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strategic plan

7 Questions to Move Your Nonprofit to Financial Sustainability

Financial sustainability seems to be the Holy Grail of the nonprofit sector. Everyone wants it, but few know how to find it.

But it doesn’t have to be that way.

I firmly believe that financial sustainability is attainable for any nonprofit, as long as board and staff are willing to ask the right questions and do the hard work.

In fact, there is a roadmap to nonprofit financial sustainability, which includes several components. Because a nonprofit’s board, their strategy, their vision and mission, their marketing efforts, their programs, all contribute to or detract from their ability to attract and use money well.

But often nonprofits struggle in so many areas (disengaged board, poor fundraising results, non-existent strategy, ineffective marketing) that it can be difficult for a nonprofit leader and board to know where to start in order to become more financially sustainable. So I’ve developed a list of questions that assess where a nonprofit is on that path and where staff and board should focus their efforts.

This mini-assessment of 7 questions is listed in priority order, so once one area is addressed, you can move on to the next. For example, you may have your “Vision” and “Strategy” all figured out, so next you need to tackle “Program Delivery,” and so on.

So to see where your nonprofit is on the path to financial sustainability, answer these 7 questions:

  1. Long-Term Vision: Do board and staff agree on the ultimate goals of the organization — what you are trying to accomplish in the world? If not, then articulate your Theory of Change, which will help you come to a shared long-term vision.

  2. Strategy: Have board and staff together articulated a strategy — how you will marshall staff, volunteers, programs, activities — to move toward that long-term vision? If not, then create a multi-year strategic plan that ties your long-term vision to the activities and resources necessary to get there.

  3. Program Delivery and Impact: Do your programs work with the people you hope to benefit or influence in your long-term vision? If not, review your target populations and analyze each of your programs’ ability to move toward your vision.

  4. Financial Model: Have you articulated how money will flow into the organization and how that money will be used to make your long-term strategy a reality? If not, then develop a long-term financing plan that articulates how much money you need, over what timeframe, and the tasks in each revenue area necessary to meet (and hopefully exceed) those expenses.

  5. Staff Effectiveness: Do you have the right staff expertise structured in the right way to deliver on your strategy? If not, analyze your staffing structure and capabilities and how they relate to what you need.

  6. Board Engagement: Do the vast majority of your board members embrace your mission and actively participate in moving it forward? If not, set clear expectations, establish accountability, and engage them one-on-one.

  7. External Relationships: Do you have the right partnerships and engagement with the right external people and organizations necessary to deliver on your strategy? If not, seek to understand the world outside your walls, develop a marketing strategy, and build the networks you need.

If you are interested in a deeper analysis of how to move your nonprofit forward on the path to financial sustainability, check out the Financial Model Assessment I conduct for clients.

Photo Credit: Jeff Power

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Is Your Nonprofit Stuck In A Rut?

The other day I was talking with a nonprofit leader and was suddenly struck by how much his story echoed so many of the stories I hear from nonprofit leaders.

See if your nonprofit fits some or all aspects of the scenario he faces:

  • His board is passionate about the mission and wants to be helpful, but they don’t really contribute much to the financial model.
  • His staff and board want to expand services, but they can’t grow their budget past where it has been for years.
  • Their funding is fairly dependent on just a couple of sources.
  • Their funders support specific projects, rather than the organization or mission as a whole.
  • Their strategic plan hasn’t been updated in 5 years.
  • The board worries whether some of what the nonprofit does duplicates other efforts out there.
  • Board and staff don’t have a common way to articulate what the nonprofit is and does.
  • Their nonprofit is just barely getting by and has no cash reserves.

They, like so many nonprofits, are stuck in a rut.

They want to accomplish something much bigger and better but continue to spin their wheels against what they have always done. It’s really a chicken or the egg scenario. A nonprofit is unable to grow their services, their board, and their supporters because the organization has limited resources. And so they keep soldiering on, same as it ever was.

But let’s face it folks, in times like these, the status quo just isn’t going to work anymore.

Luckily, there is a way out.

