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"Before it was something that was done, but done randomly," said Evan Hochberg, director of Community Wealth Ventures, a for-profit firm based in Washington, D.C., that advises charities how to launch businesses. "It's now something every strong nonprofit executive director is aware of."

The launching of businesses by charities is part of a national movement called "social enterprise," "social venture" or "social entrepreneurship." Whatever the name, experts agree that Pittsburgh is a hub.

"I'm actually quite optimistic about Pittsburgh's potential to be a leader in this whole movement," said Tim Zak, president of Pittsburgh Social Enterprise Accelerator, a project created to help nonprofits start businesses.

Experts cite many factors for Pittsburgh's leadership.

They note the history of nonprofit entrepreneurs such as Bill Strickland, CEO and founder of Manchester/Bidwell. His organization, which runs the Manchester Craftsmen's Guild and the Bidwell Training Center, is involved in real estate, jazz concerts and recordings, a gallery, catering and job training. About 700 local charity officials attended conferences last year on setting up businesses.

Another factor encouraging the growth of businesses by nonprofits is the launch last fall of Zak's group. It acts as a broker providing advice and helping to find funding for for-profit ventures.

"I'm not sure there's another one like that in the country," Hochberg said. Based in Washington, D.C., his for-profit company was spun off from the anti-hunger charity, Share Our Strength.

"Pittsburgh is very unique in how it embraced social enterprise and how it succeeded," he said.

A sluggish economy that reduced grants from foundations and governments may have heightened interest, too.

"The sour economy gives us the correct caution," said Martha Perry, associate executive director of the McCune Foundation. "We're not going to go out with money to waste. It also gives us more of an impetus to move in this direction."

Lisa Olszak, president of the Downtown-based Olszak Management Consulting, studied the social enterprise landscape in Pittsburgh. The study of 50 nonprofits found widespread interest in businesses but a lack of market and financial analysis before they were launched.

"A number of organizations are considering it because you generate unrestricted revenues, which is the hardest money to come by in the nonprofit world," she said.

"It helps diversify revenue sources, which is something organizations like to do," she continued. "They're not putting all their eggs in one basket."

Of 24 ventures, Olszak found that revenues had ranged two years ago from a $125,000 profit to a $200,000 loss. The nonprofit groups predicted revenues last year ranged from a $250,000 profit to a $150,000 loss.

Three organizations stand out among local leaders in the field.

The Boys and Girls Club of Western Pennsylvania operates Outlet Connection, a discount store in Lawrenceville. The store is run by teens who belong to the club or attend its Career Connections Charter School.

"They're not there just to stand at the cash register," said Mike Hepler, club president and CEO. "They're involved in every aspect of store operation."

Like regular businesses, those set up by charities need three to five years to make a profit. After three years, Hepler said, his store is close to black ink.

Besides expanding the store and launching catalogue sales, Hepler plans to start a Youth Enterprise Zone in the charter school. It will involve the creation of an entertainment company run by kids with the help of Walt Maddox from Pittsburgh Music Works.

Hepler said the club will develop a music studio where youths will learn how to make a CD, book groups and market music.

"We plan on putting out our first CD this spring," he said.

The Pittsburgh Center for Creative Play was born with an entrepreneurial spirit. The group used more than $800,000 in grants and gifts and an $800,000 loan to buy the former Foodland on South Braddock Avenue in Swissvale.

The charity, which encourages play among children of all abilities, occupies 18,000 square feet. The center rents 12,000 square feet to three businesses and another nonprofit group. The rent raises about $70,000 a year.

In November 2001, the center released a CD called "Time to Sing." The disc was a compilation of children's songs slowed down so that youngsters with disabilities could sing along.

"What we found is that children's music is too fast — period," Kaplan said.

The center had originally expected to sell 2,500 copies. Instead, parents, therapists and teachers from around the world snapped up 25,000.

That, of course, will lead to a CD of holiday music called "Time to Sing 2." With a national marketing campaign and television commercials, the center hopes to make $250,000 in sales and net $116,000.

Kaplan and her staff also are piloting a program called Kids VIP. On Friday and Saturday nights, parents can drop their kids off at the center for an evening camp. It costs $6 an hour for the first child and $2 for each additional child.

Currently, the center is 50 percent self-sufficient. But it hopes to increase that share to 80 percent by 2007.

Its business operations have become so myriad that it is considering a new corporate structure. Among the options are a separate corporation for the for-profit ventures and another nonprofit, holding company.

Another charity with a lot of business moxie is the Uptown-based Life'sWork of Western Pennsylvania. It helps people with disabilities or other employment barriers live and work independently.

Life'sWork already has launched three for-profit businesses and is planning a fourth, a Ben & Jerry's ice cream shop on The Waterfront in Homestead. The Vermont-based company waives its $40,000 franchise fee for nonprofit groups.

"We'd like to start this summer if we had the space," said Bob Mather, president and CEO of Life's Work. "But there isn't any space right now."

He called the odds of the center getting the space and running a Ben & Jerry's "90 percent." He estimates it will cost as much as $400,000 to open a store. But he expects to net $60,000 a year after a year or two.

Pittsburgh is leading the way not only locally but also internationally. The Alcoa Foundation has started Social Ventures Capital, a program that will allow nonprofits at seven or eight sites around the world to start for-profit businesses.

Alcoa is providing $1.1 million to share information about what works, to provide seed money and to create a network of successful nonprofits.

Charity officials warn that starting a business might not be suitable for every nonprofit. And it works best when the business jibes with the group's mission.

Olszak said many charities considering businesses fail to write a business plan or do a financial analysis. Such a study should examine customers and competitors, market size, management capabilities and the group's resources. Even though the ventures are meant to turn a profit, nonprofits don't have to pay taxes on them so long as the business is within the realm of their mission.

Like any business, the risks are high. Failure may threaten the charity's mission.

Olszak said such ventures are more likely to work when an organization is mature and has a strong board and a large enough budget and staff.

But Kaplan contends that young groups like hers have an edge over older ones.

"For older and more established organizations, it's harder to move as fast as you need to move when you're living in an entrepreneurial world," she said.

"When you see an opportunity, you've got to jump on it. It can't go through a year of board debate."

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