I invested thirty-one years as executive director of two nonprofit organizations, a community nature center and a professional association. Both were somewhat like riding a roller coaster. You experience ups and downs each year, financially and emotionally. The predictable recession economies can lead the organization onto tracks that end in midair, making you wish you could back up and make a decision differently.
A former executive director of one of the world’s largest foundations gave me excellent advice early in my career. He said, “we view many nonprofits as being like Wily Coyote of cartoon fame who chases the roadrunner off a cliff and then looks down and realizes a great fall is coming.” He was choosing a nice way to say nonprofit managers sometimes do not know the organization is in trouble until it is too late.
The foundation executive had other advice about grants that I valued and applied over and over. He pointed out that many foundations prefer to pay for brick and mortar projects (buildings) because they know their money remains as an asset. It cannot easily be squandered. Regarding operations funds, he expressed a preference for investing in new programs that would be self-sustaining. He would say, “Ask us for funding to start something that will make money for your organization each year.” It was great advice.
We landed many grants in both organizations and the funding for building something was the easiest to get. Funds for operations were the most challenging to land. When you land an operating grant, it is hard to get it a second and third time and grow it. And some grant sources from government and private sector foundations will simply disappear in hard times. Foundations also depend on growing their funds and the amount they can give is directly related to their careful management. In hard times there are few places to invest that give a return of more than two or three percent.
I never became accustomed to the roller coaster. I saw my job as being skilled at riding the ups and downs while trying to lessen the dips and heights by making good choices. The very best choice was always to work on earned income strategies. Like any business, we were good at some things and not so good at others. Earned income strategies should build from your areas of organizational strength. Some of the best earned income ideas for the nature center were:
• Annual thematic eventsthat the community came to rely on – improve the profits each year through knowledge of the details and tweaking the events accordingly (e. g. bluegrass music festival, Halloween trail, and recycled raft race).
• Market-based programs offered for a fee provided sustainable income because we provided a service we could deliver better than anyone else and we became more skilled at it over time (fee-based school programs, training in specialized areas such as flyfishing, birdwatching, and recreational programs such as cross-country skiing or river rafting,etc.).
• Sale of goods that matched our identity, our brand, created a sustainable choice because members, clients and customers bought from us knowing that the profits were ploughed back into the nonprofit purpose (native plant shop, birder shop, regional gift shop, etc.).
Your organization develops a thematic brand through these events, programs and goods, if they all match your mission and work together well, making it the preferred source. If the product mix is appropriate, a recession does not necessarily result in substantial financial collapse. Any of these individual programs may decrease by a double-digit percentage in hard times but shrinking staff as needed helps you survive economic downturns and rebuild as revenue grows back in better times.
Without diversity of earned income sources to sustain an organization through hard times, the sudden disappearance of big grants or government gifts may be an irretrievable loss. Foundation and government givers have their own problems in a recession. Philanthropy income also goes down in economic austerity periods as donors pull back and investment returns decline with plunging interest rates.
You may never get off the roller coaster at a non-profit organization. Nonprofits are usually built on seasonal ebbs and flows of business. The national economy has its own ups and downs. You will enjoy the ride more if you build a solid foundation of earned income activities and diversify revenue sources as you plan sound financial strategies.
– Tim Merriman