ThinkImpact case 4

When Saul Garlick was a young boy, he traveled with his family to Delani, a rural community in Mpumalanga, South Africa, and was shocked by the antiquated conditions and lack of schools in which the residents of the small village lived. He pledged to do something to help. When he was 18, Garlick launched a nonprofit organization, Student Movement for Real Change (SMRC), and raised $10,000 to build a school in Delani. Over the next few years, Garlicks vision for the nonprofit expanded, and SMRC began to focus on sending college students to live with local families in South Africa and build entrepreneurial ventures with them. While attending graduate school at Johns Hopkins School of Advanced International Studies, Garlick took 18 undergraduate students on a five-week trip to Mpumalanga. He was dismayed when he saw that the school he had built years before was shuttered and in total disrepair.

It was then that Garlick realized that simply throwing money at a problem would not fix it.

He committed himself to finding a scalable, sustainable solution based on a social entrepreneurship model. Garlick began to reimagine SMRC. What if, he thought, he could take bright, enthusiastic college students from around the world to Africa and have them work with local people to develop new ideas and solutions to the most pressing local problems? He changed SMRCs name to ThinkImpact and began raising money to fund its mission. By 2009, Garlick was raising $400,000 annually to support ThinkImpact; unfortunately, costs were running higher. Like leaders of most other nonprofit organizations, he was frustrated because raising money is an ongoing process that demands a great deal of time and takes away from the time they spend on achieving their mission. Still, he was encouraged because ThinkImpact had gained traction and was beginning to make a difference in local communities in South Africa and Kenya. After missing a couple of payrolls for ThinkImpacts small staff, however, Garlick began to consider other ways that he could accomplish the organizations mission.

After attending a workshop with other social entrepreneurs, Garlick identified three options:

Option 1. Remain a nonprofit organization. ThinkImpact has contracts with two universities that generate $50,000 annually. In addition, Garlick expects that grants and donations will bring in up to $100,000 per year. However, if Garlick wants to realize ThinkImpacts mission, he estimates that he will need an additional $200,000 to $250,000. As he has learned, raising money for a nonprofit is never-ending and takes valuable time away from achieving the organizations mission.

Option 2: Shut down the nonprofit and start a for-profit company. Under this scenario, the for-profit company would purchase ThinkImpacts assets and pay off its debts, essentially giving Garlick and his employees a fresh start. To finance the new company, he could borrow money and approach family members and friends who have indicated that they would invest in a for-profit company if there is a chance of earning a return on their money. The for-profit business would generate revenue by charging colleges and universities a fee to provide students with meaningful, immersive international experiences that focus on social enterprise. Garlick estimates that the for-profit company would hit its breakeven point in three years. His primary concern is whether colleges and universities would be as open to working with a for-profit company as they are with a nonprofit such as ThinkImpact.

Option 3: Keep the nonprofit organization but start a for-profit business as a subsidiary.This hybrid model incorporates the advantages of the first two options. The nonprofit could still pursue grants and donations, and the for-profit operation could utilize traditional sources of

Question 1) Which organizational structure should Saul Garlick use for the ThinkImpact business? Should it be either option 1, 2, or 3 that are found in the case study text?