Why A For-Profit Business?

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This is a sticky subject that can quickly become emotionally charged but I’m just going to dive right in since it’s a question I get often. Question: Why are you a for-profit business instead of a non-profit business? I get the feeling sometimes that the underlying question is: Why are you profiting off of the poor instead of giving all the money back to them? I have four reasons why Ara Collective is a for-profit business, and why I don’t think for-profit models mean profiting off of the poor.

To give you some background, I grew up in the NGO world and studied business and international development at the undergraduate and graduate level.  I have worked in both the business and non-profit sector Stateside and abroad. I have seen the affects of non-profit and for-profit work over the long-term and have formed my personal opinions. I believe that non-profits and for-profits both have their goods and their bads. But, at the end of the day, Ara Collective was formed as a LLC instead of an international NGO because I thought that was the best way to bring a positive long-term impact into the marginalized communities that I’m involved in.

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Why?

First, there is a time and place for aid and for work. Places dealing with war, natural disaster, and extreme hunger are in need of food, water, shelter, supplies, and health care. Everything these people know is being stripped away and they are in desperate need of empathy and generosity. But, just like humans after a personal tragedy, there’s a time when we need to move on. There is strength in being able to get on our own two feet again. Again, I’m not saying aid is bad. My dad was a bush pilot, flying tiny airplanes into remote villages to get food and doctors into places that were in desperate need. A lot of great organizations like Mission Aviation Fellowship, Samaritan’s Purse, and Doctors Without Borders are providing aid in ways that are necessary and doing it very well. But, at some point, the poor and marginalized aren’t in crisis mode anymore. They are ready to rebuild, to create, to work. And they are smart enough, talented enough, and driven enough to do it without a hand out.

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Second, the nature of business is partnership and it dignifies those who work for it. Business is simply an environment where goods and services are exchanged with one another and is thus a universal language that everyone speaks. The growth of a company depends on everyone putting in their best, both in individual roles and as a team. We learn new ways to do things and are exposed to new ideas, which are tools we can use elsewhere in the future. This sort of responsibility and shared growth is empowering, confidence-building, and dignifying. We are not working together just because you’re in desperate need and I have money/connections/ideas that could help. We’re working together because you have something that I think is extraordinary and I have something that you think will provide a good future. We work together out of mutual respect. Not pity. The poor are stripped of respect and dignity as they are marginalized in their communities and silenced in the world.

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No one wants to just survive, eking by in life depending on pity and handouts. No one. We want to thrive. We want to live. We want to say: we were here, we were valuable, we contributed. Ara Collective’s business partnerships not only provide jobs but depend just as much on the artisan’s quality and timely work as they depend on me for sales and a business model that will continue to grow those sales. I don’t have that without them, they don’t have that without me. We are each just as valuable as the other. We will succeed or fail together in business.

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Third, business is an investment that is in it for the long haul. It’s not dependent on emotionally-driven (pity) donations. Again, those are important in extreme conditions but they are not for long term or sustainable change. Aid keeps things afloat, business digs in. We say in America that small business owners have built this country into what it is today – one of the best places to live and work in the world. Why wouldn’t businesses do that in impoverished countries as well then? Yes, governments and corruption can make it very difficult but I’m not saying this is easy. (Because it’s not – trust me. At least once a week I wonder why I’ve chosen to do business in such a challenging way.) But I think the dangerous part of non-profit work is that it can be started on a whim, drum up an emotional response that gets people to give huge sums of money, and then has very little structure, strategy or accountability. Donors never want their money to go to paying the amazing staff that are on the ground and so, sadly, NGO workers are often underpaid and overworked, leading to burn out and high employee turn over. This makes it hard to achieve that “sustainability” thing we all know is essential in creating change.

On the other hand, businesses work in places where they see potential to grow something (read: change). People work for businesses that they feel they can get something good from (read: opportunity). If they don’t feel they’re getting this, they can leave. And so businesses have to ensure people feel they are paid what they’re worth so they stay and give their very best. This leads to continual company growth, higher salaries for the employees, and stability in a struggling place. If we want real change in impoverished areas, the kind of change that is long lasting and rooted in the community, emotionally-funded projects are not going to do it.

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Finally, I personally work harder when it’s a for-profit business. Yes, my passion and heart for the poor is motivating but, the truth is, my emotions can only give me energy and ingenuity for so long in the social business arena. But when my money is involved, my skin is in the game and I’m invested with everything I’ve got. I think differently about my decisions of how to spend time or money because there’s more on the line than that feel-good feeling or trying to help another. Money spent poorly and failed projects are a huge loss that could put me under, not something I can just go out and fundraise for again. And ultimately, when I’m working hard to make this business profitable, more money gets into the hands of the artisans. A consistent source of income goes into the homes of the artisans. And that means there is more and better opportunities for the artisans to feed and education their families, build good shelter and infrastructure in their communities, and even enjoy life with fun and rest.

No one wants to just survive, eking by in life depending on pity and handouts. No one.  We want to thrive. We want to live.  We want to say: we were here, we were valuable, we contributed.

There are many ways to structure a for-profit business. Yes, there are a lot of people that profit off of artisans hand making their products (notice: they will not say their products are “fair trade”). Shame on them and shame on us for continuing to support their business model. But why can’t we do business differently? Can’t we break down the way money is allocated so if the business starts to grow then everyone – not just the boss on top – sees a bump in their income and quality of life?

I say yes.

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Here’s how I’ve structured Ara Collective:

1. Artisans are paid in full for their work. We always pay their asking price, which we verify is a fair and good price in the local community.  I want the artisans to feel they are being paid what their work is worth and what they feel will provide a good quality of life for them, their families, and the future they’re building.
2. We cover the cost of all shipping and customs, which is a major component of the final retail price.
3. Whether we sell wholesale or retail, we donate 10% of every purchase back to the cooperative that made the item. We do this because I want even more of our sales success to go back to the talented hands that made Ara Collective goods. Each cooperative we partner with is doing more with their money than just taking care of their families. They’re also putting money into community development projects like school scholarships for their kids, maternal health care, literacy classes for adults, or financial and business management classes for the artisans. We want to encourage those sorts of impacting programs and that kind of local leadership.
4. After all that, what we have left is put back into Ara Collective to pay for the things that keep the company going, spread the word, travel to work in person with the artisans, and invest in future cooperatives and artisans.

I personally financially profit in no way. This model is for-profit so it is a self-sufficient company. I want it to financially succeed so I can work with more artisans who are doing mind-blowing things in tucked away places. I want these collectives to feel they are being paid what they are worth, to know that their work is admired, and to live out their days with a sense of worth and dignity.

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I’m not saying everyone should stop donating their money to non-profits. There is a such a need in the world. What I’m saying is let’s stop vilifying for-profit businesses. And instead ask: How can we do for-profit business differently? How can I spend my dollars for those shoes or food or blanket in a way that creates and supports real, lasting positive change in broken places?

And then go out and do it.

(Interested in digging deeper into this subject?  Watch the new documentary Poverty, Inc, which examines the multibillion dollar charity industry and its effects on local businesses and developing countries.)

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