Nonprofit financial sustainability is necessary for organizations like yours to develop lasting strategies that help you not only maintain your current standing but also grow.
CharityProud’s article on sustainability explains that economically sustainable nonprofits “operate within their financial means and use their inherent resources responsibly. Your resources include both tangible (donors, technology) and intangible (staff skillsets, community partners) things.”
This means that in order to increase your sustainability as an organization, you need to first improve your organization’s efficiency of your resources.
More efficient relationships with your supporters mean that you won’t need to spend as much money on your donor acquisition strategies. Meanwhile, efficiency in your technology resources means that you can fill in the gaps in your strategy using tools that are already available in your toolbox. These money-saving opportunities also help to increase your financial efficiency, which in turn, makes your nonprofit more economically sustainable.
In this article, we’ll dive deeper into several efficiency strategies your nonprofit can take to gain better financial sustainability. These strategies include:
Nonprofit sustainability has become more important, yet even more challenging in the midst of the COVID-19 pandemic. While in the beginning of the pandemic, many small to mid-sized nonprofits struggled to keep the doors open, it’s time now to consider the future — both for the rest of 2020 and for the years to come.
As everyone adjusts to the new normal, we recommend that you begin thinking about how you’ll sustain your nonprofit through the rest of the pandemic and beyond. Let’s get started.
When your nonprofit launches a fundraising campaign, your goal is more than simply “let’s raise as much money as possible.” Rather, you probably set a goal that looks more like this:
Let’s raise $10,000 through our peer-to-peer fundraising campaign to build a new playground for the kids at the local community center.
The goal itself is specific and it motivates supporters since they know exactly what impact their gift will have: it will help build a playground for local kids.
Your sustainability goal should be similar. Craft a very specific goal related to your nonprofit’s sustainability. When it’s specific, measurable, and discusses the impact, you’ll better motivate your team to succeed.
To craft this goal, consider the following questions:
As you’re walking through these questions, you may find that it’s helpful to have an open discussion with a nonprofit accountant about opportunities to become more sustainable.
Jitasa’s article about working with a nonprofit accountant explains that one of the duties covered by your accountant is comparing your income and expenses with your budget. Because this individual reviews this data in an in-depth fashion and on a regular basis, they’ll likely be the one to find opportunities for higher efficiency and improved sustainability.
For example, your accountant may find that your nonprofit frequently goes over budget in your fundraising expenses. In this case, they may recommend that you work to increase your donor retention rate to bring down acquisition costs. Or, maybe they’ll recommend that you invest in a single software solution that can host peer-to-peer fundraising campaigns and online donation pages so that you don’t have to pay for two separate systems.
Using these recommendations, carefully craft your organization’s goal. Then, tell your staff how they can help achieve it!
This habit goes hand in hand with setting your nonprofit’s sustainability goals. It’s impossible to set a concrete and measurable goal if you don’t have data you’re basing it off of. It’s also impossible to track your progress if you don’t have effective processes in place to collect relevant data metrics.
Keep in mind that each of your goals will likely have a few different metrics that you’ll want to track. For example, let’s say your nonprofit’s goal is to improve your stewardship strategy by sending emails twice as frequently to increase your yearly retention rate by 10%. In this situation, you’ll need to track metrics such as:
This list will look slightly different for each nonprofit depending on the goal that you’ve set for yourself.
We recommend that your nonprofit analyze your software to see where these metrics are collected. From here, inform your nonprofit bookkeeper about the goals so that they can keep an eye on the financial implications. They may even be able to pull reports for you!
We’ve mentioned that nonprofit retention is a great way to increase your organization’s sustainability initiatives. This is because a small increase in retention can make a major impact on your nonprofit’s financial performance.
According to further research, around 70% of donors only give one time to nonprofits and the recapture rate of lapsed donors is only around 5%.
However, once you’ve captured a donor’s attention and they give a second time, it’s much easier to engage them for longer because they’ve now given the golden donation. They’ve shown a certain level of dedication in your organization and a willingness to continue contributing. That’s why capturing this second gift is so important for donor retention.
But how can you increase your retention rate? By maintaining donor engagement through stewardship and appreciation.
Some strategies you may consider implementing to increase your own retention rate can include:
An effective retention rate is directly related to your nonprofit’s stewardship strategy. If you work to develop deeper connections with your current supporters through better communication, you’ll likely find they’ll be more willing to give again. Over time, they’ll probably give larger donation amounts, too!
During the COVID-19 pandemic, you probably ran into some fundraising roadblocks. This is to be expected given the economic downturn. However, this doesn’t mean that all nonprofit funding hit an unexpected wall. Other revenue-generating activities have maintained strong even throughout the pandemic.
If your nonprofit relies too heavily on a single revenue source, a disruption in that source will send your organization spiraling. However, if you diversify your funding sources, your nonprofit will find that a single disruption won’t hurt your nonprofit as badly.
As your nonprofit develops its strategic plan, be sure to incorporate various fundraising sources. Focus on developing all of them to be as effective as possible. Some of these revenue sources you can use to diversity your fundraising include:
As you can see, there are many opportunities that your nonprofit can take advantage of in order to raise revenue. Pursuing multiple avenues will help your nonprofit remain (at least mostly) financially stable even if external crises occur.
As your nonprofit tracks the metrics related to your sustainability goals, it’s important that you pull regular reports on these metrics to share with your team.
Informing your team of your progress is a great way to motivate them to continue down a successful path. If they don’t know how well they’re doing, it’s easy for your team members to lose their drive when working hard to reach your specific sustainability goals.
However, this isn’t the only reason your nonprofit should pull regular reports regarding your financial stability goals. With the right reports and resources, your nonprofit can be transparent with your supporters about the progress you’ve made.
To communicate your progress with supporters, you may choose to:
Pulling frequent reports on work toward your sustainability goal will help hold you and your team accountable. Plus, it’s a great way to show supporters that you’re improving and maximizing the use of their support for your mission.
Author: John Osterburg
Jon Osterburg has spent the last nine years helping more than 100 nonprofits around the world with their finances as a leader at Jitasa.