Nonprofit Sustainability 1
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1 Nonprofit Sustainability 1 Every nonprofit organization is successful in a unique way. A nonprofit s success often depends on a unique set of circumstances and uniquely adept decision making. This is all the more true to the extent that a nonprofit organization reflects and serves the needs of its surrounding community. Sustainability encompasses both financial sustainability (the ability to generate resources to meet the needs of the present without compromising the future) and programmatic sustainability (the ability to develop, mature, and cycle out programs to be responsive to constituencies over time). Financial Sustainability In addition to fundraising events and appeals the board has a responsibility to personally contribute cash gifts and to identify potential individual and corporate donors. 1 Nonprofit Sustainability Making Strategic Decisions for Financial Viability by Jeanne Bell, Jan Masaoka, Steve Zimmerman 1
2 Sustainability is an orientation, not a destination. Sometimes the phrase sustainable business model sounds as if it refers to a place that, once reached, will allow the organization to generate financial resources on an ongoing basis while the board and staff sit back, relax, and watch it happen. But what is sustainable today may be unsustainable tomorrow. Funding streams dry up or shift focus; programmatic practices evolve; client populations change. We never arrive at a mix of programs and revenue streams that can be described as permanently sustainable. But we can always be heading in the right direction. Rather than a destination or a solution, sustainability is a direction and an orientation. Sustainability requires continuous decision making that reflects the dynamic context in which nonprofit operates. A nonprofit s strategy for sustainability must encompass both: Programmatic elements the nonprofit s programs are relevant to its constituents and are having an impact Financial elements the organization has sufficient working capital for its needs and activities. 2
3 Nonprofit Business Models Must consider financial viability and mission impact together instead of strategic plans that are different and separate from a fundraising plan or business plan Are about how activities fit together and leverage each other instead of considering activities individually 3
4 The Nonprofit Business Model Every organization has one whether you know it or not. Explains how a nonprofit generates and allocates revenue to accomplish its mission and remain financially viable. Nearly all nonprofits today are hybrids combining earned income with donations. Business models change over time. Businesses with the same services can have different business models Dual Bottom Line Strategy Each activity has two kinds of impact: Mission impact (external) and Financial impact (internal) So a strategy for sustainability must be a strategy that combines both kinds of impact. 4
5 Sample Impact and Revenue Strategies Program or Event Impact Strategy Revenue Strategy English language performances of plays originally in Spanish Entertain and challenge Englishspeaking and bilingual audiences, using Latino cultural, economic, and other relevant themes Season and single-show ticket sales After-school drama workshops Special events Engage young people in the theater; provide positive options for at-risk kids; build an audience Build a community of donors and supporters; raise unrestricted funds Parent fees and city contracts Ticket sales and auction With the business model inclusive of impact and revenue strategies articulated, leaders can shift to analysis and then to decision making. 5
6 Matrix Map High Mission Impact Low Profitability High Mission Impact *** High Profitability Low Mission Impact ~~~ Low Profitability Low Mission Impact High Profitability STARS STOP SIGNS MONEY TREES HEARTS Impact High Low Low High Profitability High Low High Low 6
7 Examples Important foundation funded program Fee for service program that makes money Annual mail donations campaign Little used resource library Program that used to have funding State fundraising event Martini parties Luncheon Raffle tickets Golf tournament Strategic Imperatives for Each Type of Program or Revenue Activity Advocacy at state level Taking children to see parents in prison Show of experimental art STARS STOP SIGNS MONEY TREES HEARTS Mission High Low Low High Impact Profitability High Low High Low Strategic Imperatives Invest & Grow Close or Give Away Water, Harvest & Increase Impact Keep but Contain Costs 7
8 Seven Criteria for Determining Impact Examples of criteria: 1. Alignment with core mission 2. Excellence in execution measurement of impact: Program evaluation data Before and after surveys Focus groups Feedback from clients, their families, etc. Direct observation Staff performance evaluations Staff turnover and exit interviews 3. Scale or volume of people served, reached, etc. 4. Depth level of impact on the people served 8
9 5. Filling an important gap Review competitors and alternative providers information Ask clients and constituents where else they obtain or could obtain the service Poll referral agents to see where else they refer callers asking about this service Review page 2 of competitors and alternative providers Form 990 (showing key program accomplishments and related expenditures) 6. Community building does the program help to build the community around the organization? interviews with community and field leaders reviews of donor histories client/market surveys 7. Leverage the degree to which a program increases the impact of other programs: when the demand and the funding for programs and services are growing rapidly in a field or a geographical area when the products or the audiences developed in a program become important tools and audiences in other programs when a program has marquee value: the program gives the organization high and positive visibility and branding 9
10 Quick Matrix Map without quantitative analysis Event or Program Mission Impact Profit Level of Effort Type Action 10
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