NEMA - Turnarounds

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NEMA - Turnarounds

  1. 1. New England Museum Association Nonprofit Turn Arounds June 16, 2009 Michael Daily
  2. 2. Two Themes <ul><li>“A recession is a terrible thing to waste” </li></ul><ul><li>“Skate to where the puck is going to be” Wayne Gretsky </li></ul>
  3. 3. Upside to a Recession <ul><li>Good time to strengthen staff </li></ul><ul><li>Good time to negotiate purchases </li></ul><ul><ul><li>Lock in prices </li></ul></ul><ul><li>Good time to develop new programs </li></ul><ul><li>Stresses contribute to building a stronger organization </li></ul><ul><li>Your print advertising stands out </li></ul><ul><li>Some competitors will go out of business </li></ul><ul><li>Can connect with your audience around the values your museum represents </li></ul><ul><li>Can connect with your audience around your value proposition </li></ul>
  4. 4. Where are we today? <ul><li>The Boston Globe - 4/25/09 </li></ul><ul><li>Gardner Museum cuts staff by 9 percent </li></ul><ul><li>3 from Development </li></ul><ul><li>5 from Administration </li></ul><ul><li>3 from Conservation </li></ul><ul><li>1 Curator </li></ul><ul><li>Hiring Freeze </li></ul><ul><li>Cut </li></ul><ul><li>Printing </li></ul><ul><li>Mailing </li></ul><ul><li>Travel </li></ul><ul><li>Senior Staff Salaries by 5% </li></ul><ul><li>Overall 7% reduction for 2009 and 11% for 2010 </li></ul>
  5. 5. Where are we today? <ul><li>What have you done to weather the recession? </li></ul><ul><li>Develop a &quot;worst-case scenario&quot; contingency budget 65% </li></ul><ul><li>Engage more closely with your board 59% </li></ul><ul><li>Funder conversations to explain situation / use of currently restricted grants 48% </li></ul><ul><li>Freeze all hires and current salaries 48% </li></ul><ul><li>Use reserve funds 43% </li></ul><ul><li>Collaborate with another NPO to provide programs 42% </li></ul><ul><li>Reduce staff or salaries 41% </li></ul><ul><li>Reduce or eliminate programs 39% </li></ul><ul><li>Delay payments to vendors 23% </li></ul><ul><li>Speed up the collection of receivables 22% </li></ul><ul><li>Reduce staff hours (short weeks, furloughs, etc.) 22% </li></ul><ul><li>Reduce staff benefits 21% </li></ul><ul><li>Reduce or refinance occupancy costs 18% </li></ul><ul><li>Collaborate with another NPO to reduce administrative expenses 13% </li></ul><ul><li>Sell assets such as a building or securities 6% </li></ul><ul><li>Merge with another organization 5% </li></ul><ul><li>No change - business as usual 4% </li></ul><ul><li>Nonprofit Finance Fund Survey - 3/09 </li></ul>
  6. 6. Signs of Trouble <ul><li>Difficulty paying the bills </li></ul><ul><li>Deteriorating financials </li></ul><ul><li>Board members are not financially savvy </li></ul><ul><li>The books are behind </li></ul><ul><li>No one knows quite where we are </li></ul><ul><li>Board or Senior Staff Turnover </li></ul><ul><li>Declining life stage </li></ul><ul><li>Large grant is running out </li></ul><ul><li>Dependence on one funder </li></ul>
  7. 7. Fund Balance at Year End
  8. 8. Preventive Measures <ul><li>Dashboards </li></ul><ul><ul><li>One Page - Monthly Reports to Board </li></ul></ul><ul><ul><li>Summary of Progress/Status </li></ul></ul><ul><ul><li>Historic, Current, Predictive Indicators </li></ul></ul><ul><li>Strategic Plan </li></ul><ul><li>Good Board </li></ul>
  9. 9. Dashboard Example
  10. 10. Are you Viable??? <ul><li>Mission makes sense </li></ul><ul><li>Dedicated players </li></ul><ul><li>Financial (Business) model that works </li></ul><ul><li>Is everything on the table? </li></ul>
