Non-Profits Trade Settling for Success

The second half of the year is always a good time for non-profits to consider new growth, renew optimism, revitalize, energize and nail down the budget in preparation for future plans. In essence, to think strategically about the year ahead and how you will fund your mission, given the challenges inherent in the non-profit arena.

These challenges can be so daunting that it can also pay to kick-off your growth planning process by examining your organization’s mindset related to its ability to reach its goals.

Here are two key questions every non-profit should ask prior to developing a growth strategy:

Question #1: Are We Succeeding … or Settling?

The competition for donor dollars, the need to satisfy diverse stakeholders, the struggle to keep volunteers, not to mention the pressure to achieve a serious social mission, can all foster frustration for organizational directors, board members and staff who must often perform without the essential resources required for success.

While working in a challenging environment can certainly inspire an organization to rise above, it can also inspire the exact opposite.

Mediocrity.

Now, let’s be very clear. We’re not talking about mediocre performance from the director, board or staff. Rather, we are talking about the result of the all-too-common belief that, as a non-profit, we can’t expect more. In other words, those working in or on behalf of a non-profit can become so used to “the struggle” that it becomes difficult to believe anything more possible and, as a result, no one demands more.

Question #2: Do We Think of Ourselves as “Just” a Non-Profit?

“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 sure-fire way to stop settling and end the struggle: JUST start thinking like a business.

Today, more and more non-profits are seeking to operate and think like for-profit companies and, whether you’re the director or on the board, if your non-profit isn’t one of them it’s up to you to the lead the charge in helping your organization adopt a new mindset and practices.

The question is how?

How to Shift Your Non-Profit’s Mindset, Attitude and Results

In our work helping non-profits implement best practices in their growth and financial strategies, we encourage leadership to examine the similarities between their organization and a for-profit business.

We’ve found that doing this can immediately result in positive shifts in mindset and attitude – which then impact the level of success the non-profit is able to achieve.

To jumpstart the process, here are a few commonalities between non-profit and for-profit organizations that might not immediately come to mind:

#1: Both Non-Profits and 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.

#2: Both Non-Profits and 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 months’ worth of reserves to survive a bad year. For-profits need the same level of reserves for the same reason.

#3: Both Non-Profits and For-Profits Need to Get their Eggs Out of a Single Basket

A single customer should account for no more than 25% of a for-profit’s revenue. If one client dominates, so does risk (lost revenue, potential downsizing, etc.). Non-profits, too, must be wary of concentration risk. If a large chunk of funding comes from a single source or event, what happens when the economy or another influencing factor changes?

#4: Both Non-Profits and 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 – and doing so is certainly never easy. But non-profits can find making difficult decisions even more challenging thanks to the caring, people-centered culture typically fostered. When it’s time to make a tough decision, it can help both types of organizations to remember that the mission must come first.

#5: Both Non-Profits and For-Profits Need to Impress the Money People

In the for-profit world, investors fund a company’s growth and, therefore, have a vested interest in operations and ROI. Grantors and donors are the investors of the non-profit world, and they have the same concerns. They want to know if the non-profit is a good steward of its financial resources and whether funding is making a difference in achieving the mission.

#6: Both Non-Profits and For-Profits Need to be Strategic

Non-profits and for-profits must think long-term and big picture. The competition in both arenas is simply too fierce to leave the future to chance. Each type of organization needs to have figured out its unique marketplace position and value proposition, where it can have the biggest impact, where it’s ultimately heading and how it will get there. In short, both need a strategic plan.

#7: Both Non-Profits and For-Profits Need to have a Plan for Handing Over the Reins

Non-profits and for-profits rely on great leadership. So, just as for-profits need succession plans related to the CEO and other key leaders, non-profits need succession plans to cover key individuals such as executive directors, board members and any individual charged with strategically fulfilling the non-profit’s mission.

Once a non-profit’s leadership is thinking like a for-profit’s business team, all the misconceptions about what a non-profit can accomplish and 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 when thinking like a for-profit, the decision that will lead to success is the only logical choice.

In short, there is no such thing as “just” a non-profit. These organizations provide vital services to their communities, fulfilling a serious social mission. They deserve the best – the best professional advice, the best financial strategies and the best shot at success. Just start thinking like a for-profit business, and prepare to take your non-profit into the world of expecting more.

Read a case study about how BottomLine Growth helped a non-profit reduce costs and hire a CFO during a time of transition:

“When we were contemplating a difficult and major re-structure of management, BottomLine Growth Strategies helped us to develop a plan that ensured our success. We couldn’t have done it without them.”

Stealing Success Strategies from the Startup World

In her book, Social Startup Success, author Kathleen Kelly Janus, suggests that non-profits can do even better than many for-profit businesses by incorporating practices that originated in tech companies. Her research showed that five strategies in particular were key for laying the foundation of success in today’s non-profit environment: Testing & Innovation, Measuring Impact, Collective Leadership, Fundraising Experimentation and Storytelling. You can learn more about how these startup principles are being applied by non-profits in this interview and podcast with Janus, Why nonprofits should think more like tech companies.

Given how quickly the business environment is changing in all arenas, its imperative to continually examine new best practices and to be open to rethinking how your organization will excel. Our goal is always to make sure our clients – whether non-profit or for-profit – develop the financial, operational and growth strategies that will help them stay abreast of and adapt to change, prepare for the future and achieve next level success.