As SEE Change readers well know, one of the most challenging and critical roles of a social enterprise is to scale sustainable solutions. It’s applying our entrepreneurialism consistently, over time, to both the social mission of our enterprises and the business operations behind them. Striving to achieve this balance has been the single most important focus of our leadership team for almost a decade at First Step: Staffing for Good. Founded in Atlanta, Georgia in 2007, First Step is on a mission to provide a path out of homelessness and poverty with jobs. We’re a financially independent, self-sufficient social enterprise — and the largest nonprofit light-industrial staffing agency in the United States.
So how did we achieve that balance? I’d like to share a few of our lessons learned and inspire a conversation among other leaders in the social entrepreneurship field about the ways you’ve explored scalability and self-sufficiency. For us, three paths stand out: collaborative funding sources; diversification of data collection and impact measurement and; expansion through replication.
Explore Collaborative Funding Sources
To keep up with the demand from talent (and to help more people find work), we needed to think differently about scalability.
First Step seeks out employees that other staffing companies turn away. We compete directly with hundreds of other for-profit staffing agencies in Atlanta — however, unlike competitors, First Step gives priority in its hiring to those experiencing homelessness, military veterans, and those recently incarcerated.
This year to date, First Step has employed almost 1,700 individuals experiencing homelessness (estimated 48% of Atlanta’s homeless population.) First Step offers employees comprehensive job coaching, free work uniforms, and even rides to work. People struggling with homelessness needed more opportunities work in dignified jobs and earn a sustainable income to change their circumstances.
In December 2015, First Step took an unprecedented leap – raising $7.2M and acquiring the Atlanta operation of the area’s fifth largest for-profit staffing company (LGS Staffing). Yearly revenues skyrocketed from $2M in 2015 to 2016 projections exceeding $22M. LGS was the ideal target for First Step, offering a wealth of existing business relationships and a strong leadership team. As part of the LGS transaction we aimed to retain 100% of their headquarter staff and 100% of their key customers – two objectives we have successfully met.
The deal was debt financed utilizing a unique combination of funding sources, including government and commercial grants, loans, and financing from: Invest Atlanta; SunTrust Bank; Marcus Foundation; The Glen Foundation; Cousins Foundation; the Woodruff Foundation; and LGS Staffing.
The newly combined operation is operating as a 501c3, First Step Staffing. In 2016 it will record more than $20 M in revenue and employ over 3,000 employees (working at over 100 Atlanta area customers). Careful planning, strong sales, and the strength of our workforce will make sure the new FSS is cash flow positive/profitable and does not require outside philanthropic support to fund its Atlanta operation.
Diversify Data Collection & Impact Measurement
There is opportunity for social entrepreneurs is to seek grant funds specifically dedicated to review business and operations metrics, which give us the insights we need to continue to grow and develop. A recent grant win is allowing us to more effectively communicate three tiers of impact: employee, employer and community.
Employee Impact: Data can demonstrate that First Step employees are trained, high-quality and talented. Metrics allow us to demonstrate employee performance:
- Our average employee earns close to $10/hour
- FSS routinely places employees on job assignments within 48 hours of first contact.
- 69% of First Step employees remain employed at FSS after 90 days.
- Coaches and skills training for 15 hours per employee
- Transports employees providing more than 5,000 rides to work per month
Employer Impact: Many of our employees lack both a recent work history and permanent home address. Given these and other barriers, it can be difficult to find employers willing to take the perceived risk of employing these men and women. Data helps us make the business case to employers. For example:
- Recruitment, management, transportation, workmen’s compensation and liability insurance, and other services to de-risk our customers hiring decisions.
- 100% of excess cash flow is used to fund supportive services for our employee/clients including job coaching, van transportation to off-grid employers, housing placement assistance, and workplace equipment (e.g. steel-toed boots).
- Routine metrics that exceed the employee quality and customer service standards of our for-profit competitors, leading to more jobs and higher wages. Such as:
- Customer Fill-rate: 98 percent
- Quick-Turn Orders: 70 percent
- Do Not Return Rate: 5 percent
By 2017, First Step anticipates its jobs will reduce homeless unemployment in Atlanta by 30 percent, saving the community more than $40 million per year in social services (in the form of medical, incarceration, shelter, and foster care needs).
The data backs this up:
- The average homeless man or women consumes up to $40,000 per year in costly community services and benefits including medical services / hospitalization, incarceration and emergency shelter. By employing 1,000 homeless men and women FSS will save the Atlanta community close to $40 M in 2016.
Expand through Replication
To double our social impact, we’re exploring the idea of replicating our model by opening a second location. We are seeking up to $7 million in funding to replicate our model in a second U.S. city in 2017.
Looking to expansion will mean utilizing business-centric strategy as we did in Atlanta, by acquiring an existing, profitable commercial staffing agency; and by merging the firm into First Step’s 501c3 status and business model. Cities of interest include Detroit, Chicago, Boston, D.C., Philadelphia, SF, and LA, among others.
Importantly, exploring replication as a strategy focuses the operations on the key ingredients needed to shape success in advance of market entry:
- Partner with area homeless social-services agencies to create a pipeline of employee/clients
- Engage local government and funders focused on reducing their homeless population
- Explore robust markets for light industrial/commercial staffing
- Seek cities with developed public transportation systems
- Monitor financial and customer Key Performance Indicators
- Purchase for-profit temporary staffing agency software and metrics data in real time
- Launch longitudinal SMS based text survey process to track employee graduates
How are you looking to scale your social enterprise? We’d love to hear from you. Leave your comments below and share your reactions, ideas and challenges.
Greg Block is the founder and chairman of the board of First Step.