  11. 11. Cash Flow – How long do we have? $35 $40 Ending Cash $30 $35 Total Disbursements $5 Phone Bill $30 $30 Payroll Cash Disbursements $65 $75 Total Resources $5 $5 Memberships $20 $20 Admissions Cash Receipts $35 $40 $50 Beginning Cash Week … Week 2 Week 1
  12. 12. Cash Management – Moving Receipts and Payments to Your Advantage <ul><li>Accelerate Revenue </li></ul><ul><li>Postpone Expenses </li></ul><ul><li>Slow Down Paying Payables </li></ul><ul><li>Beware of New Programs that Eat Cash </li></ul><ul><ul><li>Understand Cash Cycles </li></ul></ul><ul><li>Understand Cash Seasonality </li></ul><ul><li>Monetarize Underutilized Assets </li></ul>
  13. 13. Seasonality?
  14. 14. Reducing Expenses <ul><li>Can we cut this? </li></ul><ul><li>Can we do it differently? </li></ul><ul><li>Do we have to do it? </li></ul><ul><li>Remember: You have the most leverage with suppliers when you are desperate! </li></ul>
  15. 15. Developing a Business Model <ul><li>Start with Cash Flow Spread Sheet </li></ul><ul><li>Relate Income and Expenses </li></ul><ul><li>Determine Fixed Costs </li></ul><ul><li>Determine Variable Costs </li></ul><ul><li>Consider Every Angle </li></ul><ul><li>Rerun Spread Sheets </li></ul>
  16. 16. Program Accounting Tricks $1,000 Contribution to funding Overhead & Fund Balance ($49,000) Less Program Expenses $50,000 Program Revenues
  17. 17. Expenses You Need to Pay <ul><li>Payroll </li></ul><ul><li>Payroll Taxes </li></ul><ul><li>Insurance </li></ul><ul><ul><li>Health </li></ul></ul><ul><ul><li>Workers comp </li></ul></ul><ul><ul><li>Liability </li></ul></ul>
  18. 18. Lay-offs <ul><li>One lay-off is better than 2 or 3 or … </li></ul><ul><li>It takes planning </li></ul><ul><ul><li>How are we going to organize to get the essential things done with less staff? </li></ul></ul><ul><ul><li>What do we want the organization/staff to look like in 18 months? </li></ul></ul><ul><ul><li>How are we going to communicate the new structure? </li></ul></ul><ul><ul><li>How are we going to tell those who are laid off? </li></ul></ul>
  19. 19. Lay-offs <ul><li>Bad Apples – Performance vs. Seniority </li></ul><ul><li>Marketing Director? </li></ul><ul><li>Development Director? </li></ul><ul><li>Consider contemporary solutions </li></ul><ul><ul><li>Collaborate on Back Office </li></ul></ul><ul><ul><li>Collaborate on Marketing </li></ul></ul><ul><ul><li>Share a Senior (or Junior) Staffer </li></ul></ul><ul><ul><li>Interns </li></ul></ul><ul><ul><li>Furloughs </li></ul></ul><ul><ul><li>Volunteers </li></ul></ul>
  20. 20. Increasing Revenues – The Best Solution! <ul><li>Increase admission fees? </li></ul><ul><li>Increase membership fees? </li></ul><ul><li>Increase programs? </li></ul><ul><li>Increase promotion expenses? </li></ul><ul><li>Add an appeal? </li></ul><ul><li>Add an event? </li></ul><ul><li>Rent out space? </li></ul><ul><li>Be aggressive about all of the above! </li></ul>
  21. 21. Final Thoughts <ul><li>“Hug your donors” </li></ul><ul><li>“Hug your board” </li></ul><ul><li>“Invest in your future” </li></ul>
  22. 22. Executive Service Corps Contacts <ul><li>Michael Daily – ESC Northern New England </li></ul><ul><ul><li>(603) 362-9300 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>www.Nonprofit-Consultants.org </li></ul></ul><ul><li>Lisa Cawley – ESC Boston & RI </li></ul><ul><ul><li>(617) 357-5550 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>www.escne.org </li></ul></ul><ul><li>Elaine McDonald – ESC Connecticut </li></ul><ul><ul><li>(860) 493-1103 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>www.nesc.org </li></ul></ul>

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