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Newsletter
February  2016
The Nonprofit Equation:  Are You in Balance?

Successful nonprofit management depends on paying attention to both revenue and expenses.  
 
Carefully managing expenses (programs, operations, and fundraising costs) is as important as generating revenue.  If expenses rise, and donations and program fees do not, your organization risks curtailing its mission,  or worse, going out of business.   Ideally, revenue should always exceed expenses, allowing the nonprofit to set funds aside for the future.  This is why investing in fundraising  must be a top priority.
 
 
What might cause an imbalance in the "Nonprofit Equation"?   
 
It might be that your organization's mission has changed. 
 
It is important to continuously monitor changes in the demand for your organization's services, and recalibrate resource allocations accordingly. OAI has worked with nonprofits facing a significant decline in need. This can be a good thing - an indication your organization is achieving its mission. Alternatively, it may mean your programs are no longer meaningful or relevant, or your nonprofit is not articulating its impact. If either is the case, you may need to revise your programs or case for support.
 
We have also partnered with nonprofits that have experienced a significant increase in need.  They scaled their programs and operations, but struggled to increase revenue sufficiently to compensate for the increased costs.  You need to conduct a fundraising assessment to ensure your organization is maximizing donations from all revenue streams and that you have the right staffing and systems in place to take advantage of all of your opportunities.
 
It might be that your revenue streams are volatile.
 
Some nonprofits rely on a very small pool of donors.  When one of these high-value donors stops giving, the organization is at consid erable risk.  This risk is even more drastic if the nonprofit increased program and operational costs without considering replacement revenue.  An economic downtown or a sudden influx of nonprofits competing for donor dollars can also have a major impact on revenue.  Careful and continuous planning and strategic management of fundraising resources is critical.
 
How can you recognize you have an imbalance?
 
Cash flow projections are a strong leading indicator.
 
Signs of concern include your organization is burning through cash, is reaching the limit of its line of credit, or does not have a robust prospect pipeline.  As a rule of thumb, a nonprofit should have cash on hand for at least six months of operations.   In order to balance costs and revenue, your nonprofit needs a plan.  Start with a realistic assessment, and ask yourself: 
  • How much do you expect to raise over the next 12 months?  Over the next two to three years?  
  • Do you have a robust prospect pipeline? 
  • Do you have a diversity of revenue streams (major gifts, corporate/foundation giving, special events, grassroots, etc.)? 
  • How do revenue levels correlate with current spending on programs, operations, and fundraising? 
  • What programs can you trim or eliminate without affecting the mission? 
  • Are there reductions or efficiencies that can be made to bring costs in line with projected revenues? 
How to address the imbalance?
 
We strongly recommend nonprofits maintain (or increase) their investment in fundraising staff, technology, and systems, even during economic downturns. 
 
Without the right fundraising resources and support, a nonprofit is at greater risk of failure.  A thorough SWOT analysis (strengths, weaknesses, opportunities, and threats) can provide useful information about how your organization and its services are perceived by users, stakeholders, and prospective donors.  It will help you objectively assess the need for your programs and prioritize those that are vital to your mission.  It will also ensure your plan is grounded in reality.  Finally, it will help you play to your strengths, investing in those mission-specific areas with the greatest impact.
 
Strategic planning, program assessment, operational efficiency, resource-needs assessment, and revenue forecasting are signs of good governance and organizational health and viability.  Successful nonprofits continually evaluate themselves against clearly-defined metrics and best practices.  In doing so, they ensure their nonprofit equation is always in balance. 
 
  __________________________________________________

OAI offers a range of fundraising and organizational planning services to develop clear, research-based, and actionable strategies that generate revenue or strengthen a nonprofit's ability to deliver programs effectively and efficiently.  Contact us today for more information at jlehr@oai-usa.com or (202) 719-8094.

OA I in the News

Craig Shelley, Vice President at OAI, was quoted in the "Nonprofit Trends for 2016" edition of NonProfit PRO on the topics of strategic philanthropy, the fundraising talent gap, and boards embracing their philanthropic role.  To view the digital edition of the magazine, please click here (pages 26, 28, and 30).

OAI Speaking Engagements

March 16, 2016
Steve Orr, Managing Partner at OAI, will moderate a panel on  A Fundraising Mindset: The Importance of Focused, Goal-Driven Thinking at the New York Nonprofit Media's Nonprofit FundCon event in New York, NY.

For more information, click here .

April 8, 2016
Craig Shelley, Vice President at OAI, will be presenting on Engaging Your Board in Leading a Philanthropic Culture at the 34th Annual NAYDO Conference on YMCA Philanthropy in Detroit, MI.   

For more information, click here.

April 21, 2016
John Lehr, President at OAI, will be presenting on 
Establishing a Culture of Philanthropy at the Center for Nonprofit Advancement's National Nonprofit Leadership Conference in McLean, VA.  

For more information, click  here.

About Orr Associates, Inc. (OAI)

 

Responding to the increasingly complex burdens on nonprofit leaders, OAI has developed a transformational approach to fundraising and strategy consulting.  Our teams of experienced professionals seamlessly embed themselves with nonprofits to fundraise, to recruit and improve board leadership, to build consensus and direction through new strategies, and to provide executive, fundraising, and financial leadership.  With offices in Washington, DC and New York City, OAI has partnered in our clients' success for 25 years, helping more than 600 nonprofits raise hundreds of millions of dollars for their causes. 

 

See how we can help you today at www.oai-usa.com.   

 

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