When I encounter a nonprofit leader like the one above who has a real desire to break out of this pattern, I suggest a Financial Model Assessment. A Financial Model Assessment analyzes every aspect of the organization (Mission, Vision, Strategy, Program Delivery and Impact, Staffing, Board, Marketing, External Partnerships) in order to understand how each element helps or hurts their financial sustainability and their ability to achieve results. It then analyzes all current and potential revenue streams to find opportunities for sustainable growth. Finally, the Assessment gives very detailed recommendations for creating a more effective and sustainable organization.

I am a firm believer in a holistic approach. You simply cannot bemoan a lack of financial resources and call it a day. You must dig deep and figure out how everything you do contributes to or detracts from your current reality.

But because nonprofit leaders are usually consumed by putting out fires and worrying when the next check will come, they don’t have the ability to take a big step back and figure out how all of the pieces can and should fit together. So a Financial Model Assessment allows a nonprofit board and staff to understand what is holding their organization back from becoming financially sustainable AND achieving more mission-related results.

Once I’ve written my final Assessment, I lead a change discussion among board and staff. We delve into the Assessment and discuss how and why I came to the conclusions I did. This is often a galvanizing moment for the nonprofit — a moment when board and staff finally understand together a way forward that can allow them to be smarter, more strategic, more sustainable and ultimately achieve more results.

If you are interested in big change and need help navigating how to get there, download the Financial Model Assessment Benefit Sheet that describes the process in more detail. And if you’d like to read about other nonprofits who undertook a change process, check out these case studies.

Photo Credit: Public domain via Wikimedia

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6 Steps to Operationalize a Nonprofit Strategic Plan

gearsOne of the biggest complaints about nonprofit strategic plans is that once created, they just sit on a shelf. A strategic plan is completely wasted effort if you neglect the final step of operationalizing it.

And by that I mean creating an annual tactical plan and monitoring process that directly tie to the larger strategy. In fact, lack of the operational part of your strategic plan is one of the 3 biggest problems with nonprofit strategic planning.

It does absolutely no good to have big goals that you want to accomplish and a larger future direction for your nonprofit’s work if you don’t have a way to connect that to your day-to-day operations.

So here are the 6 steps to do just that:

1. Create the Strategy
Start with the broad goals and objectives of your strategic plan. Typically, I recommend a nonprofit have 3-6 broad goals over a future (say 3 years or so) period. These should always tie to your longer term Theory of Change, and each goal should be broken down into the 5-10 objectives necessary to get there. And it goes without saying, but you have to create this strategy through a defined strategic planning process.

2. Create Annual Milestones
Once the board has approved those broad goals and objectives, staff needs to create a milestone table that articulates a lead person responsible (“Lead”) and a deliverable for each objective at the end of each year of the strategic plan (“Milestone”), like this:

 

milestone table

 

 

 

 

 

 

 

 

 

 

3. Create a Year One Operational Plan

Once you have that milestone table, you can pull out the milestones for the first year and develop your Year 1 operational plan (below), which lists monthly or quarterly checkpoints for each objective’s milestone for that year. This will helps you monitor (step #4 below) whether the plan is coming to fruition.

operational plan

 

 

 

 

 

 

 

 

 

 

4. Monitor Monthly at Staff Level

This operational plan should be reviewed on at least a monthly basis, where the staff comes together to analyze their checkpoints and report on what’s working, what’s not, and where they need to make adjustments.

5. Monitor Regularly at Board Level
Whether your board meets monthly, quarterly or (yikes!) less, you need to report to them on the progress of your strategic plan at every meeting. Since the board is ultimately responsible for the strategic direction of the organization, they need to understand how it is going. Using the operational plan above, you can easily highlight where: things are moving smoothly (green), things need discussion or action (yellow), and serious problems or hurdles (red) lie.

6. Adjust Accordingly
On at least an annual basis, the full board should review the organization’s Theory of Change and goals and objectives of the strategic plan to determine if any revisions (due to changes in internal and/or external circumstances) need to be made.

I believe that a huge reason for the distaste nonprofit leaders have for strategic planning comes from the poor operationalization of those plans. You simply cannot hope to execute on a strategic plan without tactics to get there.

You can learn more about what a strategic planning process looks like here.

