Recently, PPAI announced that it was going to establish a for-profit company to bring technology solutions to the industry. It did exactly that by launching a company called iServCorp which manages its newly launched DailyBoost service.
This comes from PPAI’s site:
“Enter ISERVCORP, a wholly-owned subsidiary of PPAI and a for-profit company, with a separate board of directors, a separate staff and a separate president/CEO to manage the company. The company currently is headquartered at PPAI offices in Irving, Texas, and except for some shared service agreements, operates independently of the Association, explains PPAI president, Steve Slagle.”
What are your thoughts on our industry’s non-profit association owning for-profit companies like iServCorp? Does this create a conflict of interest?
To take it a step further, how do you feel about them working to build this for profit company, with the associations time and money?
Please leave your thoughts below and subscribe to the feed using the links to the right!
I don’t like it at all, there is no reason why they can not run this service under their non-profit company. I will be contacting my friend in the state government & IRS to do a thorough investigation of the relationship between both entities. I use to work for the IRS and the government will most likely do an audit because of the large dollar value that PPAI brings in. If this audit brings up any red flags or fraud, PPAI can lose their non-profit status, which means there is a chance to start up our own non-profit promotional association, one that has strict requirements for qualifying members and suppliers (no dealing direct with end-users!). I am totally for this!
Profit is good……not a bad thing. $ can help them grow and offer more products and services we distributors can use to learn and grow our biz.
If they used PPAI cash to fund this for-profit company, PPAI members should receive a share of the for-profit company, and receive dividends from this. Also if PPAI has so much money that they can invest in new businesses, perhaps they should reduce their fees.
I am on the board of several NFPs and I’m trying to think of why I, as a board member, would approve my NFP to start a for-profit business with a different board, staff, etc. What’s in that for me? How am I thinking this for-profit entity will cater to the needs and charter of its host NFP of which I am board member (and to clarify: I’m not on, or related to anyone on, the PPAI board)?
The answer is that I can only see a field of red flags ahead. It appears that some people within are jumping ship from NFP to for-profit for greater personal gain, using lists, databases, office space and resources originally gathered under the banner of, and intended solely for, PPAI the NFP.
How is it that a wholly-owned subsidiary of PPAI designed to bring technology to the industry — created under the roof of PPAI, and by staff of PPAI??? — finds it reasonable to charge (with the intent of profit) for services and products created from cash paid in by PPAI members?
I find this both curious and stinky at the same time.
#1 They’re not going to be able to compete against a for-profit ASI without doing something that revs up the $. Anybody here eager to pay more for their membership?
#2 Non-profits often have for-profit subsidiaries. It is precisely about tax law and being able to build a warchest FOR the not-for-profit entity. For instance, at every decent sized museum, their “shop” is organized as a for-profit subsidiary.
I wouldn’t be so quick to assume the logic or goal is nefarious.
If their goals and intentions are for the benefit of current and future PPAI members, it would’ve been nice to read that sort of language in the articles posted. I’ve not read every article on the subject so perhaps they’ve already issued that sort of statement… I’ve just not seen anything along those lines in what I’ve read.
It makes total sense to me. Non-profits need revenue to provide the services the industry takes advantage of. In general non-profits are not set up to run for profit companies, so it’s only fiscally responsible to create a new entity that is owned but not run or directed by the non-profit. PPAI is going to need other revenue sources down the road, and while I support the association I don’t want my dues to go up to keep the services they offer going. Can’t think of a better way to do that than this.
I don’t like it. We pay dues they use our dues to run a for-profit business??? No brainer, don’t pay someone to run a business that they don’t share the profits of. Especially since PPAI is suppose to help us succeed.
I suggest we show PPAI that we don’t agree by cancelling our support/membership because of their association with iServCorp.
Get out!
Secondly is this legal with the IRS a non-profit running a for-profit business?? I don’t think so.
Is Madoff involved?
