Seven years ago, the board of trustees of the then-named Wellness Community of Southwest Florida, a charity that assisted some 500 cancer patients with a range of nonmedical support services from a strip mall on Clark Road, sat down and peered into the future. The number of cancer patients, they learned from research, was expected to multiply within the next couple of decades. While that’s actually good news—as medicine has found ways to keep cancer in check longer, cancer patients live increasingly longer with the disease—it also poses the challenge of how to help this fast-growing group cope with the diagnosis and treatments.
The board of trustees took two bold steps to respond to the demographic estimates. The first, in 2010, was to build a well-equipped, super-environmental $6.6 million complex in Lakewood Ranch, where, down to the doorknobs, everything is designed with cancer patients in mind. The renamed Center for Building Hope now serves some 2,000 cancer patients and their families with everything from support groups to qigong, yoga, gardening and nutrition classes.
To pay for construction and the almost $3-million mortgage, the Center for Building Hope coaxed donations from wealthy individuals and won grants from foundations.
But then came the next challenge: Pushed by the new building and the 400-percent increase in clients, the annual operating budget is expected to mushroom from $1.4 million today to $3 million in the near future. And because the board of directors stood firm that cancer patients, who face financial distress (disease is the No. 1 reason for personal bankruptcies) should neither be charged for services nor be fund-raising targets, they had to find another way of raising money.
“When we made the decision to build this facility,” says board member and former Lucent and AT&T executive Dave Shaver, “we took on a great deal of responsibility. We needed more than traditional fund-raising efforts to keep up.”
In comes the board’s second bold step: Hiring Carl Ritter, 52, a Canadian-born, hockey-loving businessman, to run the charity more like a business.
And boy, does he. Today, in the center’s pastel-colored halls and meeting rooms, in addition to “center down” and “eat well” you now hear phrases such as “ramp up economies of scale,” “increase absorption percentage” and “boost return on investment.”
“We had narrowed it down to two finalists,” remembers Charlie Ann Syprett, a former board member who was on the search committee. “One was a clone of the previous CEO, the other one was Carl. He was the risk candidate; he had no nonprofit experience. But we decided we needed to be trendsetters, so we made a conscious decision to take that risk.”
Ritter might be a familiar name to businesspeople here. For more than a decade he built a national company, CarBiz USA Inc., from his headquarters in Sarasota, growing it to the fourth largest subprime auto credit business in the U.S. in a $200-billion annual marketplace.Following an ambitious expansion, Ritter’s company defaulted on two lines of credit of nearly $29 million in January 2010; one month later, refusing to file for bankruptcy, he found himself doing the grueling work of closing his business, finding employees new jobs and paying creditors. “It closed due to the global credit market crisis,” he says.
Although Ritter was living in Sarasota, he discovered the Center for Building Hope through a national search. Having operated auto dealerships and his car finance business all his life, he had no nonprofit experience. But he did have experience with cancer. His wife, Carol, is a survivor of brain cancer.
“I saw a strong personality being devastated by that diagnosis,” Ritter says about that period. “We went through that battle.”
While this personal experience wasn’t the only impetus—Ritter did considerable research on nonprofits and heard from the search headhunters that the Center was looking for “someone with a growth mentality,” he says—it seemed to him that “the planets lined up.”
Self-deprecating and analytical, the hockey fan practices a management style that does not exclude power play and body checks; the trustees—most of them businesspeople—like him because he’s a go-getter.
And after 18 months on the job, acquiring the for-profit Brides Against Breast Cancer last January was an example of his entrepreneurial bent. Brides was a 12-year-old Oregon-based small business that sold “previously enjoyed” and surplus bridal gowns by designers such as Jasmine, Enzoaini and Amsale that were donated by individuals and bridal businesses. A portion of the sales was donated to a cancer nonprofit.
But Ritter thought the small bridal gown business could be a profit center for the Center for Building Hope. It’s an approach called venture philanthropy, and in broad terms, it means applying business skills and thinking to nonprofits. It’s not a brand-new concept. Today, 50 percent of income for charities in the United States comes from profit-generating enterprises, says Leslie Lenkowsky, a professor of public affairs and philanthropic studies at Indiana University. (See sidebar on page 32.) From the John D. Rockefeller Foundation to universities, hospitals and symphonic orchestras, nonprofits for a long time have been run in a businesslike fashion, focusing on revenues and profits.
Ritter concluded that Brides was “a retail operation with strong business foundations,” but lacked in execution. He requested and received a $175,000 loan from the Gulf Coast Community Foundation that covered the purchase price, but not the operating costs during ramp-up.
Immediately Ritter moved Brides to Lakewood Ranch and set out to expand the business. “We fixed the math flow in the model and changed some execution,” he says. Less than a year later, he says, the business is already profitable.
Before Center for Hope acquired the company, Brides operated at least one bridal boutique each weekend at a hotel in a different city, offering some 1,000 gowns in a wide range of prices, from a few hundred to thousands of dollars. The discounts can be steep—a $2,000 bridal gown recently went for $800. The setup usually consists of one big showroom and up to 30 dressing rooms.
Customers sign up online and pay a small preregistration fee, which will be reimbursed when they show up. “Some buy because of the connection with cancer; some are just looking for a good deal,” Ritter says.
