Consider sustainability best practicesFinancial sustainability is the hallmark of a healthy nonprofit. When your nonprofit is financially sustainable, you can maintain your operations, grow resources to weather challenges, and accomplish your mission in the long run.
Financial sustainability requires clear objectives, strategies and action plans. Here's help understanding the challenges and achieving results.
What are the most common challenges to financial sustainability?
Challenges to financial sustainability are varied, including:
- Dependence on external sources of funding. Government and foundation grants and private donations can be unreliable. A foundation might change its funding priorities and withdraw support, or a government program may find itself significantly reduced due to budget concerns.
- Unsuccessful branding or marketing. If potential funders aren't aware of your nonprofit's contribution — or they don't see your mission in action — they may be unlikely to support it.
- Inadequate fiscal and operational reporting. Sloppy record keeping might make a nonprofit appear to be treating finances irresponsibly. Even if that's not true, the appearance may discourage donor investment.
- Apparent duplication of mission. If your mission or initiatives seem too similar to a more established organization, donors might expect you to partner, or even consolidate, to increase efficiency.
- Economic changes. Decreased demand for services or tighter competition may erode financial sustainability. Even a change in operating costs, such as increases in the price of goods or services, may pose a threat.
What are some strategies to maintain financial sustainability?
Savvy nonprofit leaders take various steps to maintain financial sustainability. Consider these best practices:
A sustainable fundraising plan should balance grants and gifts with other funding sources while being careful to maintain a diverse donor base. Capitalizing on, and expanding, fundraising assets is key. Keep your ear to the ground about potential new sources of grant funding or shifts of priority among major funders.
To appeal to unconventional or nontraditional donors, consider creative fundraising techniques. Options may include crowdfunding, giving circles or special events. Think out of the box here, such as an auction or live concert. An added benefit to creative fundraising is that it also expands your stakeholder network, mobilizing people who haven't necessarily been part of the nonprofit or philanthropic community.
Branding and marketing
Clarity and consistency of mission are essential. After all, the mission is the motivating agent, both for the work of your nonprofit and the involvement of supporters and beneficiaries. The more specific your mission, the more likely it is to be perceived as achievable and effective — and therefore continue to earn support, financial and otherwise. Raise your brand profile by tapping into social networks and reaching out to key influencers.
Collaborations with similar organizations may forestall competition and prevent duplication of mission while helping you deliver maximum impact, perhaps by serving a larger geographic area or maximizing use of staff with complementary skills and experience. Whether unofficial or more formalized, alliances can also be key in building capacity and scaling efforts within and across communities.
Precise fiscal reporting
Clear reporting practices demonstrate accountability and value to stakeholders. This is an ethical imperative for nonprofits, as well as a key feature of the giving landscape. Funds must be accounted for and allocation of those funds (to services, administrative costs and so on) must be within established boundaries.
Culture of commitment
Staff and board members who are passionate about the mission want to stay with your organization and see it thrive. This helps support help support long-term financial sustainability. Encourage staff and board members to participate, whether directly or indirectly, in the realization of your nonprofit's mission and goals. To facilitate participation, make roles and expectations as clear as possible.
NewLevel Group: Building sustainability for nonprofit organizations
RAND Corporation: Financial sustainability for nonprofit organizations by Lisa Sontag-Padilla, Lynette Staplefoote and Kristy Gonzalez Morganti (2012)