There is nothing wrong with a non-profit owning a for profit company. It is done more than you probably know. A good example is Credit Unions, They are a member owner operation. Credit Unions form what they call CUSO for for profit activities. The IRS and other government organizations recognize this as a proper way to do business. Sometimes and maybe in this case there is a legitimate reason for PPAI to do it this way. Maybe rather than getting your fur up ask them for an explanation.
I also failed to mention on the Credit Union discussion as I would think it would be the case here. The profit portion of the company should be feeding profits back to the owning company(s), so if anything it should help bring dues and other costs down, not raise them. Now if the profit is going into someone’s pocket then you have a different story. PPAI should be very open about how they are operating this FPC, if not then I think the membership has a problem. Get the answers before jumping to conclusions.
If the profits are put back into PPAI won’t that make PPAI a for-profit business?
In this economy will there be profits or will our dues increase to sustain iServ…?
End.
Not necessarily. There are strict guidelines the IRS has for this but it is done all the time.
I would hope that PPAI doesn’t do something stupid to try and sustain a break even or below business at the expense of the membership.
As stated earlier, PPAI should disclose everything they are doing and why they are doing it otherwise they risk a class action law suit from its membership. I will assume they have had legal guidance on this matter.
I’d like to hear PPAI’s arguments for this.
Folks, as Dan said, this is done more than you know.
The end result is profit going into the non-profit by allowing them to do things which they are not allowed to do within the structure of a non-profit.
I have dropped PPAI for another reason, that being they allow regional Associations to form and let in off the street new comers at a 5th of the cost to join PPAI, thus degrading the quality of distributors out there. Now this. Its sad.
One of my major objections with PPAI, although I have been a member in the past, was their constantly slamming ASI several years back. I had manufacturers at the Vegas ASI Show pull me aside to decry the evils of ASI charging for services.
I told them I had no problem paying for services as long as I was receiving value…most disagreed.
It seems to me if PPAI has plans to morph into another version of ASI, the members should have been notified a while back. Rather than presenting themselves as a “different animal”, they should have said “we eventually want to be like ASI, but we are merely using the “education front” as a ploy, until we can reorganize ourselves and become like they are.
My concern is the products that iservecorp offer compete with PPAI supplier members. SmartBlast, Sage, and others. Iservecorp staff told me and others at the PPAI show they are coming out with a research tool. They already have an email blast tool and were promoting it at the show.
Essentially, SmartBlast, Sage, etc will be paying for their competition to compete against them. Who knows where the competing against it’s own members will end.
So many opinions, yet so few facts. It would be healthier for everybody if this dialogue was deferred until the facts about the new company and its products and services become clearer to all.
Makes sense, but then my suggestion for PPAI would be to avoid taking things public before they are ready to back it up. This is marketing 101. Maybe they had a rush to judgement? Pressure from competition to roll their product out before it was ready? Maybe they thought they needed to release it at the Expo in 2009, even though they weren’t ready?
Not sure about the other companies here, but our company doesn’t go live with anything that they are not prepared to back 100%. Perhaps PPAI should seek a press secretary, business consultant, or anyone who can help them avoid situations like this in the future.
Hey, your blog is very good, found while in search for shop info on yahoo and it has very related information on it. Will be sure to come back again and bookmark.
You make a good point about the rush to introduce things at the annual trade show. Many years ago, I think it was more important to seize that event as a time to make announcements. These days, it probably isn’t as significant. Nevertheless, many people still look to it as a milestone date/event.
Look at how Apple withdrew from Macworld a few months ago, explaining that they have a larger audience at local retail stores and they can announce things on their own timetable instead of having that arbitrary deadline. Makes sense to me when there are so many avenues to announce things today. Look at how the Obama campaign took advantage of YouTube for example.
I have only been with PPAI for 6mos. but so far I don’t see much that I’m getting for my money. They need to do something to increase the benifits you get from being a member beside just FedEx discount. But no increase the dues because they will loose people.