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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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