It’s no secret that nonprofits struggle with money. In fact, the Nonprofit Finance Fund’s most recent State of the Nonprofit Sector Survey found that 41% of nonprofit respondents ran a deficit in 2012. If we really want to rewrite this rule for the nonprofit sector, we need to make some pretty big changes.
So here’s a radical idea.
What if every nonprofit board were responsible for bringing in 10% of their nonprofit’s annual operating budget?
That means that if your nonprofit’s budget is $1 million, your board would be responsible for raising $100,000 each year. They could do that through a combination of give/get activities, meaning they could all write personal checks (at whatever level makes sense for them individually) and then use their unique skills, experience and networks to raise the remaining amount.
That’s a crazy idea, right?
I don’t think so. Here’s why.
The Board Must Really Understand the Money Engine
A board of directors simply cannot separate themselves from the financial engine of their nonprofit. The entire board must fully understand and contribute to how money flows to the organization. They cannot argue that money is the purview of the staff; money HAS to be part of the board’s job. Until we make the board really participate in making the financial engine run, they won’t be able to have substantive conversations about how to raise or spend that money.
The Board Must Share the Burden
I’m so tired of silly, small board fundraising goals. Does a 15 member board that brings in only $15,000 out of a $1 million budget really make a difference? Absolutely not. That’s pennies. If they are truly going to lead the nonprofit that they serve, they must share the financial burden. Ten percent of the operating budget starts to make a significant dent, so let’s start there.
The Board Must Tap Into Their Unique Assets
I am not suggesting that we force every board member to ask individuals for money. Far from it. Rather, I’m arguing that nonprofits start getting really strategic about tapping into each individual board member’s strengths and assets in order to make a bold fundraising goal a reality.
But you can’t just turn to the board and tell them to bring 10% in the door. Some things are going to have to dramatically change in order to make 10% a reality.
Here’s what you have to do:
- Work one-on-one with each individual board member to create an annual plan for how they will meet their part of the goal.
- Give the board lots of different ideas for how they can meet their goal.
- Provide the training, materials, and education they need to execute on that individual plan.
- Hold each individual board member accountable for their individual plans and goals, check in with them every month to see how they are progressing.
- Have the board report at every meeting about their progress on the 10% goal.
If we really want to see a shift in how the nonprofit sector is funded, we need to make some pretty radical changes to business as usual. So start to entertain the idea. What would it look like if your board brought in 10% of your annual budget?
If you want help transforming your board, check out the Board Engagement consulting services I provide.
Photo Credit: Richard Matthews
Last week I spoke to a group of nonprofit leaders about 5 Nonprofits Trends to Watch in 2013 and a woman stood up and said “These trends are all well and good, but we need to talk about the fact that the money just isn’t there anymore. We are having to compete with more organizations for much less available funding. We need solutions to that.”
Agreed — fewer resources and more competition for those shrinking resources is the reality we are facing. But it’s not going to change anytime soon. So it is up to nonprofit leaders to embrace and adapt to that new reality. Instead of beating our heads against the wall of change, let’s adapt to meet it.
In fact, it is time for a new kind of nonprofit leader, one who has the confidence, ability, foresight, energy, and strength of will to really lead the nonprofit sector forward.
This new nonprofit leader:
Moves to Impact. She realizes that it is no longer enough to just “do good work.” Nonprofits must create a theory of change and then find a way to measure and articulate the outcomes and impact they hope they are achieving.
Finances the Work. He works toward completely integrating money into the mission his nonprofit is trying to achieve, understanding that big plans are not enough, he also must finance them. And beyond just recognizing his lack of infrastructure, he puts together a plan for raising capacity capital and convinces donors to start investing in a stronger, more effective organization behind the work.
Refuses to Play Nice. She overcomes the nonprofit norm of politeness at all costs and gets real with funders, board members, or staff who are standing in the way of the mission and impact of the organization.
Looks Outside. He understands that a nonprofit can no longer exist in a vacuum. He and his board and staff must constantly monitor the external marketplace of changing client needs, demographic and economic trends, funder interests in order make sure their nonprofit continues to create community value.
Gets Social. She embraces the idea of a networked nonprofit and is willing and able to open her organization and let the world in as fully engaged partners in the work her nonprofit is doing.
Asks Hard Questions. He constantly forces himself, and his high-performing team of board, staff, funders and volunteers to ask hard questions (like these and these) in order to make sure they are pushing themselves harder, making the best use of resources and delivering more results.
