Intense competition for a limited pool of donations is prompting nonprofit organizations to support their missions by generating revenues in the marketplace. Business ventures, once an alien concept in a sector that relied wholly on grants and donations, are now seen as a supplementary funding tool or even as a way to promote a cause directly—for example, by providing training and employment to beneficiaries of social programs.

Building a sustainable business is never easy, however, and nonprofit organizations face particular challenges. In general, these groups are led by people who, though dedicated and entrepreneurial, usually have little training in launching and managing a competitive venture. They must find ways to combine business success with social impact while overcoming internal concerns that a commercial operation will distract the organization from its core mission or compromise its values. They must also raise the seed money required to turn an idea into reality. The difficulty of surmounting such obstacles means that many projects never get past the idea stage.

Nonetheless, by using assets such as the organization's brand, expertise, distribution systems, and real estate, nonprofits can, for example, enter into licensing deals with corporate partners or set up service, manufacturing, or consulting businesses....