Sunday, March 23, 2014

The Danger of Fiscal Sponsorship

I am stunned by the number of organizations I encounter that operate under the umbrella of another organization. Beware! This arrangement will strip your branding and will leave you at square one to restart your organization if you ever do break free. This excerpt from page 39 of Defying Poverty with Bicycles shows why you should avoid fiscal sponsorship:

“...In the U.S. and some other countries, the leaders of a new organization can choose to avoid incorporating by asking an incorporated nonprofit to become their ‘fiscal sponsor.’ This can look very enticing to new leaders who are already overwhelmed by all the tasks required to found an organization.

But don’t be deceived! Fiscal sponsorship becomes a cozy arrangement that is very difficult to escape. The most harmful problem with fiscal sponsorship is that the ‘mother’ organization must be mentioned in all communications. Also, all checks and credit card payments that go to your organization must be made payable to the mother organization, not yours. This means that all of your donors, grantors and customers will relate their experience with your program to the fiscal sponsor. If you and your fellow leaders eventually manage to break free of this fiscal sponsorship (and that’s a big if), none of these important people will have any connection to your organization. In other words, once you break free and incorporate your organization independently, it will be as if you are starting from day number one.

The other danger of fiscal sponsorship is that the fiscal sponsor, or mother organization, does all the administrative work, including taking the credit for your organization, and simply charges a fee such as ten percent of all income that comes to your organization. This is of course fair because otherwise an established nonprofit could not justify taking on the burden of being a fiscal sponsor. Also, because of the high level of responsibility they have for your organization, you and your team will have to hand over some leadership of your organization to them.

Once you and your team have settled into this arrangement, most of you will be tempted to remain there in order to avoid the responsibility of learning how to do tax returns and sending reports to your funders. I know of some nonprofits that have operated under fiscal sponsorship for more than a decade and I can easily bet they will never break free. They will also remain small—the ones I know of are either run by volunteers or have just one, underpaid staff member.

The most important danger of fiscal sponsorship in regards to Social Bike Business is that it will not allow the full implementation of the program. No fiscal sponsor would take on the responsibility and administration of such a complex program. Then consider that everything that includes the name of your organization must also show the name of the fiscal sponsor in order to give full disclosure. Imagine the sign you’ll hang on the front of your bicycle community center... with two names. Imagine your brochures, business cards and custom price tags, all with two names of the organizations that run the program. Would you shop at a place with such a suspicious dual personality?

My recommendation regarding fiscal sponsorship is: Don’t do it! And if you’ve unfortunately slipped into this cozy yet dangerous situation: Get out as soon as you can!”

Monday, March 10, 2014

Do We Need a Third Bike Industry?

Even the most casual observer will recognize two distinct bike industries: one enticing with the latest and greatest, the other enticing with the lowest prices. The first is the one I featured in my December post, Planned Obsolescence in the Bike Industry. This is the bike industry that has most blatantly forgotten people who live in or near poverty. Their obsession with high-tech, high-priced, fragile, disposable bikes and parts has segregated bicycling from the vast majority of the world’s inhabitants.

The other bike industry does not consider itself a bike industry. These mass merchants make and sell appliances, yard equipment, plastic swimming pools, exercise equipment, electronics and toys right alongside their bikes. In fact, if you want to find a bike in one of their stores, check the toy aisle. Their bikes and parts are just as fragile and disposable as those from the other bike industry. The main difference, besides missing those few months of noteworthy performance before they break, is the price. While I have to say this second, mass merchant bike industry does indeed recognize low-income patrons as their main customers, all they care about is wresting those few dollars from their wallets. Providing bicycles and parts designed for their needs isn’t part of their equation.

When I first began discussing Social Bike Business with our founding board, we assumed that every element would eventually become part of the first bike industry I describe above. Social bike shops would simply be another sort of niche shop along with those serving road racers or mountain bikers or triathletes. Social bike business career training programs would welcome those aspiring to serve high-end riders right along with those wanting to serve their low-income neighbors. The bikes and parts designed and manufactured through the program would be sold alongside the fragile jewelry-like parts in wholesale catalogs and bike shops.

I’m still holding out for this vision. Our Bike Shift Lever will hopefully be the first of many such bike parts to find its place in these channels.

Even so, as I watch this first bike industry veer even farther into elitism I have to wonder if a third bike industry is needed or would even work. A social bike industry focused entirely on the needs of impoverished customers would require its own channels just as the other two bike industries have created for their products. At first this seems a gargantuan task until we look at other socially designed productions such as for irrigation, medical supplies, wheelchairs and drinking water. Even some of the social bike programs in place have created their own supply channels already, out of necessity. Connecting a few dots with like-minded partners would result in local manufacturing and supply channels that would reach most areas of the world.

What are your thoughts on this issue? Should we give up on our wayward bike industry and focus on partners who truly want to serve the 80% of the world’s population living in or near poverty? Is our time better spent working with people who already have these ideals or trying to convince those in the established bike industry to add this new customer base along with products that serve their needs? In other words, do we need a third bike industry?