Recently, I posted the first part of a 3-part series to begin re-branding the nonprofit sector. For a refresher on step 1: “Change the Name, Change the Narrative” check out the post: Step 1 to Re-branding the nonprofit sector
This week I’ll discuss steps 2 – 4 and open up the conversation about having for purpose leaders, board and staff, define their organization’s unique full-cost funding model and enshrine a culture of sustainability and strength…not scarcity!
For the remainder of this 3-part series, I will use the term “for purpose” organizations in lieu of “nonprofit”, and offer that as my contribution to the dialogue of adopting a new term to describe tax-exempt charitable organizations.
Purpose is the why. Service is the what. Income generation is the how.
All for purpose organizations can begin to break the culture of scarcity by adopting an economic model that provides for the support of the full costs of their programs and operations, and advocate with grantmakers and donors to fund the same. (Huffington Post: “What Nonprofits Need Most.”)
Studies have shown there’s no “one-size-fits-all” when it comes to business and funding models (SSIR Review, Fall 2011 Finding Your Funding Model .) The important lesson here is that for purpose organizations can and must be able to identify their unique revenue drivers and determine how to invest in and grow these revenue streams. It’s also worth noting that many organizations have successfully scaled their work in the last 20 years due to this methodology. It’s time to Think Money First to break the culture of scarcity.
Ask yourselves “How well do your staff and board Think Money First and understand your full cost funding model?”
Sustainable growth depends on the viability of the organizations leading the change. Funders and service providers should know what sustainability means in functional terms so they can adopt it as a chief operating principle. Here’s a draft definition: Sustainability means maintaining operations – as well as financial good health – over the long-term through income generation and adequate planning to survive unexpected financial challenges. (“Financial Sustainability for Nonprofit Organizations – A Review of the Literature”, Rand Corporation, 2012 )
For purpose organizations must ensure that revenues cover the full costs of doing business, including the creation of operating cash reserves, investing in their people, funding depreciation, and developing risk capital. This will help for purpose organizations navigate through economic ups and downs and allow them to better capitalize on growth opportunities.
What’s the most important financial goal? Many donors would say “scaling the work.” However, not every “for purpose” organization has a mission that correlates with broad growth of their services. Some local community service agencies (such as a Boys & Girls Club or a community garden) are valuable assets for a particular neighborhood or community, but “scale” is not a long-term strategic priority, nor should it be. These organizations often need to think about strength much more than growth. They need to ensure their programs, services, and finances are being fully funded to deliver quality services to a particular community.
Ask yourselves “How well are are you defining and enshrining sustainability at your organization?” “How well are you advocating for full-cost funding with donors and grantmakers?”
Look out next week for step 5 of breaking the culture of scarcity – Rigorous Education for Board Leaders!