What distinguishes a sustainable nonprofit from, well, all the other organizations that have come and gone? One word: Impact.
Luckily, the movie Avatar provides an interesting if unexpected case study in why. Remember back in 2009 when we were all rushing out to see Avatar? We threw on our 3-D glasses and settled in for a special effects-filled extravaganza. It seemed everyone was buzzing about the film for months. But as the New York Times Magazine recently explored:
Though the first ‘Avatar’ was the world’s top-grossing movie, its most oft-cited claim to fame is its surprising lack of cultural impact.
So a film that has earned a record-breaking $2.9 billion at the box office, ended up having little to no lasting impact? Switch from a film to a program, and it sounds like a nonprofit executive director’s nightmare.
What can you do to avoid the “Avatar scenario” in your organization?
A Sustainable Nonprofit Requires More than Just Funding—But Finances Still Matter
We often think of sustainability solely in terms of dollars and cents. Funding is, of course, critical. And to create a sustainable nonprofit, you’ll want to cover the basics, including:
- Cash on hand: Do you have 4-6 months or more of cash on hand to cover expenses like payroll, office rent, and program activities? Are you monitoring cash flow monthly, including expected changes in income and expenses?
- Balanced budget: As part of your organization’s annual budgeting process and ongoing budget management, it’s important to keep an eye on different income scenarios. Consider: How secure is the income in your annual operating budget? If major new or renewal gifts fall through, how will you re-balance your organization’s budget? For example, will you delay new hires or postpone program expansions?
- Diversified funding streams: You’ve certainly heard before that nonprofits should aim for diverse funding streams that combine foundation grants, major individual donors, and small dollar donors, along with other income sources relevant to your organization, such as government grants, earned income, and corporate contributions. But understanding the reasoning for this advice is critical. If your organization becomes too reliant on one income source or one donor, you risk a financial crisis if that funding dries up.
- Engaged donor base: Engaged donors are much more likely to renew their gifts. For sustainable fundraising over the long term, you’ll need a comprehensive donor relations strategy. This means setting aside the time to communicate with your donors regularly, whether via email, on the phone, or in person. If you want your donors to renew their gifts, you’ll want to share updates about your organization’s accomplishments—and how their contributions are making an impact.
But the reality is that your organization could be doing all of the above, and still not be sustainable. How?
Because nonprofit sustainability is also about impact—and sustaining and growing that impact over the long term.
Questions to Ask to Assess Your Nonprofit’s Sustainability
- Do you have a strategic plan—and, if so, are you using it? A strategic plan outlines your organization’s goals over the next 3-5 years, the strategies you’ll use to achieve those goals, and the benchmarks that will enable you to evaluate success. Combining these tools enables you to clearly demonstrate your organization’s planned and actual impact (including to donors). You’ll also ensure you’re investing in the right places—rather than spending money on programs that aren’t actually contributing to your organizational goals. All of which enables your organization to grow with long-term sustainability in mind. However, the key here is using your strategic plan. A document sitting on a shelf won’t help you achieve your goals. That’s why the most sustainable nonprofits practice strategic decision-making.
- Are you using strategic decision-making, even in urgent moments? Strategic decision-making is a central way to put your strategic plan into action. It means assessing major decisions—even those made in what feels like a moment of crisis—based on which choices advance your organizational mission and vision and align with your stated strategies. Your strategic plan is your best friend when it comes to strategic decision-making. It not only outlines everything from mission to benchmarks, but through the planning process you will have invested your board and staff in its vision. By using your strategic plan as a guide for decision-making you’ll increase transparency and buy-in, even in the most challenging moments.
- Are you investing in your people and planning for succession? It’s easy to assume we’re investing in our staff simply because we give them raises and promotions. But the reality for many nonprofits is that we tend to give promotions without thinking about the training and support our staff need to succeed in their new roles. That’s why sustainable nonprofit organizations invest in ongoing leadership and management training for their staff, along with board development. Finally, to truly be sustainable long-term nonprofits need succession plans. A sustainable nonprofit can’t be built only around a single charismatic leader. You need a strong board, excellent staff, and a plan for smooth leadership transitions.
Creating a Sustainable Nonprofit Requires Focus
Sustainable nonprofits don’t create themselves. Sustainability needs to be intentionally cultivated year after year. To get there requires aligning staff and board leadership around on what sustainability looks like for your individual organization, both in terms of finances and impact.
But once you put the core pieces in place—including a donor relations strategy, a budget management plan, a strategic plan, and a succession plan—you’ll be well on your way.
Want to learn more about nonprofit capacity building? Check out our 2023 Webinar Series: Growing with Intent.
