Building Models for Sustainability

Nonprofit Revenue Strategies:

Mark P. Fulop, MA, MPHmark@facilitationprocess.com

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

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.

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.

Diversity is the wrong starting place

Positive

• Moderates the ups & downs of $ - balanced portfolio.

• Larger dollars derived by adding funders.

• Is a proxy for growth that board members understand.

Negative

• Raises Overhead Costs related to managing & soliciting funds

• Each funding stream brings new task masters.

Real Drivers of Stability

Autonomy

• The degree to which your revenues are flexible to be redeployed as needed.

• Flexible money can fuel innovation & growth, can fill in gaps

Reliability

• Predictability of Operating Revenues for cash flow management

• Can also fuel growth & maybe innovation, maybe a gap filler.

PureGiving

PureInvestment

PureNonprofit

PureProfit

Adapted from: Raymond, S (2010) Nonprofit Finance for Hard Times. John Wiley & Sones, Hoboken, NJ.

small individual gifts

Corporate

Donor advised funds

Government Grants

Cause Marketing

Venture philanthropy

Mission Investment

Fee-based Services

Autonomy Spectrum

Social Impact Bonds

What is Your Revenue Model?Funding % Auto Relia Challenge Opportunity

Government

Foundations

Corporate

Federated

Major Donors

Small Donors

Earned Income

Putting it together

Autonomy

Rel

iabi

lity

low highlow

high

Crisis operation & little resiliency to adapt to change and no growth

Ability to adapt to changes limited ability to grow

Strong services less innovation & possible growth

potential

Strong services ability to adapt, innovate & grow

Living People

Estates

Corporations

Foundations & Charities• Private• Corporate• Operating• Community• Trusts

Earned IncomeNonprofits

Pathways for Revenues

Chart Adapted from: Frumkin, Peter. 2006. Strategic Giving: The Art and Science of Philanthropy (Chicago: University of Chicago Press).

Giving Circles

Social Media

Self-organized events

When does Social Enterprise make sense?

• Aligns with your organization's 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. 1,6,7,8http://www.authenticityconsulting.com/npbd/Social%20Entrepreneurship%20Basics.pdf

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.

Operating Revenue versus Capital

Operating Revenue

• Pays the Bills

• Tied to Service Provision

• Managed as Income & Expense

Investment Capital

• Investment in Assets

• Investment in Capacity

• Uncoupled from Operations

Diversify in proportion to your capacity

What works for one – Works for one

Reliable - Gov Re-imbursement

Autonomous - Small Donations/Events

Autonomous - Sliding Scale

What is Your Revenue Model?Funding % Auto Relia Challenge Opportunity

Government

Foundations

Corporate

Federated

Major Donors

Small Donors

Earned Income

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).

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).

Case Study – Community Servicesservices are unique but not basic needs

74%

6%

4%

16%Government

Donations

Fee for Service

Foundation

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.

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

Case Study – Community Servicesservices are unique but not basic needs

65%

19%16%

Government

Donations

Fee for Service

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.

Case Study – School Enrichment

6%

71%

4%

11% 8% Government

Family Foundations

Corporate

Individuals

Partnerships

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.

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

Case Study – School Enrichment

15%

35%

25%

15%10%

Government

Family Foundations

Corporate

Individuals

Partnerships

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 Governor's early education initiatives.

• Engaging staff from the Grant-maker affinity groups.

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.

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

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Mark P. Fulop, MA, MPHmark@facilitationprocess.com

Facilitation & Process, LLC is a consulting firm based in Portland, Oregon. With Facilitation & Process, you are not our client but rather we are your partner in strategy, performance improvement and success. We design customized approaches that are tailored to your needs. Organizations that benefit most from working with us are those who are tired of the same old solutions and are ready for the fresh, imaginative and objective. We help you think about your organizational context and the larger community ecosystem in which you operate. We help you think systemically, systematically with a focus on the long view.

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