Stacy Ratner is in Business to do Good

The founder of Chicago-based Open Books has built a high-impact literacy nonprofit by applying everything she learned as a serial tech entrepreneur.

Riva Richmond By Riva Richmond

Stacy Ratner spent 7 years co-founding and building technology businesses — and the last decade applying everything she learned as a serial entrepreneur to growing a high-impact organization.

That organization is Open Books, whose businesslike approach is helping thousands of Chicago youth learn to read and, what’s more, write for fun. It collects hundreds of thousands of used books each year, sells them at two bookstores and online, and channels the proceeds to its reading and writing programs, measuring “profits” in gains.

Ratner founded in 2006 after learning that a shocking 30 percent of Chicagoans are functionally illiterate — they have trouble reading labels on food, filling out job applications, deciphering bus schedules. An avid reader (and novelist in her dreams), Ratner realized there was a huge need for literacy services, and believed she could make the biggest impact by targeting young people.

Today, Open Books has 18 employees and 500 volunteers a year and runs on an annual budget of $1.4 million. Some 70 percent of that sum is earned income from book sales, with the rest coming from grants and gifts. That budget allows Open Books to operate its stores, run programs that serve about 5,000 K-12 students a year, and give away 100,000 books to students, teachers and other Chicago nonprofits.

By design, Ratner, whose business acumen is belied by a shock of green hair, operates Open Books a lot like a typical for-profit business. The organization sells a product, donated used books, to make money. As with profit-making businesses, all its efforts serve one end: “build something that people want to be a part of and get them to put their time, their money and their heart into it,” she says.

A business model that supports scale

Of course, operating a nonprofit is also quite different. There’s less latitude to spend money in ways she may deem necessary, Ratner says, amid pressure to appear frugal. Also, reporting requirements make you answerable to the public at large, not just investors and shareowners.

She finds the first issue particularly challenging. Funders, tuned to look for financial efficiency, “don’t want to see large and, in some cases, competitive salaries. They don’t want to see nice or fancy workspace,” she says. While efficiency is a virtue, it can go too far. “It’s very difficult to attract people to do really critical work in literacy or anything else when you can’t compete with what they would make on the open market.”

There are many other differences, she says, but these two “make a really stark point about how different it is — and, in a way, how much more difficult it is — in the nonprofit world” to build a sizable, lasting and effective organization.

To make it easier, Ratner relies on a business model that has let her scale up and drive social impact. Selling books both provides significant financial independence and ties in directly to Open Books’ literacy programs, she says. And having stores provides avenues for promotion and venues for reaching the public.

“I don’t know exactly what Open Books would have looked like without the books and, therefore, the stores and the income that comes with it,” she says. “But it would be, I imagine, small.”

In addition to scale, the entrepreneurial approach leverages Ratner’s experience. “That was super helpful when I started Open Books, because I had never written a grant, I had never asked for a charitable contribution,” Ratner says. “That was a direct carry over from the for-profit world, and I was really, really fortunate to have that in the arsenal.”

Lessons for other nonprofits

But Ratner cautions other nonprofits against racing to an earned-income model.

“It happens to work really nicely for Open Books. That doesn’t mean it will work well for everybody,” she says. “I would really be careful about forcing an earned-income model where there isn’t an obvious fit, because you can certainly waste a lot of time and money trying to build a thing that isn’t viable,” and divert resources from your mission in the process.

Her advice? Consider whether there is a real business opportunity that fits your mission. For instance, if you’re focused on job training, you might start a social enterprise that gives trainees work experience in a particular industry, say hospitality or landscaping. Then consider whether the enterprise is financially viable. Can you can test it and scale it affordably? And finally, find out how much competition you would face. If there are a slew of local landscapers, beware. Your effort might not be sustainable.

If a well-applied business model can give a nonprofit organization independence and scale to do good, adhering to the principles of organization-building can make sure it lasts and keeps growing. It’s especially important to create a strong leadership team to take on day-to-day operations, so the founder can focus on the big picture and what’s next.

“It’s kind of where I see Open Books right now. There’s a fantastic leadership team in place. They are building and growing and maintaining and doing everything they should be doing. We just finished working on our next strategic plan, in which my role is very clearly set out as evaluate new things,” she says.

So, on the cusp of Open Books’ 10 year anniversary this month, Ratner is considering an array of growth possibilities. Expanding into other cities is interesting to her, particularly if former Open Books leaders who left Chicago would take up the challenge. Many other ideas are percolating, though she’s hesitant to reveal them. One involves combining existing pop-up Booksmobile sales, programming and storytime “in a big and interesting way.”

“I’m always in an inventing phase, because that’s kind of what I do. I’ve got three new ideas each week that I’m so excited about,” she says. “One of the great things about having this leadership team is they are a good break on what would otherwise be my extremely forward-moving ambition.”

Posted: May 17, 2016

Riva RichmondStacy Ratner is in Business to do Good