Friday, June 4, 2010
Thursday, June 3, 2010
Charter Support Organizations Lessons--Fool's Gold Sustainabilty Trap
Charter Support Organizations (CSOs) are strongly encouraged by their funders to become more financially self-sustainable. If I were to take this literally, this would seem to mean that I would need fewer grant dollars. Many CSOs are having to raise more grant dollars not less--even as their "earned revenues" increase. This is not the trend we would hope to see. The following are the reasons why sustainability becomes illusionary:
1. Measuring the wrong thing---"Net Surplus" from each member service or product is not measured...only "earned revenues".
2. Underestimating costs---If a Net Surplus is calculated, CSOs are not loading all the costs such as personnel, overhead, administration, marketing, sales, and product/service development into the calculation. This makes the member service or product seem profitable when it really is not.
3. Cost growth outpaces Net Surplus growth--CSOs increase overhead faster than the total sum of Net Surplus from all its products and services. This often occurs when the CSO takes on grant funded initiatives that in the end do not have revenues to cover the cost.
What to do...
1. Measure Net Surplus for each activity diligently with FULLY loaded costs that include personnel, overhead, facilities necessary to deliver that activity.
2. Face the Brutal Facts about what is profitable and what is not and be realistic how long an activity may take to actually generate a Net Surplus consistently.
3. Be disciplined to not take on initiatives with increasing costs that outpace your Net Surplus capability.
4. Be focused to make a few product and service offerings really generate Net Surplus versus spreading thin and losing money across many products and services.
5. Make each transaction with your members generate Net Surplus and use grants only to fund research and development of products and services as well as the initial marketing and sales push.
1. Measuring the wrong thing---"Net Surplus" from each member service or product is not measured...only "earned revenues".
2. Underestimating costs---If a Net Surplus is calculated, CSOs are not loading all the costs such as personnel, overhead, administration, marketing, sales, and product/service development into the calculation. This makes the member service or product seem profitable when it really is not.
3. Cost growth outpaces Net Surplus growth--CSOs increase overhead faster than the total sum of Net Surplus from all its products and services. This often occurs when the CSO takes on grant funded initiatives that in the end do not have revenues to cover the cost.
What to do...
1. Measure Net Surplus for each activity diligently with FULLY loaded costs that include personnel, overhead, facilities necessary to deliver that activity.
2. Face the Brutal Facts about what is profitable and what is not and be realistic how long an activity may take to actually generate a Net Surplus consistently.
3. Be disciplined to not take on initiatives with increasing costs that outpace your Net Surplus capability.
4. Be focused to make a few product and service offerings really generate Net Surplus versus spreading thin and losing money across many products and services.
5. Make each transaction with your members generate Net Surplus and use grants only to fund research and development of products and services as well as the initial marketing and sales push.
Friday, November 7, 2008
Economic Crisis Impact on Nonprofit Organizations
The big question today is how the economic and financial market crisis will affect the nonprofit industry and your nonprofit organization.
I have included a Nonprofit Strategy white paper titled: "Economic Crisis Impact: Nonprofit Organization's Survival May Depend on Decisive Action". I hope you find this helpful in framing the issue and thinking through your organization's strategy.
We are considering holding an online workshop in the next month to help you assess your organization's risk. Email me today at tedf@consultlandmark.org if this is something you would be interested in attending.
If you have any questions or wish to discuss this white paper with me, feel free to contact me.
Click here to view white paper (Adobe Acrobat Reader Required)
I have included a Nonprofit Strategy white paper titled: "Economic Crisis Impact: Nonprofit Organization's Survival May Depend on Decisive Action". I hope you find this helpful in framing the issue and thinking through your organization's strategy.
We are considering holding an online workshop in the next month to help you assess your organization's risk. Email me today at tedf@consultlandmark.org if this is something you would be interested in attending.
If you have any questions or wish to discuss this white paper with me, feel free to contact me.
Click here to view white paper (Adobe Acrobat Reader Required)
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