double ROI (return on investment)-- for themselves and for their community.
Lastly, sometimes we get backlash for being a for-profit organization because we're not giving 100% of all revenue to artisans-- unfortunately, there are some people who feel that we're not being true to our mission. While I can see where they're coming from, it's just not a realistic expectation. I need to pay my incredible staff here in the US, and the margins we make on products allow us to continue purchasing from artisan partners around the world. I hope that this assumption that for-profit business means bad/unethical business will change as more mission-driven, for-profit businesses prove otherwise!
We try our best to be a transparent organization. If you want to know more about any of this, please ask! We're happy to share with our customers as well as with people who might be interested in starting a mission-based organization in the future.
Here's to sustainable income and economic opportunity for all!