This new nonprofit leader is confident, engaged, and savvy. She will, I have no doubt, lead this great nonprofit sector to new heights.
If you need help figuring out how to adapt to this new reality, let me know.
Photo Credit: John Morton
Nonprofits, like any organization, are constantly faced with new opportunities. In a world that is moving faster, becoming more competitive and increasingly requiring solutions, new opportunities crop up all the time. Should you offer services to a different kind of client? Should you collaborate with a competing organization? Should you pursue a new potential revenue stream? Because nonprofits are consensus-based and have multiple “customers” they sometimes go after new opportunities that they shouldn’t.
The trick is to analyze whether the new opportunity makes strategic sense for your nonprofit. Here are 5 questions to help you:
- Does it fit our strategic direction? You don’t want a strategic plan that sets in stone your organization’s future course, particularly given the tremendously volatile world in which we now live. So if your strategic plan is a good one, you’ve created filters for analyzing new opportunities. If this new opportunity fits within those filters that’s great, but you still need to determine what resources you will reallocate in order to do this new thing.
- Does it fit our core competencies? Even more important than your strategic direction, this new opportunity must play to your strengths. If you excel at running a pre-K reading program, a new math program might not be a good fit. Included in this question is the follow up: Could someone else do it better? If so, let them. Focus on what you do best.
- Is someone pushing this because of their own interests? Let’s face it, nonprofits are made up of many people, some of whom have their own individual interests or pet projects. But once you start following one of those individual interests instead of the interests of the organization as a whole you are in big trouble. Take a step back and make sure this new opportunity is really going to get the organization further.
- Do you want to do this because of your own baggage? Leaders are only human, and we humans all have our weaknesses. Sometimes when a nonprofit leader is making a critical decision some of their personal baggage gets in the way. Perhaps you are afraid of how you will look to your peers if you don’t pursue this opportunity, or maybe you want to keep your fiercest competitor from gaining turf, or perhaps you have a really hard time saying no. Whatever it is, you need to recognize when your baggage, instead of smart strategy, is calling the shots.
- Will this new opportunity further your mission or long-term financial sustainability? If it’s not about mission or money, why are you doing it? Don’t get caught up in vague ideas about “community goodwill.” You will achieve community goodwill by working toward your mission effectively. And be careful about assuming any potential money is a reason to pursue an opportunity. Not all money contributes to the long-term financial sustainability of the organization. Make sure that this new opportunity doesn’t cost more than it brings in.
Nonprofits should not fear new opportunities. Indeed innovation, which the sector so desperately needs, requires a real openness to change and risk. However, nonprofit leaders must take a disciplined approach to making new opportunities part of their overall strategy.
Photo Credit: mytmoss
In this month’s Social Velocity blog interview, we’re talking with Dennis Morrow, the Executive Director of Janus Youth Programs, a multi-service nonprofit agency that works with children, youth, and families in Portland, Oregon and Southwest Washington. Janus Youth caught my eye a few months ago when Village Market, a nonprofit inner city grocery store they launched, turned a year old. Their solution to inner city food deserts fascinates me, and I wanted to learn more.
You can read past interviews in our Social Innovation Interview Series here.
Nell: What was the impetus for starting the Village Market in North Portland?
Dennis: In 2006 Home Forward (formerly Housing Authority of Portland) rebuilt the former Columbia Villa Tamaracks, Oregon’s largest public housing development, through federal HOPE VI Project funds. Renamed New Columbia, redesign plans included both subsidized rental units and moderately priced homes for purchase, a new grade school, a Boys and Girls Club, service buildings, and expansion of Janus’ Village Gardens Urban Agriculture Initiative to New Columbia. This expansion included a second community-run garden site, a second children’s garden club program, and an orchard. The new community center included a park, office/community room space for services, and space for a privately run “main street” grocery store that operated for approximately 2+ years before closing.
As Village Gardens continued to expand leadership opportunities for residents in New Columbia and the adjoining low-income Tamaracks Apartment Complex (also a Home Forward property), residents and garden leaders voiced the need to reopen the local grocery store selling healthy, fresh, culturally relevant food (no alcohol/tobacco/lottery tickets) in New Columbia where 33% of the 3,000+ residents lack personal transportation and faced a 45 minute bus ride each way to the closest grocery store. These community members also had a vision that the store could be community-run and could provide additional employment opportunities for teens/adults. They also saw the store as a central meeting place for the exchange of information (focused on healthy eating/healthy living) and a community meeting place for New Columbia’s diverse residents.
