Leading an enduring non-profit, an Executive Director, while not profit-driven, must be financially savvy. Robin Morgan has considerable knowledge and expertise in the area of non-profit finance. In this post she will address the financial challenges which non-profit organizations face. In this Series she has provided many nuggets of wisdom, including of course financial information and insight. We begin this post with 3 financial insights shared by Morgan, a seasoned pro.
In Successful Time Management for Non-profit Leaders, Morgan recognized Executive Directors who are ready, willing, and able to delegate to others. Not being a willing delegator may have financial consequences too.
Some leaders hold on to some things too long; some tasks, therefore, are overlooked or get done late. The consequence of this, where funding-related deadlines are missed, is that money due the organization is put in jeopardy. In these situations, lost time can result in lost money.
In addressing the issues which growing non-profits face (The Life of a Non-profit: Growth & Growing Pains), she touched on the role which finances have in the early and middle stages of an organization’s growth. A lack of funds in these two stages can adversely affect a non-profit’s success. Morgan stated in that post:
A lot of non-profits hit the middle stage of growth – and the vexing growing pains which go with it. Some are in a free, no-rent space or building which doesn’t fit their needs anymore. Some find they are still using outdated, unreliable computers – because they were free. The space or computer equipment was given to the organization, but they are no longer serving the non-profit well.
Morgan suggested several financial actions which a person, who is starting a non-profit, should take (5 Habits of People who Start Non-profits Successfully). Read this post if you are considering launching a non-profit.
In that post she eloquently expressed how a lack of funds can impact a young non-profit.
If someone opens the doors of their non-profit, and is relying only on the merits of their Mission, however grand, it takes a very short time for the money to go away. No cash, no mission. No mission, no organization.
- What are the financial challenges facing non-profit organizations?
In this post, the seasoned financial professional answers this question. As well, Robin Morgan offers a financial strategy which every non-profit should consider adopting – to make their operation more financially sound.
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Robin Morgan
Having worked for eight years as a financial professional in the non-profit sector, after many years in the corporate world, I’m keenly familiar with issues which Executive Directors and non-profit Boards face. What are the financial challenges they face? Due in large part to the economic downtown in recent years, there is less grant money available. The competition for non-profits who rely on grants is much higher.
Moreover, the downturn itself has fueled a shift in the types of non-profit organizations who are getting grants as well. Those that aren’t offering critical social services, in high demand during downturns in the economy, at times are not well positioned to get the grant funds that are available. Consequently, grant-dependent non-profits which don’t offer these types of services have to find other ways to fund their Missions. If they can’t, their sustainability is compromised.
One way for all non-profits to financially fuel their operations is to plan and set up an earned revenue stream. All of your funding doesn’t need to come from grants and donations. In addition to fundraising, have an earned revenue source of income as well.
For example, a non-profit that has a mission of promoting literacy that chooses to operate a book store. The revenue made from selling donated books demonstrates the literacy non-profit using earned revenue to help fill their coffers. Located in a well-populated community, such a store would promote their mission and generate funds too.
In running a non-profit in recent years, it is important I feel for non-profits leaders and Boards to have an open mindset. It is such a mindset that recognizes the potential which exists in considering all sources of funding, including those that are earned. For some non-profits, in order to fulfill their mission fully, establishing an earned revenue piece is frankly the only way to avoid cutbacks. If cutbacks are done, the organization’s mission will remain undone.
Quite simply, having a closed mindset hinders a non-profit’s ability to fulfill it’s funding potential. Just because an Executive Director is running a not-for-profit operation does not mean they can’t earn revenue to support essential expenses. In a time of fewer grant dollars, it could be the difference between just surviving and sustainability.
LEARN
- The game has changed folks. Grant funds are dwindling for many types of missions.
- Where’s the money going? Critical social services are in high demand.
- Beyond grants and fund-raising, sustainability can be achieved through a non-profit’s earned revenue stream(s).
- The mindset of a non-profit organization’s Executive Director and Board has to, we feel, evolve to support the changing funding landscape.
GROW
Earned revenue streams: Are they anathema to a non-profit? Unfortunately, some non-profits out there think they are. Yet, as Robin Morgan has expressed above, the game has changed! Grant dollars, for some non-profits, have dried up entirely. For those where grants are readily available, the competition to get those funds can be considerable. Morgan, with almost three decades in the non-profit space, is quite right.
What strategy allows a non-profit to get the funds needed to support itself?
The answer: Earned Revenue. Creating an earned revenue stream is a wise move for many non-profit organizations to do. So how does one get started in setting up such a revenue stream? Let’s look at how one North Carolina non-profit did it.
Housing Consultants Group (HCG), profiled in Your Outcomes Well last July (link), had to contend with some harsh realities. With a mission that was dedicated to Financial Literacy at the outset, they become deeply entrenched in pre-foreclosure and post-foreclosure counseling. This was during the years that followed the financial crisis in 2008. What that meant for them, at the time, was an abundance of new funding and grant sources – to provide desperately needed help for many homeowners across the state.
Fast forward to 2015. Those funds have for the most part dried up. So the housing non-profit’s Board tasked the Executive Director (Sofia Crisp) with a critical initiative: Creating new income streams to fund HCG’s ongoing programs and mission.
How did Crisp respond to her Board’s call to action? The Executive Director assessed the skillset of her organization, identified her defining differentiator, and developed a brand new program. The focus of the new HCG program: Serving as the Non-Profit Realtor for a city program. That program was desperately trying to find the best way to build, rehab, or modernize homes in a potentially blighted area of the city. Last year the organization was licensed to market and sell real estate; the fees for any properties sold by HCG are earned revenue for the emerging non-profit.
- Crisp was already serving the community by providing Individual Development Account (IDA) classes and First-time Homebuyer classes. Now she moved to create a whole new source of earned revenue for HCG. It also fulfills a real community need: Helping the city market and sell properties in their portfolio, which in turn helped keep certain neighborhoods from falling by the waist side.
- Additionally, under Crisp’s leadership, HCG partnered with another non-profit, Community Housing Solutions. This organization uses volunteers to do rehab and construction work for people in need.
The Bottom Line: A Win/Win/Win/Win
It’s a . . .
- Win for the Community – A neighborhood is improved, rather than continuing to
suffer and become more “blighted”. - Win for the prospective homeowner – Someone achieves the dream of home ownership, usually at a reduced cost, because of the contributed services of the partner non-profit.
- Win for the City Government – They look good because they are solving a problem that potentially harms their residents.
- Win for HCG – Creation of a earned revenue stream, by using their distinct capabilities and a partner non-profit to solve a real problem.
Your Outcomes Well
Better outcomes through Best Practices (Non-profit leaders)
- What are the 2 biggest financial challenges you have faced as a non-profit leader? (Your comments and answers to this question are welcomed)
Being a successful leader of a non-profit in 2016 requires more than just passion. An open mindset, creativity, and good cash flow to grow are also needed! Earned revenue, good grant writing, and effective fundraising are what can allow a well-led non-profit to ‘do good’ and be well-funded too. The financial skills of someone, on an organization’s staff or Board, can be invaluable.
Remember this: Your bottom line as a non-profit lies in the heart-felt statements of gratitude, from the people your organization helps, NOT simply financial statements. The funds you raise and earn are simply a means to an admirable end, not the end itself. Again, as Robin Morgan expressed, ‘no money, no mission’.
Photo credit: nuttakit/FreeDigitalPhotos.net
Your Outcomes Well
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