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Strategic piggybacking--a self-subsidization strategy for nonprofit institutions
Sloan Management Review
|February 5, 1983
Summary
Nonprofits can fund mission deficits by developing new, unrelated businesses. This strategy, termed strategic piggybacking, uses profits from the new venture to subsidize the primary mission.
Area of Science:
- Nonprofit Management
- Business Strategy
- Social Enterprise
Background:
- Nonprofit organizations often incur deficits due to their primary, socially beneficial missions.
- Existing funding models may not adequately address these persistent financial shortfalls.
Purpose of the Study:
- To propose a novel funding strategy for nonprofit organizations facing mission-related deficits.
- To synthesize specialization and diversified portfolio approaches for sustainable nonprofit finance.
Main Methods:
- Introduces the "strategic piggybacking" method.
- Advocates for acquiring or developing a new, potentially unrelated business.
- Focuses on leveraging new business activities for deficit subsidization.
Main Results:
- The proposed strategy offers a framework for financial sustainability.
- New business ventures can generate revenue streams to offset primary mission costs.
- Diversification through unrelated businesses can mitigate financial risks.
Conclusions:
- Strategic piggybacking provides a viable model for nonprofit financial health.
- Nonprofits can achieve greater financial stability by diversifying revenue through new ventures.
- This approach supports the long-term viability of socially worthwhile missions.