Janus had worked in and with this North Portland community for over 15 years and had established ourselves as trusted partners who see our mission not as “doing for” or “doing to” but rather “working with” the community to realize the vision they have for their neighborhood and their families. Both Home Forward and the surrounding community specifically asked Janus to assume a leadership role in planning and overseeing the development/operation of the Village Market. With support from Janus’ Village Gardens staff, Janus’ Administrative Team and the Janus Board, New Columbia leaders spent nearly two years researching/surveying the community on the products that would be important to sell in the store, interviewing potential vendors, developing a business plan, and designing the store’s layout which included neighborhood murals. In 2011 after having secured foundation/public funding for start-up and operational capital, the Village Market was opened as a non-profit, community-run healthy corner grocery store.
As with every new initiative of Village Gardens, the impetus for the store came directly from the resident community’s expressed needs and desire.
Nell: The grocery store industry is a really competitive one. Do you think being a nonprofit store, instead of a for-profit one, puts you at a competitive advantage? Why or why not?
Dennis: There are definitely both pluses and minuses to our nonprofit status. The advantages it creates is that it was possible to secure public and private funding (literally worth over $800,000) for start-up and initial operational costs because of the programmatic issues also being addressed by the store including community health, employment for low-income teens and adults in an economically challenged area of Portland, community development/revitalization, social impact, and public safety. It has become a positive symbol of success for the community and in the community. What we do not know yet is the degree to which being community owned/managed and a nonprofit actually impacts on consumer behavior: do folks actually shop with us because of that? Our Store Advisory Committee is in the process of beginning customer and neighborhood surveys to answer this question more directly.
One disadvantage of being a non-profit operation is that there are very few models of success nationally to draw on. As a nonprofit youth-serving organization, running a retail business is also not part of our corporate skill set. We have a very good consultant who works hard to “train us” into the intricacies of successful store management. Ultimately, however, it is not the nonprofit status which represents our greatest challenge—it is the “healthy food” concept. The grocery industry is very competitive and, in a largely low income community, also very price sensitive. Margins on products/sales need to be much tighter than in a traditional store, and there is a smaller product mix due to space limitations. This makes it essential to have the right products on shelf so product moves, to manage inventory control very tightly, and to track pricing very closely. Featuring organic produce, for instance, instead of beer is a much more significant challenge in terms of shelf life and spoilage. Eliminating sale of alcohol/tobacco products and lottery tickets essentially removes the primary profit generators from a traditional convenience store. Essentially this puts us at a competitive disadvantage with for-profit stores but the disadvantage is not in being a non-profit but in being a small, organic/healthy food store.
Nell: One year in, it looks like Village Market could be a model for solving the growing problem of food deserts in poor, urban areas. Do you think your particularly model could be a solution to this growing problem?
Dennis: We do not believe there is a one-size-fits-all solution to food deserts. The Village Market offers one potential road map. But remember, the essence of Village Market is that it was “birthed by” the community—not Janus, not Home Forward, and not some federal grant program. We trust each community to find solutions that will work for them—but in order to do this, you have to have an incredible faith in people who live in that community. We also refer to Janus as the “vehicle” through which the Village Market vision was made real, not the “owners” of the Market. A study was just completed by the Oregon Public Health Institute on Village Market which details out the various elements that have gone into its success so far, and this study could be a guide for other communities exploring these issues.
One element which does excite us is the core concept that the Market is much more than a store. It is a community hub where neighbors can gather, it is employment opportunities in a neighborhood where there are few, it is an educational program serving as home base for a team of Community Health Workers, it promotes inter-generational growth with a “Healthy Kids Snack Corner” designed by children from the neighborhood school, and it represents a beacon of hope that the community can thrive.
On the other hand, we are not yet a solution because we do not yet know for sure if the model is sustainable over time. Sales have gone up every month for the last seven months—but due to the lower profit margins inherent in the healthy food concept, we are still “living” on our start-up subsidy funds. The outstanding question now is whether a store like this can self-sustain or whether it will require some form of ongoing subsidy. If a subsidy is required, then there is a major policy issue of where it should/could come from—in essence, who will step up to provide the irrigation necessary to turn a food desert into an oasis?
Nell: How do you integrate Village Market with the other core homeless youth work of Janus Youth? Have you ever been concerned that the market might distract the organization from your mission?
