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Mar 27, 2013

Nonprofit self-sufficiency 101

David Fetterman wrote an op-ed in the Chronicle of Philanthropy that echoes my frequent theme that nonprofits must chart a course of financial self-sufficiency that does not count on philanthropy nor government grants or contracts to ease their financial stress.  I argue for developing profit-generating new activities to supplement philanthropy and cover the emerging gap between what governments pay and what they expect nonprofits to provide.  We both have our eyes on the same ball.

He provides four pieces of advice.  I could not agree more.  His four points reflect what I call the moral imperative of being a nonprofit:  Being a reliable provider of a useful community need.  This is the heart of Linking Mission to Money and why I titled my second book More than Just Money.  If you need more amplification on theses themes, email me or sign me up to speak at your next event.

Here are his heavily excerpted thoughts:

“1. Keep in mind that survival requires smart and nimble action. Nonprofits that reassess how much it costs them to serve their community and stay in business are most likely to survive.

“2. Stop focusing on the charitable deduction. Charitable deductions are critical for high-net-worth donors. However, … charitable deductions are not the holy grail. Many donors never take the deduction because they earn too little to itemize on their tax returns. And even people who do take deductions don’t give just for tax reasons. They give to causes they believe in. Make your mission as irresistible as the iPad so your appeals don’t have to focus on tax motivations.

“3. Give accountability and self-evaluation high priority.  Donors like to be associated with successful ventures that produce a measurable return on their investment. So to survive in a more competitive environment for donations and government grants, nonprofits must show the value of their services. Nonprofits that fail to do so will lose credibility with clients and ultimately donor support.

“4. Come to grips with the nonprofit life cycle. Nonprofits need to view some services as loss leaders, others as cash cows, and still others as investments in new markets. It’s also important to think of the life cycle of a nonprofit’s work. Making this transition might take a shifting of funds from one program to the other and a shuffling of staff members. But nonprofits that begin to engage in this type of thinking, that focus both on the bottom line and changing community needs, are most likely to survive the shifts that will soon affect all nonprofits.”