Ritter ramped up Brides from one show per weekend to 74 a year. The company has added six more employees to the original two, operates a showroom and warehouse at Lakewood Ranch and now owns two trucks.
The business also began to sell more accessories, thus increasing its margins. The new management is enhancing event sponsorships with local vendors, such as hotels, bakeries, travel agencies, dance academies, photographers and DJs who like being in a room with 150 brides.
“When we go to a show, we know our costs,” Ritter says, explaining that at this point, vendor sponsorships cover about 60 percent of the show costs upfront. He wants sponsorships to eventually cover 100 percent of costs.
The bridal shows always have a local cancer support partner that gets a piece of the revenues. This, in turn, generates free media coverage and builds good will every time a show comes to town. The system also wouldn’t function without some 100 volunteers, usually more than 20 at each show, to tend to customers.
At the core of its success, though, is its ability to secure a steady supply of used wedding dresses. Currently, some 75 percent of the inventory comes from donations by individuals and 25 percent from stores. After 12 years, Brides Against Breast Cancer is the market leader among used wedding dress retailers, with a reputation on the donation side that ensures a rising flow of supply.
And the risk? Competition. At this point, there are smaller used-gown outfits, but they are for-profit businesses without a charity angle, Ritter says. A not-for-profit challenger has not emerged yet.
With a goal of selling up to 3,000 wedding dresses a year, spread all over the country, in the 2-million-a-year U.S. gown market, Brides is not big enough to become a major irritant to other wedding gown chains.
“We’re not serious competition,” says Ritter.
Finally, should the business fail, the Center won’t be trapped in a hole of debt. There’s some capital investment, but the assets will cover outlays.
“In the worst case, we have 3,000 gowns and a truck that can be liquidated,” he says. “There’s enough equity to pay off our debt.”
The Brides venture has created a major breakup for Ritter and his trustees, though. The national organization the Sarasota charity had been affiliated with since its beginnings in 1996 was concerned about turf wars with other local affiliates over the Sarasota nonprofit’s new national business, and so the Center and its longtime parent organization parted ways. (It also forced a confusing name change. The Sarasota nonprofit was originally The Wellness Community of Southwest Florida and, like all the affiliates, was part of the national Wellness Community. A few years ago, the national organization merged with Gilda’s Club International and many of the affiliates, like the one here in Sarasota, renamed themselves Cancer Support Community. The Sarasota board’s decision to go rogue has meant yet another name change to today’s Center for Building Hope.)
The trustees seem confident, however. The loss of the Gilda stamp of approval, says board chair Carol Ann Kalish, was offset by a new affiliation with Harvard University’s Benson-Henry Institute for Mind Body Medicine.
“We decided we had to undertake projects such as Brides,” Kalish says. “We had to have the autonomy to respond to our needs.”
Today, some 15 percent of the charity’s budget comes from the profits of Brides Against Breast Cancer(25 percent of the Center’s $1.4 million revenues are generated via events, and 60 percent comes from traditional donations and grants).
Says Shaver: “With 15 percent, we can balance our budget,” covering any deficit left by traditional fund-raising.
Ritter wants the for-profit business to go beyond being a stopgap, however. His ambitious goal is, within 18 months of operations, to have the Brides business contribute about 40 percent of the Center’s $3 million annual budget.
As part of the plan, he wants to almost triple the number of Brides Against Breast Cancer sales events across the country. To fund this expansion, he is trying to secure a $500,000 investment from “venture philanthropists.” As part of his commitment to the investors, he plans to ramp up the show schedule from 75 to 100 in the first six months, then to 150 in the following six months, and finally to 200 in the last six months.
Says Shaver: “We would like to be a role model for other nonprofit organizations.”
Other examples of creative philanthropy.
Manatee Players Theatre recently received $1.1 million through a special loan called a program related investment (PRI loan) to complete construction of its brand-new building along the Manatee River. PRIs are loans made at no interest or below market interest rates and usually have no fees, guarantees, mortgages or security agreements. They’re especially useful for nonprofits, which often have little access to capital through conventional commercial loans.
In this case, the Manatee Community Foundation and Community Foundation of Sarasota County helped the anonymous donors set up a donor advised fund that would lend the money in the form of a PRI. The donors wanted oversight of the project and all bills had to be approved and paid through the fund. All loan repayments go back into the fund—instead of to a commercial lender that would have high interest rates and fees—so the donor can do further charitable work. If the nonprofit defaults, the loan would convert into a grant. The donors receive a charitable tax deduction for all money in the donor advised fund.
Mote Marine Laboratoriesraises sturgeon at its commercial farm in east Sarasota to support the operations of its lab and aquarium. Through October of this year, about 3,000 pounds of sturgeon caviar have been produced or are in production, and are sold through top distributors nationally. Florida Whole Foods and Costco.com, for example, carry Mote’s caviar. The farm also has raised about 67,000 pounds of sturgeon so far this year, and this product is sold to restaurants here and in the Midwest, New York and Boston.
The enterprise is about 80 percent self-sustaining and brings in about 7 percent of Mote’s annual budget. The hope is that the program will be entirely self-sustaining in two to three years. Already Mote is the second largest producer of farm-raised caviar in the U.S. For more information, go to caviarmote.org/.