Dennis: Janus’ organizational mission is to “be a leader in creating innovative community-based services that enhance the quality of life of children, youth and families by working in partnership with others to create a safe and healthy community.” We are actually not a homeless youth service agency but a multi-service agency for children, youth, and families. Janus operates over 40 different programs at 20 different locations including long-term residential treatment, a full continuum of services for runaway/homeless youth, home visiting/parent training for teen parents/infants/children, a youth scholarship fund, and Village Gardens. Our organizational chart is actually a tree reflecting different branches of service with each leaf being an individual program. The Village Gardens limb actually has several leaves besides the market including two community garden sites, a community health-worker project, a flock of organic hens, and an organic farm run totally by teenagers. The Village Market is a “stretch” for Janus, but it is a natural leaf on the Village Gardens limb—and when we were asked to be the vehicle for this community vision, our mission clearly tells us that is exactly what we should do. Each of Janus’ “limbs” of service operate with a high level of autonomy but with a core set of values based in Safety and Respect: creating a Safe environment for staff, youth, and families to grow, learn and heal and building Respectful relationships with others which empower them to find effective solutions for themselves. So the Village Market does not so much “integrate” with our mission as it “fits” within our mission.
Nell: The Village Market was obviously a big risk for Janus Youth to take on. Were board and staff initially concerned about the risks and how did you overcome those fears?
Dennis: This type of venture represents a huge risk to any organization. Our leadership staff and Board were extremely concerned particularly around the financial area. Starting up a new business requires substantial start-up capital as well as subsidized operational capital for an initial period of time. One of our Board members owns a business consulting firm, and he personally worked with the community planning team to build a sound business plan. This plan also had substantial input from our “grocery store consultant”. We then worked with Home Forward to solicit funding for the business plan and were successful in raising over $800,000. Home Forward contributes free rent and utilities as part of their investment. The Board approved opening the store based on two parameters: 1) We would not open until all of the start-up/operational capital in the business plan had been raised; and 2) Once open, we will operate the store as long as it does not require a subsidy from Janus. We were successful in meeting “1” and are now in the process of testing out “2”—but the Board is clear that we cannot afford to drain resources from other program areas in order to support ongoing operation of the store. Either it will reach a “break-even” point as a stand-alone business or we will need to find the operational subsidy necessary to maintain it on an ongoing basis.
The following list comes from the Resources page of the Social Velocity web site. The page includes social innovation conferences, organizations, funders, blogs, books and other things that anyone involved in the social change space should be aware of. It could be a starting point or an ongoing exploration of what’s going on in the space.
We are constantly adding to the Resources page, so if we are missing something, let us know in the comments.
Organizations Moving Social Innovation Forward
- 130 Ways to Fund Your Social Venture
- Center for Effective Philanthropy
- Dell Social Innovation Competition
- Echoing Green
- New Profit
- Nonprofit Finance Fund
- Public-Philanthropic Partnerships at the Council on Foundations
- Robert Wood Johnson’s Pioneer Portfolio
- Sea Change Capital
- Unreasonable Institute
- Venture Philanthropy Partners
- Accelerating Social Entrepreneurship in the Age of Austerity
- Bottom Billions Bottom Line
- Clinton Global Initiative Annual Meeting
- Conference on Scaling Impact (by Social Impact Exchange)
- FSG and SSIR Collective Impact Conference
- Grantmakers for Effective Organizations Conference
- Harvard Social Enterprise Conference
- Net Change Week
- Net Impact 2011 Conference
- NextGen: Charity
- The Nonprofit Management Institute (by Stanford Social Innovation Review)
- Opportunity Collaboration
- ReVisioning Value
- Skoll World Forum on Social Entrepreneurship
- Social Capital Markets Conference
- Social Enterprise Summit
- Social Enterprise World Forum
- Social Good Summit
- Social Venture Capital / Social Enterprise (Miami)
- Social Venture Network Conference
- Social Venture Partners International Annual Conference
- The Feast
- UST Symposium on Social Entrepreneurship
Philanthropic Thought Leaders
Things to Read
- SSIR Opinion Blog: Social Entrepreneurship
- SSIR Opinion Blog: Nonprofit Management
- Philanthropy 2173
- NFF's Social Currency Blog
- New Philanthropy Capital's Blog
- Money and Mission
- GuideStar: Bob Ottenhoff Blog
- Full Contact Philanthropy
- Deep Social Impact
- Dan Pallotta: Harvard Business Review
- Beth's Blog: How Nonprofits are Using Social Media to Power Change
- Against the Grain
- About.com Nonprofit Charitable Orgs
- A Smart Bear: Startups & Marketing for Geeks
- Beyond Fundraising
- Nonprofit Growth Capital, Building is not Buying
- The Nonprofit Starvation Cycle
- Social Finance
- Social Impact Bonds
- The Task Force on Social Finance
- Understanding Nonprofit Financial Statements
Using Social Media
- Built to Last: Successful Habits of Visionary Companies
- Creating Public Value
- Forces for Good: The Six Practices of High-Impact Nonprofits
- Good to Great
- Good to Great and the Social Sector
- Leap of Reason: Managing to Outcomes in an Era of Scarcity
- Strategic Management of Charter Schools
- Getting to Maybe: How the World is Changed
- How to Change the World
- One Day, All Children…: The Unlikely Triumph Of Teach For America And What I Learned Along The Way
- Social Innovation Generation
- The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World
- The Social Innovation Dynamic
- Work on Purpose
- Franchise Organizations
- Scaling Social Impact: Strategies for Spreading Social Innovations. Stanford Social Innovation Review
- The Five Meanings of Scale
- The Nonprofit Outcomes Toolbox
Photo Credit: annabellaphoto
Note: This post originally appeared on the Change.org Social Entrepreneurship blog last year.
