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Nonprofit Revenue Strategies

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There is an ever-increasing pressure for nonprofits to develop revenue models that are sustainable over the long-term. Funding continues to shift in this uncertain economy that, in turn, demands nonprofit leaders to intentionally assess, monitor and adapt their organizations’ revenue models in the changing environment. The goal of the session is to equip nonprofit leaders with the tools to plan, implement and adapt a revenue model that builds on the organization’s existing strengths and capacity.

Published in: Business

Nonprofit Revenue Strategies

  1. 1. Nonprofit Revenue Strategies:Building Models for Sustainability Mark P. Fulop, MA, MPH mark@facilitationprocess.com
  2. 2. Welcome & Introduction• Why Are You Here? -challenges, opportunities, ideas?• Ground we will cover • Discuss changing conventions & assumptions. • What is the same, what is different? • Discuss when is diversity is too diverse? • Discuss the drivers of autonomy & reliability • Describe two case studies • Discuss roles of messaging, accountability & transparency
  3. 3. Conventional Wisdom or Stereotypes• Brainstorm a list• Diversity is important. Low overhead is good.• Converse concentration is bad. Earned income in a holy grail. Endowments are key to long-term survival. There are too many nonprofits.
  4. 4. Opening Assumptions Revenue Models• Creating a revenue model is thinking about the potential universe of funding accessible to your organization and making strategic decisions about preserving, increasing and/or expanding your revenues.• Creating a revenue model is not the same as creating or managing your year to year budgets.• Creating a revenue model focus starts with a clear understanding of your true cost of services.
  5. 5. Diversity is the wrong starting place Positive Negative• Moderates the ups & • Raises Overhead Costs downs of $ - balanced related to managing & portfolio. soliciting funds• Larger dollars derived by • Each funding stream adding funders. brings new task masters.• Is a proxy for growth that board members understand.
  6. 6. Real Drivers of Stability Reliability Autonomy• Predictability of Operating • The degree to which your Revenues for cash flow revenues are flexible to management be redeployed as needed.• Can also fuel growth & • Flexible money can fuel maybe innovation, maybe innovation & growth, can a gap filler. fill in gaps
  7. 7. Autonomy Spectrum Mission Investment Social Impact BondsPureInvestment Cause Marketing Venture philanthropy Corporate Fee-based Services Donor advised funds Government Grants small individual gifts Pure Giving Pure Pure Nonprofit Profit Adapted from: Raymond, S (2010) Nonprofit Finance for Hard Times. John Wiley & Sones, Hoboken, NJ.
  8. 8. What is Your Revenue Model?Funding % Auto Relia Challenge OpportunityGovernmentFoundationsCorporateFederatedMajor DonorsSmall DonorsEarned Income
  9. 9. Putting it together Strong services Strong services high less innovation & ability to adapt, possible growth innovate & grow potential Reliability Crisis operation & Ability to adapt to little resiliency to changes limited adapt to change ability to grow and no growth low high low Autonomy
  10. 10. Pathways for Revenues Giving CirclesLivingPeople Foundations & Charities • Private Nonprofits Earned Income Estates • Corporate • Operating • Community • Trusts Corporations Social Media Self-organized events Chart Adapted from: Frumkin, Peter. 2006. Strategic Giving: The Art and Science of Philanthropy (Chicago: University of Chicago Press).
  11. 11. When does Social Enterprise make sense? • Aligns with your organizations mission and core values • Leverages an asset or capability that you already possess • Addresses a defined but unsatisfied need and want in the community • Will generate a financial surplus (or be financially sustainable) • You have the acumen to plan and the patience to see the return. Horsnell, A. & Pepin, J. (July 2002). Social entrepreneurship basics, Front & Centre, Vol. 9, No. 4; pg. 1,6,7,8 http://www.authenticityconsulting.com/npbd/Social%20Entrepreneurship%20Basics.pdf
  12. 12. Earned Income does not Equal Social Enterprise• Are there other ways to leverage assets or capabilities that you already possess: • Renting Extra Space • Setting up a sliding scale fee for service • Provide training or consulting • Others• You have the acumen to plan and the patience to see the return.
  13. 13. Operating Revenue versus Capital Operating Revenue Investment Capital• Pays the Bills • Investment in Assets• Tied to Service Provision • Investment in Capacity• Managed as Income & • Uncoupled from Operations Expense
  14. 14. Diversify in proportion to your capacityWhat works for one – Works for one Reliable - Gov Reimbursement Autonomous - Small Donations/Events Autonomous - Sliding Scale
  15. 15. What is Your Revenue Model?Funding % Auto Relia Challenge OpportunityGovernmentFoundationsCorporateFederatedMajor DonorsSmall DonorsEarned Income
  16. 16. Case Studies – Opening Principles• Assess where you are today and look for opportunities• Create a plan that combines building on your strengths, developing new strengths. There might be precursor work to implementing a plan.• Think about maximizing your existing relationships and developing new ones that support your plan.• Know that reinventing your Funding model will take time & resources.• Monitor performance, execute and adjust (with reason).
  17. 17. Case Studies – Opening Principles• Assess where you are today and look for opportunities• Create a plan that combines building on your strengths, developing new strengths. There might be precursor work to implementing a plan.• Think about maximizing your existing relationships and developing new ones that support your plan.• Know that reinventing your Funding model will take time & resources.• Monitor performance, execute and adjust (with reason).
