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The Three Avocados Model

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Recently, I’ve received a number of questions about our financial model. I’ve also seen some blog posts where people are taking a stab at what it might be. I think that’s absolutely wonderful that people are interested in the model behind Three Avocados. Based upon the interest, I wanted to take a few minutes to write a simple blog post describing the model.

Simply put, in many ways, Three Avocados is no different than any other business…well, except that we give away 100% of our profits. The easiest way to think about our model is just that of a regular for-profit business.

I often see us grouped with charities, presumably because of our focus on clean water and the fact we are a non-profit. I really don’t think of Three Avocados as a charity though. In fact, I started Three Avocados because I was seeking a way to help without going down the standard charity route of asking for donations. I think there are a ton of great charities that do amazing work, but that’s just not my thing. A portion of our revenue does come from donations, but the beautiful thing is that the sale of the coffee more than covers operational costs, which means any donations can go 100% to providing clean water.

The primary focus with our model is to achieve self-sustainability. In other words, donations should never be a critical part of our model. We should be able to fully survive, and generate profit, without a single donation. We are not asking for donations, rather, we’re saying “buy this not that”. We’re not asking people for new money, but rather asking them to redirect money they are already spending to buy coffee. And by choosing our product, they can make an impact on a life halfway around the world.

Currently, we have no staff, no offices, no loans, so our cost structure is very simple. We have the cost of green (unroasted) coffee, bags, labels, roasting, and then some minimal ancillary marketing costs. Over time, this will grow – we will need to hire employees, buy equipment, get loans, etc. However, fear not, our business model is purposely set up to allow for such things. Again, think of any large coffee roaster – Starbucks, Green Mountain Coffee, Caribou Coffee, etc. They all manage to fund operations, marketing, and turn a profit. With Three Avocados, the same model applies, except our profit provides clean water.

So, why a non-profit vs a for-profit social enterprise? For me, it was a simple choice. My motivation in starting Three Avocados had absolutely nothing to do with making money. In getting Three Avocados started, I wanted to ensure that the motivation stayed with helping others, whether I was in charge of the organization or not. I wanted to do whatever I could in the beginning to protect against greed at a later date, again, whether it be me in charge, or someone else. My dreams are that Three Avocados will one day do $100 million a year in revenues. And I want every cent of profit to benefit those living in poverty, through clean water, education, and health.

I hope this helps you to understand our model. If you have any questions, please leave a comment and I’ll be glad to answer the questions. Now…go buy some coffee!

Note: We do not yet have our 501(c)(3), but are registered with the State of Missouri as a Non-Profit Corporation. Hopefully our 501(c)(3) will be granted sometime in 2011.

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