Photo Credit: Kevin Utting

 

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Where Does Your Nonprofit Fit In the Market?

nonprofit puzzleAs much as we might like to deny it, nonprofits exist in a market economy, which means that nonprofits, like everything else, must compete for customers and resources. Therefore it is critical that you understand where your nonprofit fits in the market.

While a business has one customer, a nonprofit has at least two distinct customer groups:

  1. Those who benefit from a nonprofit’s work (clients), and

  2. Those who fund that work (donors, government contractors, etc).

So it is absolutely critical that nonprofit leaders understand what unique value their work brings to these customers. This can be done through a Marketplace Map, which is one of the first exercises (along with a Theory of Change) that I help nonprofit leaders create during a strategic planning process.

A nonprofit organization is best positioned to create social change in a sustainable way when their core competencies (what the organization does better than anyone else) intersects with a community need (or set of social problems) apart from their competitors or collaborators, like this:

Marketplace Map

 

But don’t get me wrong. I am not saying that a nonprofit shouldn’t collaborate.

On the contrary, nonprofit leaders must forge strategic alliances that help move the social change they envision forward. However, when they create those alliances, they must be crystal clear about what their organization brings to the table, versus what a potential ally brings to the table. Thus, a marketplace mapping exercise is absolutely critical to charting a way forward.

In order to create their marketplace map, a nonprofit’s board and staff must answer these three key questions:

  1. Core Competencies: What superior assets (expertise, relationships, etc.) do we possess as an organization that are not easily replicable?

  2. Community Needs: What community needs/social problems are we attempting to address?

  3. Competitors/Collaborators: What other entities are working on some/all of those same problems?

The social change sector has become increasingly competitive in recent years. Now more than ever, nonprofits need to understand this external marketplace of competitors/collaborators against their own core competencies in order to understand the unique value that their nonprofit can contribute.

From this marketplace mapping exercise, some key strategic questions will emerge for the nonprofit, such as:

  • Where do our core competencies and activities end, and where do others’ begin?
  • Is our nonprofit better positioned than other entities to conduct all of the activities (from our Theory of Change) that we currently do? Should some activities be left to those who do it better?
  • Are there core competencies that we must develop in order to better address the community needs we’ve identified?
  • Are there collaborators/competitors that we should be more strategic about aligning with?

Creating a Marketplace Map, much like creating a Theory of Change, is an incredibly useful exercise that gets your board and staff thinking in bigger, more strategic ways about your work. And those more strategic conversations can help lead to a more effective and sustainable path forward.

If you want to learn more about how I work with clients to develop their strategic plan, download the Strategic Plan benefit sheet.

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Why Some Nonprofits Aren’t Ready for a Strategic Plan (Yet)

nonprofit capacityDon’t get me wrong, I am a huge believer in strategy. I talk about it All. The. Time. I firmly believe that every nonprofit should have a long-term strategy with a corresponding financial model.

But sometimes a nonprofit is not quite ready to create that long-term strategy because they don’t know what they don’t know.

When a nonprofit suffers from a host of problems that they don’t know how to solve, I encourage them to take a big step back. Because you cannot articulate your theory of change, your goals for the future, the makeup of your staff and board, your financial model, if you are putting out fires and struggling to keep your doors open.

Let me give you an example. An animal welfare nonprofit came to me recently wanting to embark on a strategic planning process. Yet, in the course of our conversation, they revealed that they currently faced a long list of challenges, including:

  • A disengaged board of directors
  • A poorly structured staff
  • A non-existent marketing strategy
  • An over-reliance on a couple of funding streams
  • An inability to articulate to outsiders what they do and why

These are huge challenges, and creating a strategic plan won’t solve them. If the leader of this nonprofit were to gather her board and staff and ask them to chart the next three years, they would only be talking in circles. Because if you don’t know what’s wrong, you have no hope of figuring out how to fix it.

You should only embark on a strategic planning process when you have the knowledge and capacity necessary to chart a clear future course.

So how do you know if you are truly ready to launch a strategic planning process? Start with these questions:

  • Do you have a critical mass of key board members who are excited about and in general agreement on the future of the organization?
  • Are you fairly confident of your cash flow over the next several years?
  • Do board and staff have the time, capacity and commitment to devote to a rigorous and external-facing, long-term planning process?
  • Can board and staff confidently articulate what the nonprofit does and why it matters?
  • Does the organization have the right staff in the right places?
  • Is your supporter/funder base growing?
  • Is the majority of your board effectively engaged in your nonprofit?

