I had three people approach me about nonprofit sustainability last week.
On Monday, I spoke to a radio reporter in Chicago who is doing a very interesting story on a not-for-profit literacy group in Chicago that is hoping to move towards self-sustainability through a used bookstore they run. The full interview is online at http://www.changinggears.info/2011/06/15/nonprofits-tackling-illiteracy-in-chicago/. The reporter wondered if this is a funding model that is gaining more traction as other funding is harder to come by.
On Tuesday, I had lunch with a colleague (we share a common funder) who is providing terrific international news and information services, but is still searching for a sustainable business model that can reduce his reliance on foundation funding and put his organization on a firmer footing for the future, with greater and more predictable resources.
Lastly, a person I met at a conference the week prior called to ask if she could stop by to discuss her plans for a self-sustaining model for helping former inmates rejoin the workforce.
Clearly sustainability is the buzz word of the nonprofit sector right now.
With government sources under extreme pressure, and likely to go down, and individual contributions likely to remain flat or decline, looking for new sources of revenue seems like a sensible thing to be doing. Dues, fees and charges already constitute 38 percent of overall revenue for the nonprofit sector, but a good chunk of these result from medical and educational fees. Still, I can think of lots of organizations relying on fees and sales: museum shops, ticket sales at cultural events, and public broadcasters with tapes and books. At GuideStar, we’re proud of our sustainability record. We are projecting to have 95 percent of our operating expenses covered by sales and products, and we now use foundation grants primarily for special projects and special opportunities. At the same time, over 98 percent of the uses of GuideStar data remain free of charge.
Over the years we’ve learned a few lessons about sustainability:
- Be patient. It can take years to work up to generating meaningful revenues. Put together a five or ten year plan where you gradually increase your sustainability ratio. GuideStar is now in its 9th year and we don’t project being 100 percent sustainable until the end of 2012 – a ten year journey.
- Be realistic. Earned revenue doesn’t just happen. You already know how much work goes into raising philanthropic support. Earned revenue is no easier. Find out your audience’s needs and interests. Start developing capabilities in marketing, product developing and sales – all activities that require investments in people and tools in order for you to be successful.
- Remember why you are doing this. Board members with for-profit experiences often focus more attention on generating money. They forget that we’re earning money in order to support our mission. Here’s the way Jim Collins put it in Good to Great and the Social Sectors: A Monograph to Accompany Good to Great:
“The confusion between inputs and outputs stems from one of the primary differences between business and the social sectors. In business, money is both an input (a resource for achieving greatness) and an output (a measure of greatness). In the social sectors, money is only an input, and not a measure of greatness.
“A great organization is one that delivers superior performance and makes a distinctive impact over a long period of time. For a business, financial returns are a perfectly legitimate measure of performance. For a social sector organization, however, performance must be assessed relative to mission, not only to financial returns. In the social sectors, the critical question is not ‘How much money do we make per dollar of invested capital?’ but ‘How effectively do we deliver on our mission and make a distinctive impact, relative to our resources?’”
It’s your turn to tell me: How are you or your nonprofit working towards sustainability?
The preceding is a guest post by Bob Ottenhoff, Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.