Finance

Starting a Nonprofit Shop

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It was five years ago when 69-year-old Judith Hergenes was driving to work and was rear-ended by another driver talking on his cell phone.

Doctors told her that a woman of her age only had a 50 percent chance of recovering from the neck and lower-back injuries. Even worse, the injuries forced Hergenes out of work for almost five years.

During that time, Hergenes’ car became what she calls a “lifeline,” transporting her between the overwhelming amount of appointments with doctors, physical therapists, chiropractors and acupuncturists.

“I’ve had this whole team of health care providers working to make me better,” she says. “I have an emotional attachment to this car.”

So when Hergenes’ car broke down earlier this year, and with all of her retirement benefits going to pay for her appointments, she found herself at a dead end.

That’s where Cathy Heying came in.

Heying is the founder of The Lift Garage, a three-bay, nonprofit auto repair shop in Minneapolis that provides low-income Minnesotans with affordable car repair.

“We want people to feel heard and respected,” Heying says. “I want to make a space that says you are welcome here, we’re glad you’re here, you’re not a burden to us, and we want to be a support for you in your already challenging life.”

But more importantly, for customers like Hergenes, the repairs have meant a shot at getting their lives back on track.

“People who would perhaps not even have a car because they didn’t have money to fix it, have the hope again of a future, hope of being able to tend to their cars, get to work and take care of their families,” Hergenes says.

Filling the Gap

Heying has spent almost her entire career in social services. She received her bachelor’s degree in social work and a master’s degree in pastoral ministry, before going on to work for both St. Stephen’s Catholic Church and St. Stephen’s Human Services in Minneapolis.

As the director of social justice at the church, which runs a homeless shelter on its property, Heying was no stranger to the importance of reliable transportation.

Often, a broken-down car was only the start of a domino effect: No money for the $300 repair means no car; no car means no way to get to work; no transportation eventually means no job; and, in the end, no job means no housing.

“I heard some variation of that story over and over again,” says Heying. “I just kept thinking, ‘Somebody should do something about this.’ Eventually it became clear that that somebody would be me.”

She started toying with the idea for The Lift Garage during her nine years at St. Stephen’s, but it wasn’t until Heying left her job in 2008 that she began to take the idea of a career change seriously and signed up for automotive technical college.

“There were a dozen times I wanted to quit in that first quarter but I just kept holding this vision of a place that not only helped fill that gap for folks but was also a place of hospitality for people,” she says. “People in poverty often get pushed along. Having worked in social services, I’ve seen it a lot. I envisioned this place where it was a safe space for them that had affordable car repair to help them remain self-sufficient.”

Collecting the Data

Upon graduating technical college in 2010, Heying quickly realized the need for affordable car repair hadn’t gone away. So she spent the better part of the next two years collecting information.

“I was having a lot of conversations,” she says, “asking people out to coffee and asking them, ‘What do you think? Is this feasible? Who else should I be talking to? What do you think the next five things I should be doing are?’”

Heying talked to shop owners, business leaders, mechanics, lawyers, and, much to her surprise, the reaction was overwhelmingly positive.

“Everybody thought it was a great idea and was as helpful as they could be,” she says. “That was really encouraging.”

In the fall of 2011, Heying brought together a group of 11 city council members, social service providers, business leaders, and people who had experienced homelessness to act as a board of directors.

GETTING EDUCATED: Before opening her nonprofit repair shop, Cathy Heying trained as a technican. She works in the Lift Garage with one other tech. Photo by Stephen Geffre

Among those board members was Isaac Wengerd, a state program administrator for the Minnesota Department of Human Services, who worked closely with a group of local law students to secure the 501(c)(3) nonprofit status and create a business plan.

Wengerd says the shop originally planned to form as a hybrid for-profit and nonprofit business. The idea was to create a stand-alone shop with a nonprofit component that would serve low-income people. The for-profit segment would funnel funds to the charitable efforts.

“That’s the route we pursued doggedly,” he says. “Finally we decided to put in our application without that for-profit component. The information we were getting from the attorneys was that it was too risky to go to the IRS and ask for nonprofit status when we were potentially charging our full cost to some clients. The IRS rule of thumb for nonprofits was 85 percent of your actual cost is the maximum you should be charging people or you’re no longer fulfilling your charitable mission.”

