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October 25, 2020
Financial Stability Builds on a Process with Many Moving Parts
By Leigh Tucker

Leigh Tucker
Leigh Tucker
No matter how noble the cause and because it cannot survive on good intentions alone, every nonprofit must first establish a certain level of ongoing, financial sustainability to support its operations.

But this isn’t always as easy as it seems. Many leaders will attest that more of their working hours are spent finding ways to fund their missions than in executing the missions themselves.

Unfortunately, the challenge of achieving financial sustainability is even greater for organizations that serve the neediest communities. Those located in poorer neighborhoods have fewer donors and greater competition for limited resources. There are however, some simple strategies that will go a long way in helping any nonprofit improve their long-term financial viability.

A recent study by the RAND Corporation examined some of the major challenges that nonprofits in low-income communities face in regards to financial sustainability. They study also offered recommendations that any nonprofit, regardless of size, location, or mission should think about during their strategic planning for 2015.

Minimize your dependence on traditional sources of funding.

While state and federal agencies provide enormous support for many nonprofits, their funding is subject to cutbacks during economic lows. In addition, nonprofits that accept state and federal funding are required to comply with guidelines on how the money is used and provide extensive documentation as proof of their compliance. This can become a costly administrative burden for the organization.

Instead, nonprofits need to supplement their portfolios with their own, innovative fundraising campaigns that tap into their unique assets and leverage the networks of board members. Some examples include establishing giving circles and nurturing relationships with private investors.

Build your brand.

Any organization that competes for resources must have clear and consistent messaging about who it are, the value it provides, and why it is are better than the competition. A strong brand identity is a powerful tool that not only builds trust in the community, but also provides a framework for prioritizing organizational activities and preventing mission drift.

Much like for-profit organizations, nonprofits need to utilize an arsenal of marketing tools to promote their brands to new audiences—websites, social media, public relations—while ensuring that their messaging stays true to their identity.

Partner with other nonprofits.

There are countless ways that nonprofits can help each other by sharing resources, expenses, and expertise. Whether it is in fundraising, grant writing, or purchasing in bulk, strategic partnerships between nonprofits means that everyone achieves more, with less.

Demonstrate the ROI of your programs.

Tracking and reporting on the effectiveness of your organizational activities is not only a legal and ethical obligation, it also supports your case for asking funders for additional money year after year.

Establish a formalized measurement system to demonstrate the impact of each dollar that is used in your programs. Provide this data in annual reports and other channels of communication to reflect your accountability. This will help garner trust and credibility among your constituents.

Promote community involvement.

Encouraging members of your community to accept roles as board members or volunteers can open the doors to new resources and areas of expertise that you would not otherwise have. A pool of highly motivated volunteers can be one of the greatest long-term assets a nonprofit can achieve. Research indicates that when members of the community have a sense of ownership toward a nonprofit and its mission, the organization is less vulnerable to downturns in the economy.

Improving your financial sustainability is a complex and continual process. These are just a few strategies to consider, and if you’ve already put them in place, stop for a moment to evaluate how well are you executing. You are likely to find small ways to improve in each area that will make a lasting, measurable difference over time.

Leigh Tucker, managing director of nonprofit solutions at AMS, runs Nonprofit Executives, an organization that connects professionals serving the nonprofit sector, which originally published this article.
March 2015
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