There is an economic concept that is beautifully profound in its simplicity, but often overlooked in the nonprofit sector. Opportunity costs are the cost (financial, time, resource, other) of what you have given up in making a choice between two or more options. Understanding the opportunity costs of decisions is particularly important when resources are scarce, as is the case in the nonprofit sector.
Key to the concept of opportunity costs is that you are consciously analyzing two or more options and what you must give up in choosing one over the others. So, for example, a child who has to decide if they want a candy bar or an ice cream cone recognizes that in choosing the candy bar they are giving up the enjoyment of the ice cream cone. It seems so simple, yet in the nonprofit world it becomes much more complex.
Because the nonprofit sector is undercapitalized, money is king. A driving motivation in many nonprofit organizations is to preserve money, or go after money, at all costs. So the idea of opportunity costs is often thrown out the window.
Say, for example, that a nonprofit leader is deciding whether to spend $45,000 to hire a grant writer or $75,000 to hire a Development Director. The tendency would be to hire the grantwriter because they are cheaper, because in the world of nonprofits, cheaper is always better.
But let’s look at the opportunity costs. In hiring a grantwriter, the nonprofit would save $30,000, but lose many times that amount in opportunity costs. If they had hired a skilled Development Director with experience raising money from sources beyond foundations (individuals, corporations, earned income), the difference in revenue brought in under the grantwriter versus under the Development Director could be in the hundreds of thousands. In choosing the “cheaper” grantwriter, the nonprofit is actually costing the organization a huge amount–the opportunity cost.
Nonprofits are sometimes so strapped for money that they head out the door with a fundraising ask trying to get the quickest money, instead of the most money. Take Idealist’s campaign earlier this year to raise emergency funds for the nonprofit job board. They raised some good money, but what if they had waited to launch a fundraising campaign until after they put a new business plan together? With a solid, innovative plan in hand for completely revamping a struggling organization, they probably could have raised 10 times the amount they did raise. So for them the opportunity costs of not waiting to go public with an ask was potentially huge.
But the calculation of opportunity costs goes well beyond money. The value of a board member’s time in a nonprofit is huge. A good board member has the potential to forge relationships with funders, partners, governing entities and others that could grow or strengthen the work of the nonprofit. But often a board member’s time is instead used to organize fundraising events, sit in endless meetings, review mindless policies. If a nonprofit were to calculate the opportunity cost of choosing to have a board member pick out tablecloth colors for the next event (trust me, it happens) versus having them use that time to introduce the Executive Director to a new potential donor, the costs would be eye-opening. A board member’s time, just like the money flowing to the organization, is not limitless.
Nonprofits cannot ignore opportunity costs, as if they don’t apply in their resource-strapped world. Indeed, because nonprofits are so constrained for resources (money, time, staff, volunteers) they should be even more cognizant of opportunity costs and ensure that every last resource is put to its highest and best use.
Photo Credit: Freddy The Boy
var _gaq = _gaq || ; _gaq.push(['_setAccount', 'UA-6524244-1']); _gaq.push(['_trackPageview']);
- Download a free Financing
Not Fundraising e-book
when you sign up for email
updates from Social Velocity.
Sign Up Here
- Do You Want to Find
for Your Nonprofit?
Make it happen with the
Develop a Financial Model