  18. 18. Case Study – Community Services services are unique but not basic needs 16% Government4% 6% Donations Fee for Service Foundation 74%
  19. 19. Strategic Challenges & Opportunities• 3 Government contracts were incrementally cut over several years creating a gap between revenues & true cost of services. Reliable but shrinking - 2 have low autonomy & one fairly high autonomy• Executive Director does all the fundraising & the board sporadic in their support (60% give) – No development staff• 9.5 FTEs & 13 Staff. Salaries flat for 2 years benefits are PTO, $200 pref. dev & 75% of health insurance premium.• Foundation proposals have not scored well. More unfunded than funded often loosing out to basic needs. When available was typically not very aiutonomous• Volunteer pool of over 100 & 1,200 clients/year are never asked to donate beyond passive mailers.• Fee for service community training –when done– generates profits most of the time.
  20. 20. How would you change the Model• Think about this nonprofit scenario and embellish the story if you want…• Talk about list of opportunities & challenges that the agency faces and develop a strategy of how you would change the pie. Develop the rationale to support your strategy.• Identify the steps that the agency should pursue to position themselves to change their funding mix.• How would you communicate the plan to key stakeholders?• What would you monitor and how
  21. 21. Case Study – Community Services services are unique but not basic needs 16%19% Government Donations Fee for Service 65%
  22. 22. Strategic Approach• Engaged the board in creating a fund raising plan & implemented 1 year.• Started courting a foundation hired a grant writer to help• Leveraged the board engagement & plan for a foundation grants to hire a development coordinator to increase donor base & market fee-for-service. Investment Capital.• Used unrestricted funds to “buy” staff time to devote to fee for service training.• Refocused foundation outreach towards developing investment partners.
  23. 23. Case Study – School Enrichment 8% 6% 11% Government 4% Family Foundations Corporate Individuals Partnerships 71%
  24. 24. Strategic Challenges & Opportunities• Recently transitioned from grassroots to established small agency.• 4 FTE’s with 11 staff. Part time staff Virtually no benefits.• Family Foundations have made multiyear commitments.• While government education money decreases overall, the outcomes data of the program create a compelling story to be competitive for limited government dollars. Three programs in area addressing the same needs but different approaches.• Still small enough that they are seeking a reliable & stable funding model• Founder had high value connections in the community & some corporate connections.
  25. 25. How would you change the Model• Think about this nonprofit scenario and embellish the story if you want…• Talk about list of opportunities & challenges that the agency faces and develop a strategy of how you would change the pie. Develop the rationale to support your strategy.• Identify the steps that the agency should pursue to position themselves to change their funding mix.• How would you communicate the plan to key stakeholders?• What would you monitor and how
  26. 26. Case Study – School Enrichment 10% 15%15% Government Family Foundations Corporate Individuals25% Partnerships 35%
  27. 27. Strategic Approach• Convened their funders and hosted an investors briefing to discuss their strategic plan and direction. Sought stable commitments over time.• Investing resources in developing marketing and brand materials that will be used to leverage corporate investments.• Redesigned the board from a working board to a governance board with deeper civic reach• Connected to the Cradle-to-Career initiative and trying to connect with the Governors early education initiatives.• Engaging staff from the Grant-maker affinity groups.
  28. 28. Communicate your Plan • Inform Stakeholders and Current Donors of your plan • Keep Stakeholders and Current Donors informed of progress • Magnify the communications by being just a little more accountable and transparent than you are comfortable with.
  29. 29. Summary Principles• Managing your existing budget and understanding true cost of programs and services matter• Autonomy & Reliability trump the Diversity debate.• Nonprofits often need capital in addition to operating revenue• Business planning is a part of good strategic planning or parallel to it.• Communication, accountability & transparency are not optional• What works for one - works for one
  30. 30. Facilitation & Process, LLC is a consulting firm based in Portland, Oregon. With Facilitation & Process, you are notour client but rather we are your partner in strategy, performance improvement and success. We design customizedapproaches that are tailored to your needs. Organizations that benefit most from working with us are those who aretired of the same old solutions and are ready for the fresh, imaginative and objective. We help you think about yourorganizational context and the larger community ecosystem in which you operate. We help you thinksystemically, systematically with a focus on the long view.To help you create solutions, we offer a range of supporting services including performanceassessments, facilitation, strategic, capacity, business & social impact planning, board & staff development andretreats, and developing meaningful community engagement.Contact us for a free initial consultation Mark P. Fulop, MA, MPH mark@facilitationprocess.com (503) 928-4082 Skype: facilitation.process Website http://www.facilitationprocess.com Twitter: http://www.twitter.com/facilitationpro Facebook: http://www.facebook.com/facilitationprocess Linked In: http://www.linkedin.com/in/markfulop Google+ http://gplus.to/facilitationProcess

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