Wengerd says operating as a for-profit business also meant that the shop would be considered a competing business with other repair shops, even though the shop had a different mission.

Eventually, the board of directors decided to stick with nonprofit status, and by the summer of 2012, it had achieved the 501(c)(3) status and fundraised the agreed-upon $50,000 needed to open the shop.

Heying originally planned to purchase a building, but after looking at her options, realized the costs were too high. In February, Heying received an offer to sublet a bay from a hybrid-vehicle conversion business, which was moving from the three bays it rented in back of a Minneapolis car wash and wanted to sublet the space for the remainder of its leasing term. Heying decided leasing a space was a better route to take, and was able to negotiate a six-month lease for one bay.

Heying was responsible for bringing all her own equipment, most of which was donated. A shop owner friend of Heying’s donated a lift and alignment machine, and Heying had previously purchased tools during her time in automotive tech school. For the first few months, Heying was the shop’s only paid employee, relying on mechanic friends and other volunteers to help with repairs.

By April 2013, The Lift Garage was open for business.

Stocking the Shop

The shop is now open on Saturdays from 9 a.m. to 6 p.m., and offers services from basic maintenance, such as batteries, to service repairs, including suspension and steering.

“It’s all safety and drivability,” Heying says. “We’re trying to get people’s cars back on the roads and getting around safely.”

In late summer, Heying hired a part-time mechanic, who is paid for 10 hours of work each week.

Currently, all customers must be referred to the shop by a caseworker or social worker that can verify their income through documentation.

To be eligible, customers must make at or below 30 percent of area median income, which translates to roughly $17,000 a year for a household of one and $24,700 a year for a household of four, and be able to transport the car to the shop. The Lift Garage charges $15 per hour for labor plus the cost of parts, which don’t have any markups. With those prices, Heying says that a complete front brake job could cost roughly $130 total.

Besides the inexpensive repairs, Heying also strives to create an experience that makes customers feel warm and welcome.

“Hospitality is a huge value of mine,” she says. “I think it’s so important for us to be welcoming. I don’t just want the cheapest of everything for the space. We want people to feel heard and respected. Hopefully we can continue getting better and better at that.”

Hergenes says the hospitality she experienced was an unexpected highlight.

“[The Lift Garage] is sharing what’s going on and what they can do,” she says. “They’re doing an educational piece too and they’re helping people like me to understand how to keep their car going. That’s been the greatest part of my journey.”

Meeting the Demand

No sooner had the doors opened to The Lift Garage than business started flooding in. Heying started by inviting only a select number of social workers to act as referring sources, but word quickly got out. The shop is now regularly booked three weeks out and Heying estimates she receives at least five new inquiries every week.

“The more we can raise, the more people we can serve,” says Wengerd. “Our costs are somewhat relative to what we can raise.”

For the first year, the shop primarily relied on private fundraising along with small grants from the faith community and small family foundations to help cover additional expenses, such as Heying and the mechanic’s 10-hours-a-week salary.

In late September 2013, the Lift Garage was awarded a $25,000 grant from the Bremer Foundation, which will cover some operational costs with the intent to expand.

“There aren’t a lot of foundations that want to take risks on new [organizations],” Wengerd says. “A lot of people want multiple years of operating experience. I empathize with that, but I’ve also tried to convince them that we have the capacity on our board with finance people, lawyers, grants people, to make sure that this really happens and they won’t be disappointed. That’s where the Bremer grant will really help us prove ourselves.”

In June, Heying took over the lease for the additional two bays, one of which is used for office space. Wengerd says the shop hopes to use some of the grant money to hire a second part-time mechanic.

“Now that we have a sizeable amount for a fixed period of time, I think we can develop a plan based on that and we can put in some growth triggers,” Wengerd says. “We want to expand capacity so we don’t have to schedule people so far out.”

On the Horizon

Looking ahead, Heying hopes to become a full-service shop, which would also incorporate a job-training component for people coming out of shelters or prison.

In addition, Heying hopes to open a second for-profit sister organization that anyone could take their car to, with profits funneling back to the nonprofit. The second shop would also act as a key component of the job-training program, providing real-life experience for apprentices.

“We get a lot of folks who are interested but who don’t meet the criteria,” she says. “My long-term vision is to provide a place for everyone.”

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