Three Lessons Game Changers Can Learn from a Detroit-Based Nonprofit

 

Veronika Scott started The Empowerment Plan (TEP) in Detroit, MI as a class project while she was in art school. The nonprofit organization trains and employs homeless individuals to create and sew the company’s unique “sleeping bag coat” which helps those living on the streets survive in cold winter temperatures. Scott learned a number of lessons in starting this organization, lessons which were shared with me in a series of case studies I generated about TEP.

 

Pivoting to serve your customers’ most pressing needs

 

We can never know what customers truly need until we put our products in front of them. Scott initially prototyped a “sleeping bag coat,” as part of a design school class. When she went out on the streets of Detroit and showed her prototype to her customers, she received feedback that the coat looked like a “body bag.” Going back to the drawing board, she redesigned the coat and produced a few units for distribution.

 

As she was distributing her coats on the street, a homeless woman approached her and said “We don’t need coats. We need jobs.” This was the moment when Scott realized that she needed to pivot her business. Rather than making the coat distribution the central activity, she decided to recruit, train and employ homeless people to make the coats, thereby breaking the cycle of poverty for these employees. Without being in the market, interacting with her customers, and being willing to iterate on her business idea, TEP would never have become the organization it is today.

Running a small business requires a multidisciplinary approach

 

As the startup founder you need to wear many hats and look at any decision you make from multiple perspectives. For example, at one point in its history, TEP was considering starting a direct-to-market line of coats for sale to the general public. From a financial perspective, this could provide added earned income to the organization. But it also requires consideration from the operations perspective – for example, could TEP continue to source inputs for its coats from the same suppliers who supported its nonprofit activities? From a legal perspective, would this new venture need to be its own standalone legal entity? From a human resources standpoint, would employees at the new venture be compensated in the same way as workers at the nonprofit, and if not, would this create tension between the two employee populations? Adopting a multidisciplinary approach and working with employees and advisors from a variety of backgrounds are critical to running your own company.

 

There are no easy decisions

 

Some decisions for a business seem like “no brainers,” but they may actually not be. Even in a fast-paced small business, it is important to properly analyze options when they present themselves.

From time to time, TEP is offered free donations of materials that could potentially be used in their coats. On the surface, this seems like a great deal. However, before accepting the materials, TEP must first test a sample of them to ensure they meet minimum safety and durability standards. Even if the materials meet these standards, TEP also needs to conduct a total cost analysis to ensure the donation makes sense. For example, if TEP needs to pay for the shipping of the donated materials, they could end up costing more than materials which are purchased from a source that offers reduced or free shipping costs.

 

This type of calm and considered decision making is necessary for every major decision you make, from selecting a business partner to raising funds.

 

By Rashmi Menon

 

Rashmi Menon is an Entrepreneur in Residence and Lecturer in Entrepreneurial Studies and Business Administration at the University of Michigan’s Ross School of Business. She began her career launching numerous businesses and products within large corporations including The Walt Disney Company, Microsoft, and Yahoo!. She transitioned to entrepreneurship by co-founding a green technology startup, serving as Vice President of Product Management at two high technology startups and launching her own strategy and product management consulting practice. She received a BA from Harvard University and an MBA from Stanford University.

 

 

 




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