Non-Profits Trade Settling for Success
By Affiliate Carol Coughlin, Founder and CEO of BottomLine Growth Strategies, Inc.
The non-profit arena is tough. Competition for donor dollars; the need to satisfy diverse stakeholders; keeping volunteers; not to mention the pressure to achieve what is usually a serious social mission, can all foster frustration for organizational leadership. Directors and board members alike must often perform without the essential resources required for success.
While working in a challenging environment can certainly inspire greatness, it can also inspire something not so great. Mediocrity.
Now, let’s be very clear. We are not talking about mediocre performances from the director, staff or board. We are talking about the reality that non-profits sometimes become so used to “the struggle” that they begin to believe they’re not supposed to get the best – and as a result, they don’t demand it.
The thinking works like this:
“We can’t afford to hire a top-notch financial strategist. We’re not a business, we’re JUST a non-profit.”
“We can’t put aside cash reserves. We’re not a business, we’re JUST a non-profit.”
“We can’t demand timely financial reporting. We’re not a business, we’re JUST a non-profit.”
If this perspective has wormed its way into your non-profit, there’s only one way to stop settling and end the struggle: JUST start thinking like a business.
The good news is that, more and more, non-profits are seeking to operate and think like for-profit corporations. Whether you run a non-profit or sit on a board or two, it’s up to you to the lead the charge in your organization. The question is how?
In our work helping non-profits implement best practices in their financial strategies, we encourage leadership to examine the similarities between their organization and for-profit businesses. We’ve found that when this is done, the mindset shift comes easily. After all, non-profits and for-profits have more in common than what might immediately come to mind:
7 Similarities that will Help Your Non-Profit
Stop Settling and Get Down to Business
Stop Settling Similarity #1:
Both non-profits & for-profits are on a mission
Non-profits are mission-driven. They serve a clear purpose and address a specific societal need. In realizing their mission, they make change. Well-run for-profits also have a clear purpose and address a specific marketplace need. In realizing their mission, they make money.
Stop Settling Similarity #2:
Both non-profits & for-profits need cash
Well-run non-profits need a positive bottom line and positive net assets in order to build reserves. A best practice is to have at least six month’s worth of reserves to survive a bad year. For the same reason, for-profits also need reserves.
Stop Settling Similarity #3:
Both non-profits & for-profits need to get their eggs out of a single basket
A single customer should account for no more than 25% of revenue. If one client dominates at a for-profit, so does risk (lost revenue, potential downsizing, etc.). Non-profits, too, must be wary of concentration risk. If a large chunk of funding is from a single source or event, what happens when the economy softens?
Stop Settling Similarity #4:
Both non-profits & for-profits must get tough
Non-profits and for-profits must be willing to make tough business decisions to avoid dipping into reserves. For-profits are asked to make these kinds of decisions every day, but non-profits can find it difficult thanks to the caring, people-centered, atmosphere typically fostered. When it’s time to make a tough decision, it can help to remember that the mission must come first.
Stop Settling Similarity #5:
Both non-profits & for-profits need to impress the money people
In the for-profit world, investors fund a company’s growth. They have a vested interest in operations and in ROI. Grantors and donors are the investors of the non-profit world. They have the same concerns. In particular, they want to know if the organization is a good steward of its financial resources and whether funding is making a difference in achieving the mission.
Stop Settling Similarity #6:
Both non-profits & for-profits need to be strategic
Non-profit and for-profit companies must think long-term and big picture. The competition in both arenas is too fierce not to have figured out the organization’s unique position and where it can make the biggest difference. Both need a strategic plan.
Stop Settling Similarity #7:
Both non-profits & for-profits need to have a plan for handing over the reins
Non-profits and for-profits rely on great leadership. Just like for-profits, non-profits need succession plans to cover key executive directors, as well as board members charged with strategically fulfilling the mission.
Once a non-profit’s leadership is thinking like a business team, all kinds of misconceptions about what a non-profit can or should do disappear.
For example, a budget of $70K will afford a highly qualified part-time CFO, but not much of a full time one. Because there is a common misconception that non-profits should hire only full-time positions, the director may have settled for an accountant rather than the CFO he or she really needed. But with business thinking and creativity in place, the path that will lead to success is the only logical choice.