If you can’t answer yes to these questions, you may not be ready for a strategic planning process.

But all is not lost. Instead, you may need an organizational assessment (what I call a Financial Model Assessment) to determine what is holding your nonprofit back. An assessment helps a nonprofit figure out why money isn’t flowing the way they need it to be, why the board is disengaged, how to articulate what you do and why, how to structure staff effectively, and ultimately how to build the capacity and knowledge necessary to chart a future direction.

A Financial Model Assessment provides a roadmap to help a nonprofit board and staff analyze and prioritize their immediate challenges so they can address them in preparation for a longer-term planning process.

The approach, in essence is two-fold:

  1. Assess: Figure out what is holding your nonprofit back (from financial sustainability, operational effectiveness, board and donor engagement, etc.) and how to remedy those challenges.
  2. Plan: Chart a future direction that lays out the strategy for moving the organization to that next level.

It’s a one-two punch that is sometimes necessary when nonprofit leaders are so caught up in the day-to-day that they simply aren’t prepared to make the big, long-term decisions necessary in a strategic planning process.

If you want to get more strategic as an organization, I applaud you. But make sure your nonprofit is truly ready to create a strategy, or you will just be spinning your wheels and wasting everyone’s time.

If you want to learn more about these two processes I use with my clients, download the Financial Model Assessment benefit sheet and/or the Strategic Planning benefit sheet.

Photo Credit: Kale Taylor

 

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10 Most Popular Posts of 2015

10 most popular postsIt’s that time of year again — to put work away, enjoy friends and family, and give yourself a chance to take a breath. I will be taking the next two weeks off from writing the blog. But before I go, as is my tradition, I wanted to leave you with a list of the 10 most popular blog posts from this past year, in case you missed any of them.

And if you are feeling ambitious, you can also see the 10 most popular posts from 2011, 2012, 2013, and 2014.

I hope that you all will find some space over the next couple of weeks to relax, to get away, to regroup, and to ready yourselves for the next chapter. We need you social changemakers now more than ever, so please find some time to take care of yourself before you get back to taking care of the rest of the world.

Thank you for being part of the Social Velocity community and for all of your hard work making the world a better place. I wish you all a very happy New Year. I’ll see you in 2016!

  1. The Problem with Nonprofit Events
  2. How Scarcity Thinking Holds Nonprofits Back
  3. 7 Questions to Guide Your Nonprofit Strategy
  4. 5 Myths the Nonprofit Sector Must Overcome
  5. How to Build a Stellar Nonprofit Staff
  6. How to Create a Compelling Fundraising Ask
  7. 3 Signs of a Bad Nonprofit Strategic Plan
  8. 5 Fundraising Delusions Nonprofits Suffer
  9. What Do Your Programs Really Cost?
  10. The Network Approach to Social Change

Photo Credit: Ethan R

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Strategic and Sustainable Nonprofit Growth: A Case Study

AppleMark

I talk a lot about the many challenges of leading a nonprofit. But sometimes even success itself can be a challenge for a nonprofit. This was particularly true for one of my clients, Breakthrough Austin.

Breakthrough is a very successful nonprofit that identifies cohorts of 6th grade students who want to be the first in their families to graduate from college. The nonprofit then supports those students over the next 12 years so that they reach that goal. Over their 10+ year history, Breakthrough has achieved impressive student outcomes and the support of a deep donor base.

In fact, Breakthrough has been so successful that other schools and school districts have asked to add the Breakthrough program. But that’s not always a good thing, especially when a nonprofit doesn’t know where they can grow most sustainably and with the greatest results.

In the Spring of 2015, Breakthrough board and staff wanted to grow to reach more students, but they didn’t know how to determine when and where. They needed a strategic plan that could help them chart a growth trajectory to reach more students in a sustainable way. And baked into that strategic plan they needed strategic growth filters that helped them assess how to know if new locations were a good fit with their model and their long-term plans.

