e-Newsletter: Connect to Solutions

Sustainability and Financial Resource Development
by Jeffrey S. Vengrow, Director of CNE Solutions

Times are tight in the nonprofit sector. Are you sustainable?

The number of new nonprofit organizations is on the rise and the demand for resources is growing faster than the rise in philanthropic giving.

The competition for resources has raised the bar of the sustainability challenge to new heights. Sustainability by definition means that the critical mass of resources and capacity are reliably in place on an ongoing basis, to enable the organization to continue in support of its mission.

The sustainability question remains the same, but has become increasingly difficult to answer. Traditional answers have been either to raise more money through existing channels, or to reduce the services provided. But as we all know, these are not traditional times.

It’s no longer enough to simply write more grant proposals or conduct yet another “special event fund-raiser.” And, the work required to raise money is becoming more resource intensive as well as competitive within the nonprofit community. Unfortunately, the alternative choice to proportionately reduce services can lead down a slippery slope to obscurity or oblivion.

More recently, some organizations have ventured into unknown waters searching for new ways of raising funds such as opening an earned income enterprise, or launching a capital campaign. But without adequate planning or skills, the risk of failure is high, and the consequences potentially severe.

It’s time for a fresh look.

An effective sustainability model must necessarily ensure that a Financial Resource Development Plan (FRDP) is aligned consistently with the organization’s mission, and that the organization has either the competency in place, or develops a plan to acquire the competency to implement it.

Start with the strategic and business planning process. The FRDP is a critical component of the business plan and must support the strategic direction of the organization. When developing the FRDP, the following elements should be considered:

· What financial resources are required to support the plan?
· How will these financial resources be used?
· When are they needed?
· What will be the primary sources of revenue? (i.e. individual contributions,foundations, government, or earned income)
· Are the sources consistent with our mission, our image and values?
· What infrastructure is needed and in place (experienced and sufficient staff, mailing lists, software, policies, and procedures?
· Who is responsible for what? (role of the Board, and the role of Staff)
· What will the FRDP cost?
· What are the risks?
· What legal requirements exist?
· Who is the competition?
· What’s the contingency plan?

I had a client who developed a program expansion strategy during a board retreat. The board next determined that a large capital campaign would be necessary, and that the method of fund raising would be to solicit large gifts from targeted individual donors. The organization’s historical contribution model was small gifts from many donors, so this approach was a significant departure from their traditional fund development efforts.

When I asked who on the board or staff had any experience with large gifts, only one member out of ten raised his hand. Needless to say, the plan was somewhat less than complete, so the project was tabled for further study.

The board later developed the tactics and the budget that would be required to support the chosen resource development model. They contracted with a fund raising professional who trained several board members, and who helped manage the process from behind the scenes. They also recognized that they needed to address their board composition and began recruiting potential board members who had experience with various fund development models. Within a year, they exceeded their fundraising goal.

The nonprofit sector has experienced tough times before and has survived. However, there is a real danger in this severe downturn that many individual organizations will not. Sustainability is more than about survival. It is about supporting mission over the long term, and a successful sustainability model will require that nonprofits adopt a new way of working. Financial resource development planning supports strategy, and when it is integrated with the business planning process, it is most likely to succeed.

Contact Jeff Vengrow by calling 330.315.0432 or emailing him at vengrow@cfnpe.org.