Maintaining funding and developing new funding sources must be built into your nonprofit’s business strategy. It is more than ever necessary to demonstrate quality, mission effectiveness, constituent benefit and competitive advantage.
The president of a national association serving veterans and their families had just walked out of the board meeting where a resolution was passed, making significant programmatic and operational cuts. The organization was already contending with significant strains from reduced federal and state funding, stagnant philanthropy and an eroding investment portfolio. The new cuts would mean losing staff, curtailing counseling and discontinuing other programs — fewer services and fewer served. Even with an impeccable reputation for quality, long-term viability was concerning.
Too frequently, when boards and senior management turn to short-term thinking and cost cutting for fiscal survival, sustainability is threatened if aggressive steps are not taken to strengthen existing funding sources or secure new ones. In addition, the core operating issues causing financial duress must be understood and addressed. These are the financial and operational challenges faced by many nonprofit organizations that are highly dependent on federal/state funding, foundations and individual/corporate donors.
In today’s challenging operating environment, with heightened constituent scrutiny and demands, and more onerous compliance regulations, competition for support is fierce. In some instances, protracted strains have led to closed doors.
How we got here
In this economic climate, limited dollars from federal and state agencies, donors, corporations and foundations are spread thin as organizations struggle to cover the cost of their mission and maintain liquidity.
Competition has taken the shape of private enterprises that have increased the quality and breadth of services, implemented efficient channels and methods to deliver their services, and streamlined practices to better control costs.
With constricted funds and a larger pool of potential recipients, grantors have become more selective about the nonprofits they’ll support. They applying more rigor in due diligence, and post-award requirements and oversight. This more disciplined approach is in response to two realities: 1.) market volatility that results in a reduction in the availability of funds for distribution, and 2.) greater demand from boards to define, track and report the outcomes of their grant-making.
Demonstrating value is now expected
It is not enough for a nonprofit to just do good work. An organization must promote its brand and reputation, and determine how to raise its visibility in a crowded and competitive field of service providers. To elevate awareness of your brand, results of meeting social needs must be heralded. Articulate how your organization excels and how your approaches and practices are accomplishing your objectives.
Grantmakers want to support best-in-class and unique programs. They examine not only how an applicant’s mission aligns with its own grant-making objectives and principles, but also if the prospective grantee is respected and supported by the community, and has a record of success based on empirical, verifiable data.
Outline a holistic view of your organization and its strengths
Ten strategies can strengthen your ability to demonstrate value, purpose, organizational capacity and success:
Examine how your program offerings have morphed over time, and determine if they still align with your mission. Solicit input from board members and constituents.
Distinguish your organization and be a competitive differentiator by identifying underserved demographics or developing new ways to serve a distressed population.
Measurable goals and performance metrics
Show how specific program goals and outcomes are being achieved. Use metrics to hold management accountable for achieving programmatic goals. See “Utilizing data analytics to improve performance.”
Getting your message out
Make it easy for grantors to learn about the excellence of your organization and its programs, and how the mission is being fulfilled.
Capacity to fulfill your mission and provide program offerings
Demonstrate in project plans and proposals your ability to deliver programs and fulfill the mission. Explain the scalability of activities, and how your organization can address sudden excess or strained capacity. See “Taking budgeting to the next level: Integrating the strategic plan.”
Board composition and engagement
Look for candidates among dedicated volunteers and donors, and seek expert advice about your organizational governance. Bring together a mix of visionary, practical, empathetic and financial acumen qualities and talents. See “Guidebook offers stewardship direction for nonprofit boards,” “Does our board represent our constituents?” and Corporate governance: The tone from the top, Grant Thornton global governance report 2015.
Strength of reputation
Leverage invaluable affirmations: grantor references, testimonialsof recipients/program beneficiaries, and positive reports from regulators and auditors. See “Enhancing stakeholder communications, transparency.”
Appropriateness of financial resources
Assure the ratio of total program expense to total expense is consistently better than 70%; hold reserves appropriate for scope, size, complexity and risk profile; and maintain financial flexibility to react to opportunities and changes in the market. See “Reserves planning: A step-by-step approach for nonprofit organizations.”
Diversified revenue streams
Diversifying revenue associated with a particular program or service is wise for maintaining sustainability and minimizing vulnerability to periodic funding declines. It can be difficult; an optimal strategy is pooling revenues from various sources in support of a singular purpose.
Stability of management team
Verify that compensation is commensurate with the marketplace. Perform robust due diligence in hiring, and as needed, retrain leadership and complement the team with external resources.
For best practices in these and other demonstrations of value, see “Recognizing, averting risk of financial failure.”
It’s not enough to quietly fulfill the mission your organization cares so deeply about. To remain viable, relevant and capable of long-term success, focus on strategies that will ensure your organization is financially sustainable.
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