Breakthrough hired Social Velocity to lead their strategic planning effort. With my guidance, Breakthrough created an advisory committee of board, staff and key external stakeholders. I led the group to analyze the external environment in which Breakthrough operates, develop Breakthrough’s theory of change, refine their vision and mission statements, and articulate the goals and objectives and corresponding financial projections of the next 3 years for the organization.

Together we created the various elements of their strategic plan:

  • A Marketplace Map, to understand how their core competencies fit with a set of community needs, apart from their competitors and collaborators
  • A Theory of Change, to articulate the value they hope to create
  • Strategic Growth Filters, to analyze where they should grow
  • Revised Vision and Mission Statements
  • 3-Year Strategic Plan and Budget
  • Year 1 Operational Plan, to execute on the strategic plan
  • System for Monitoring the Plan, to make sure it is coming to fruition

Over the course of the 6-month planning period, Breakthrough board and staff became increasingly excited about their new strategic plan and the clarity it gives them about how and when to grow. They are already putting the pieces in place for expansion and are beginning to build the additional capacity necessary to get there.

Creating a strategic plan helped Breakthrough become crystal clear about how to grow strategically and sustainably, as Michael Griffith, Breakthrough Executive Director put it:

“Nell helped us chart a course for the future that meets the needs of our current students and allows us to expand to serve even more. She was skilled at developing a framework that allowed us to grapple with the tough questions of strategy and sustainability. We are thrilled we made this investment and look forward to the coming years with a plan firmly in place!”

If you want to learn more about the strategic planning process I take clients through, check out the Strategic Planning page, or if you want to read more client case studies, check out the Clients page.

Photo Credit: Breakthrough Austin

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3 Signs of a Bad Nonprofit Strategic Plan

nonprofit planningI’ve been leading several strategic planning processes lately, and as we wrapped up the last planning meeting for one of my clients (who had been encouraged to create a strategic plan by a funder) my client announced:

“I have to confess that when we started this process 6 months ago I inwardly rolled my eyes because I thought it would be a pointless process, full of silly buzzwords and with little value. I have completely changed my mind. I can already see how this new plan is making us smarter, more effective and more sustainable.”

Yep, I completely get it.

Strategic planning, when poorly done, is just a joke. But, when strategic planning is done well, it can completely transform an organization.

And there are three key places where a bad strategic plan falls short:

  1. Your Strategy Isn’t Big Enough
    To create an effective strategic plan you have to start with the big picture. You must analyze and articulate who your target audience(s) are and your theory of change. Then you must look externally to understand the needs, the competitive landscape, the funding, the changing factors in the marketplace in which you operate. Nonprofit leaders sometimes mistakenly think they are creating an effective strategic plan when they sit in a room, look around at their fellow board and staff members, and ask each other what they think they should do. It is also a mistake to think that in such a rapidly changing world you can simply develop a status quo strategy. In order to stay relevant and sustainable you have to understand how you interact with the forces outside your walls and outside your control. And here’s a little secret: the more you think about the bigger world out there, the more excited your board and funders will be by the plan. Your nonprofit doesn’t exist in a vacuum, neither should your plan for the future.

  2. Your Strategy Isn’t Small Enough
    But the other danger is to get too big and neglect the small part — the execution and monitoring of the plan. It’s great to have a bold vision and ambitious goals for the future that flow from an exciting theory of change. But that’s not enough. How will you implement it? How will you break down tasks, and responsibilities? What’s the timeline? And what is your process for determining, on a regular basis, whether the plan is actually coming to fruition? A good strategic plan, one that will actually transform your organization, requires operational detail and a process for monitoring it over time.

  3. Your Strategy Ignores Money
    There is no effective strategic plan that neglects to answer how you will finance it. That’s why a good strategic plan devotes one of its goals to money. How much will it cost to deliver on all of the goals of your plan? How will revenue (and capital if you need it) flow to meet (or exceed) those expenses? A good strategic plan forces nonprofit leadership to become financially savvy (when they may not have been before) and begin to use money as an integral management tool.

How does your nonprofit’s strategic plan stack up? Is it big enough, small enough, and well financed? If you want to learn more about what a strategic planning process looks like, check out my Strategic Planning page or download the Strategic Planning benefit sheet.

Photo Credit: ESO/H. Dahle

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