Real learning gets to the heart of what it means to be human. Through learning we become able to do something we never were able to do.
― Peter M. Senge
― Peter M. Senge
Does your not-for-profit have less than one month of operating reserves? Have you lived through those months when it felt like an elephant was sitting on your chest as you worried about how you’d cover the monthly bills - or worse, payroll! I’ve been there and it's awful. But you don’t have to be one of the fifty percent of all US not-for-profits in the same boat. That is if you’re willing to talk about building wealth for your organization. Ok, a conversation about wealth and not-for-profits feels a little crazy, I admit. But like most important things, I’m pretty sure we need to talk about it a whole lot more. Your mission is too important. You work to transform our communities, our country, and the world. In fact, a recent study noted that one in five Americans relies on not-for-profits every day for basic needs. If you are trying to build lasting change, you need to focus on financial security - for today, for tomorrow and even for a distant future. Rick Moyers, one of the smartest independent consultant and former foundation executives I know wrote in a piece for the Center for Effective Philanthropy, “When organizations are financially unstable, the people and communities being served experience adverse effects, such as disruptions to or lowered quality of services. And chronically underfunded organizations are less likely to be reliable partners in delivering on the impact strategic philanthropy aims to achieve.” Building a surplus is hard work; spending less than we bring in is not always possible. Having spent most of my career in the not-for-profit sector, I remember being thrilled when we finally got a 401k at the nonprofit I used to run. When the person came to sign us up, she asked me about my retirement goals, I said, “I want to eat the good cat food.” No really, she said. I just smiled. I’ve been contributing as much as I can ever since. It’s likely that you want your organization to meet community needs for the long run. As purpose-driven people, building financial resources starts with a conversation about our missions. When we’re focused on the “why,” it’s easier for boards and staff leaders to discuss long-term stability and sustainability. We know that there are many reasons why not-for-profits struggle to save money. Single year funding, two little general operating support, undernourished major donor programs, and a passion for taking that last dollar and putting it towards improving someone's life rather than putting it in the bank. Ok, so what does it take to build wealth? For sure it’s all about a disciplined approach to revenue generation and spending. The focus on building unrestricted resources should show up in 3-year plans, budgets, and the scorecards of board members and staff leadership. It needs to be measured and reviewed quarterly. Sound hard? Sure. But like any skill, it can be learned. I spoke with Robert Santana, the CEO of the Boys & Girls Clubs of Central Orange Coast, one of the largest and most innovative Clubs in the country. Robert is that rare leader who effortlessly weaves together strong business practices with a focus on outcomes for the youth they serve. He and his staff stay very focused on building wealth. For them, that means increasing cash reserves as one of the strategies they implement to strengthen the business. “My experience is that the whole charity business model is broken. For most organizations, if you generate a surplus, it's by chance, not by strategy.” At our Boys & Girls Club, “we create a roadmap to build the surplus. We start with a conservative revenue number. Then we discuss a surplus number that we could reach if we were targeted and focused. The goal is that we have a strategy to have revenue targets exceed expenses by building a surplus into the budget. Of course, that's a lot of work, you're putting your neck out. It's hard to tell everyone that you have to stretch further. We also take a hard look at expenses and build that the surplus into the budget that would address any needs we might have (staff, etc) as we grow. Santana agrees that it’s critical to build organizational wealth. He continues, “The value of building reserves and generating an annual surplus is that it allows you to stay strategic when making decisions and enables you to make investments into infrastructure when needed. If a business is living paycheck to paycheck, it is always in a state of crisis.” The best line I think I ever saw about building wealth was that building wealth is like losing weight. It's not always easy, but it's simple. I wonder if they have low-fat cat food…. Comments are closed.
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