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March 05, 2006

Did You Say Non-Profit Capitalists?


And you can meet Pacific Community Ventures by visiting not only their website, but also the websites of dozens of businesses benefiting from PCV's investment, advice and other resources. PCV focuses on businesses that offer good wages and benefits plus skill and asset building to folks who live in low and moderate income parts of California. They sometimes invest -- and they always provide resources, including advisory help from seasoned business professionals seeking to make a difference. Perhaps most critically, PCV sets, evaluates and achieves impressive goals regarding both the financial and non-financial aspects of how their portfolio businesses -- including the employees of those businesses -- are doing.

PCV offers a wonderful example of using performance to drive change. And, as indicated by the title to this post, PCV demonstrates that, while profits -- or put more specifically, positive cash flow -- is essential to the life blood of any business, there is no requirement that all businesses be 'for profit'.

None. Hundreds of years of culture -- reinforced by our transition into a world of markets, networks, organizations, friends and families -- have embedded this orthodoxy: 'business = for profit'.

It is inaccurate. Business = sustainable cash flow? Yes.

But the choice about the form of any business -- for profit or not for profit -- is a separate matter. The businesses PCV invests in are for profit. For them, cash flow must cover the costs associated with each respective business's goals of delivering great products and services to customers and providing attractive wages, benefits, skills and opportunities to employees as well as generating profits for owners. For the entity PCV, on the other hand, there is no profit component to be covered by cash. This is the key distinction. PCV is non-profit. The businesses it supports are for profit. Both need sustainable cash flow. But, unlike the businesses it promotes for the good of low and moderate income areas, PCV does not require cash to fund profits for itself.

Most of us are familiar with non profit businesses that provide goods and services. Pacific Community Ventures is a business that connects the capital markets to the goods and services markets. PCV invests in for profit businesses that benefit folks in low and moderate income areas. It does so by providing for profit enterprises both money capital and human capital. PCV is impressively successful. And, by all indications, sustainable.

And it is a not for profit. It chooses to invest in for profit businesses. But PCV itself is a not for profit captialist.

Posted by Doug Smith on March 5, 2006 12:58 PM | Permalink