Exploring a New Model for Sustainability

Exploring a New Model
for Sustainability
Betsy Davis, Executive Director, The Center for Wooden Boats
Presented with permission of the authors.

Thanks especially to Jan Masaoka for sharing her slides from
her presentation at the Nonprofit Management Institute held
at Stanford Business School Sept 2011

Washington Museum Association June 2012 - Exploring a New Model for Sustainability

Strategic Questions
• How to optimize mission impact within
financial constraints?
• How to choose which activities to undertake?
• How to create a shared vocabulary with the
board around tradeoffs?


Fabulous Resource


Additional Resources


Your Turn
• Something you know about this topic?
• A question you have about this topic?


Non Profit “Business Model”
• Every organization has one (whether we know
it or not.)
• Explains how a nonprofit generates and
allocates revenue to accomplish its mission
and remain financially viable.
• Nearly all nonprofits today are hybrids
combining earned income with donations.
• Business models change over time.
• Businesses with the same services can have
different business models.

Non Profit “Business Models”
CONTRIBUTED INCOME

EARNED INCOME


CONTRIBUTED INCOME
• Individuals
– Planned gifts
– Annual Gifts
– Events
– Pledges
– Major Gifts
– Phone-a-thon


CONTRIBUTED INCOME
• Individuals
• Foundations
• Businesses (other institutions)
• Government


CONTRIBUTED INCOME
• Individuals
• Foundations
• Businesses (other institutions)
• Government

EARNED INCOME
• Admission
• Program Fees


Similar products but different business
models

• Lower cost goods, mid to upper • High priced, higher income customers
middle consumers
• Downtown and high income mall locations
• Lots of free parking
• Full color catalogs mailed to high income
• Newsprint inserts in newspapers zip codes


Similar mission but different business
models


Viewing the Business Model
Each activity has two kinds of impact:
• Mission impact (external) and
• Financial impact (internal)

So a strategy for sustainability must be a
strategy that combines both kinds of impact
and must assess how activities fit together
and leverage each other

Your Turn
• What is the main work your organization
does? (aim for about 12 things…)
– Major mission programs?
– Major work to bring in other earned income?
– Major work to bring in contributions?


Matrix Map

IMPACT

PROFITABILITY


Matrix Map
HIGH IMPACT
HIGH PROFITABILITY

IMPACT

LOW IMPACT
LOW PROFITABILITY

PROFITABILITY


Stars
HIGH IMPACT
HIGH PROFITABILITY

Examples:
• Important, foundation-funded
program
IMPACT • Fee-for-service program that makes
money
PROFITABILITY • ?


Stop Signs
LOW IMPACT
LOW PROFITABILITY

Examples:
• Little-used Resource Library
• Program that used to have funding
IMPACT • Stale fundraising event
• ?
PROFITABILITY


Money Trees

LOW IMPACT (other than money raised)
HIGH PROFITABILITY

Examples:
• Martini parties
• Luncheon
IMPACT • Raffle tickets
• ?
PROFITABILITY


Hearts

HIGH IMPACT
LOW PROFITABILITY

Examples:
• Advocacy at state level
• Free boatrides for the public
IMPACT • Show of experimental art
• ?
PROFITABILITY


The Matrix Map


Your Turn
• List the primary work that your organization
does (remember contributed income efforts)
• For each item, list its relative impact
(1=low, 5=high)
• For each item, guess at its relative profitability
(income minus expense)
• Try mapping your work onto the matrix


Relative Impact
Examples of criteria
• Alignment with core mission
• Excellence in execution
• Scale or volume
• Depth
• Filling an important gap
• Community building
• Leverage


Example
1. Alignment with Core 2. Excellence: To 3. Fills an Important 4. Community &
Mission: How much what degree does the Gap (FIG): To what Constituency Building: To
does the activity align activity reflect the extent is this important, what degree does this build the
Criteria
with our core mission? and the only one of its movment in which our
best work we do?
kind available to the organization works?
community?
Environmental
4 4 3 2
Education
Restoration &
4 3 1 4
Reforestation
Nursery 3 1 1 2
Resource
2 1 1 2
Library
Direct Mail 2 2 1 3
Major Donors 2 3 1 3
Annual Event 1 2 1 2
Site Rentals /
Birthday 2 2 1 1
Parties


Charting Impact

Alliance of BBB Wise Giving Alliance, Guidestar USA and Independent Sector


Charting Impact
What is your organization aiming to accomplish?
What are your strategies for making this
happen?
What are your organization’s capabilities for
doing this?
How will your organization know if you are
making progress?
What have and haven’t you accomplished so far?


Determining Profitability
Revenue Expenses
• Assign restricted and • Include full costs:
generated revenues to each
business line Program Costs

Shared Costs

Admin Costs


A single compelling image
4.00 Film/Curriculum
packages

3.00
Film making
Impact

(250,000) (200,000) (150,000) (100,000) (50,000) - 50,000 100,000 150,000
Major
2.00 Donors
Direct
Jewelry sales Mail

Resource
Equip Library
rentals 1.00
Aha!

