Why do finances have to be a never-ending struggle?

Why do finances have to be a never-ending struggle?

Blog Post
Wednesday, February 26, 2020

The following guest blog post is written by PSW Road Show partners and presenters, Impact City Founder Salah Boukadoum & CEO Jennifer M. Ware.

Today’s funding models leave so much opportunity on the table for our communities. Too often we find the nonprofit whose mission is to help women out of poverty is stuck in the poverty cycle itself. Income is intermittent, hard to plan, and not enough to fully execute its mission and run the organization. This lack of resources drives short-term decisions and deferred investment in infrastructure. Further adding to financial challenges is the expectation that nonprofits should do more with less, forcing leaders to undervalue the cost of delivering their programs.

“Why do finances have to be a never-ending struggle?”

This question, asked by grantors, donors, leaders, and board members alike, reveals both a great challenge and a great opportunity. Getting to the solution begins with understanding the underlying structures and beliefs that keep nonprofit organizations from moving beyond resilient to sustainable, and ultimately to scalable.

We often hear that nonprofit organizations should “run more like a business,” Typically, this statement implies the need for internal changes such as better financial reporting and analysis, improving human resources practices, or creating a dashboard with key metrics.  The underlying message suggests that nonprofits could achieve their missions if only they improved their own operations or became more efficient.  But what if running like a business referred explicitly to the nonprofit’s model for creating revenue? 

In our experience, great nonprofits already “run like a business” on the inside. Nonprofit leaders are already required to be highly efficient – they accomplish the toughest jobs with the least resources. They already know that “nonprofit” is merely their tax status and does not dictate to what degree the organization operates with excellence.

Today we look to nonprofit organizations to transform the world, addressing and solving our greatest human challenges such as hunger, poverty, violence, education and clean water.  At Impact City, we know that to do so, nonprofits will first transform themselves. They will shift over time from a funding model based on grants, donations, and government contracts, to a business model that covers all their costs and more, creating the conditions for investment and scale.

Discovering the right business model for an organization takes time, dedicated leadership, and commitment from a broad representation of the nonprofit’s constituents.  It requires shattering stereotypes rooted in the nonprofit sector and opening minds to new ways of thinking about where the organization brings value, and how it can capture that value in revenue and resources.

Foundations are uniquely positioned to support nonprofits on their paths to becoming financially sustainable Impact Organizations.  In the early stages, foundations can provide unrestricted support, giving leaders enough time off from fundraising and enough space to do the work, and take the risks, to develop new, extended models.  When the time is right, foundations can provide investment capital through program-related investments, one-time grants, or as guarantors helping the nonprofit access low- or no-cost working capital to support scale.

When a nonprofit can reliably cover all its costs, it reaches sustainability. When its business model generates returns, then can it truly scale – growing its impact and creating last change for families, communities, and generations to come.

Join the conversation at a Philanthropy Southwest Road Show event near you where you can learn more about innovative solutions to help your grantees begin the process of becoming sustainable.


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