-
Profitability


Community Theater
Matrix Map
English / Spanish
Plays 4.00
Spanish Language
Plays

3.00
After-School Drama
Workshops
Impact

(100,000) (80,000) (60,000) (40,000) (20,000) - 20,000 40,000 60,000

2.00

Special
Newsletter Events
1.00

-
Profitability


Everest Environmentalists
Matrix Map

4.00 Environmental
Education

Restoration & 3.00
Reforestation
Impact

(250,000) (200,000) (150,000) (100,000) (50,000) - 50,000 100,000 150,000
Major
2.00 Donors
Site Direct
Rentals Mail

Nursery Resource Annual
Library Event
1.00

-
Profitability


Career Closet Nonprofit

Closet

Service clubs

Annual gala


Rural AIDS Nonprofit

AIDS program
(government funded)

Individual donations


The
Strategic
Imperatives


Strategic imperatives for
Stars
HIGH IMPACT
HIGH PROFITABILITY

Pay attention.
Keep it a star.
Make sure the board is involved.
Invest time and money.
IMPACT
Grow it.
PROFITABILITY


Stop Signs
LOW IMPACT
LOW PROFITABILITY

Instead of
•Trying once again to improve it . . .
•Not thinking about it . . .

IMPACT
• Spin it off to another organization
PROFITABILITY • Close it


Hearts
HIGH IMPACT
LOW PROFITABILITY
Instead of
•Closing it because it’s not breaking
even . . .
•Making it a Sacred Cow that can’t be
IMPACT criticized . . .

PROFITABILITY
• Keep it. Celebrate it.
• Contain the costs.


. . . for Money Trees
LOW IMPACT
HIGH PROFITABILITY
Instead of
•Giving it second class status
•Keeping it separate from programs . . .

IMPACT

PROFITABILITY
• Water the tree.
• Increase impact.


Strategic Imperatives


Your Turn
Looking at Your Organization…
• Can you identify one “star” in your
organization you may want to grow?
• Can you identify something to “stop”?
• A “money tree” where you can grow and
increase impact?
• A “heart” you want to keep but contain costs?


Portfolio: BEFORE
Local legis

State legis Restoration
News Schools
events Scorecard

Newsletter Dinner
Major
donors
Policy alerts


Grow slightly.
Drop except for
rare huge issues
with high possible
decisions Star. Grow
given
limitations.
Star.
impact. Grow.
Increase
HIGH IMPACT Local legis HIGH IMPACT impact
LOW PROFITABILITY HIGH PROFITABILITY by
deepeni
ng
Drop. Lower State legis Restoration quality.
impact all the time
(newspapers). News Schools
Task force to see if
something new events Scorecard
could achieve
goals better at
lower cost. LOW IMPACT LOW IMPACT
LOW PROFITABILITY HIGH PROFITABILITY Breakeven, so
me impact.
Give away.
Newsletter Dinner
Major
donors
Policy alerts
Increase
Change to e- impact.
Drop. Being done newsletter to Increase Growth not
by others. increase impact. Grow likely.
impact, reduce if possible. Increase
costs profitability.


Portfolio: AFTER
Local legis
Restoration Schools
State legis

Newsletter

IMPACT Dinner

Major
donors

PROFITABILITY


Looking at special events
Event Impact $ Effort
Senior
high low medium
lunch
medium
Crab
medium but high
feed
growing
New
Year’s
low low high
mochi
making
Sake
low high high
festival
Golf
low high low
Tourn.


Looking at special events
Event Impact $ Effort Type Action
Senior Keep. Contain
high low medium costs.
lunch
medium
Grow. Increase
Crab feed medium but high impact.
growing
New
Year’s Give to church
low low high that also has
mochi one.
making
Sake Grow. Increase
low high high impact
festival
Golf Increase
low high low impact. Age
Tourn. changes?


Growing “Money Trees”
• Practical tips for
engaging board
members
• Short chapters
• Can be used as a
toolkit for board
discussions


Growing “Money Trees”


The Business Model Statement
Mission Statement:
Elm Prairie Preservationists works for the restoration and preservation of
our prairies so future generations may benefit from their unvarnished
beauty and bountiful natural resources.

Business Model Statement:
We educate children to be of stewards of our prairies, supported by
government contracts and fees-for-service, and restore prairies with the
support of corporations and foundations. When the generosity of
individuals makes it possible, we advocate for policies that will protect and
preserve our lands.


Your Turn
• What is the business model statement for
your organization?


Thank you !!!
“For nonprofits, financial sustainability and
programmatic sustainability cannot be separated.
It’s not enough to have a high-impact program if
there’s not effective strategy for sustaining the
organizational financially. And neither is it enough
to be financially stable: we build our organizations
for impact, not for financial stability…This book’s
key premise is that financial and impact information
can and must be brought together in an integrated,
fused discussion of strategy.”
Jeanne Bell, Jan Masaoka, Steve Zimmerman Authors of Nonprofit Sustainability


Exploring a New Model for Sustainability

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