2/17/2020 Revenue Analysis Steve Zimmerman Principal, Spectrum - PDF document

2/17/2020 Revenue Analysis Steve Zimmerman Principal, Spectrum Nonprofit Services @SpectrumSteve 1 Our Timeline Our Timeline Phase Process Step Format Dates Sustainability Theory Business Model Overview Webinar Kick Market Analysis Framework November 6* Phase 1: Off Cohort Process Description Foundations of Intended Impact Sustainability Direct Beneficiaries December 10 1 Day In- 9:00 AM – 3:00 Define Programs Person Session PM ET Mission Impact Assessment Phase 2: Profitability / True Costs Webinar January 22* Business Model Data Revenue Analysis Webinar February 18* Phase 3: Key Messages of the Matrix Map 1.5 Day In- April 21 (9 - 4) & Business Person Session April 22 (9 - 1) Model Communication & Reporting Analysis & Strategy Peer Learning Webinar May 20* Coaching (25 hours shared among all organizations) *All webinars from 12:00 PM – 2:00 PM ET (unless otherwise noted) 2 Matrix Map Process Matrix Map Process Assess Mission Impact Articulate Making Define Plotting Analyzing Intended Strategic Determine Programs Your Map Your Map Impact Profitability Decisions Analyze Revenue 3 1

2/17/2020 Today’s Conversation Today’s Conversation  Develop a shared understanding of key revenue vocabulary  Differentiate between revenue diversification across revenue streams versus within streams  Identify and explain a strategic approach to nonprofit revenue analysis Connect revenue analysis to the nonprofit  business model 4 Revenue Analysis Revenue Analysis Develop a shared understanding of key revenue vocabulary 5 Revenue Analysis Revenue Analysis Drawn from Nonprofit Finance Fund State of the Nonprofit Sector Survey 2018 Report. 6 2

2/17/2020 Revenue Analysis Revenue Analysis T. Rowe Price T. Rowe Price The Johnsons! The Johnsons! Foundation! Foundation! I know someone I know someone My cousin! My cousin! at Under Armour! at Under Armour! 7 Revenue Analysis Revenue Analysis Revenue Stream Specific Donor 8 Revenue Analysis Revenue Analysis Revenue Streams v. Revenue Sources 9 3

2/17/2020 Revenue Analysis Revenue Analysis Revenue Streams v. Revenue Sources 10 Revenue Analysis Revenue Analysis Differentiate between revenue diversification across revenue streams versus within streams 11 Revenue Analysis Revenue Analysis 12 4

2/17/2020 Revenue Analysis Revenue Analysis What people typically mean Government Foundation Individual Fee-for-Service Grants / Grants Giving Contracts 13 Revenue Analysis Revenue Analysis “Maintaining multiple, highly diverse revenue streams can be problematic when each requires, in essence, a separate business. Each calls for specific skills, market connections, capital investment, and management capacity.” Clara Miller “Shattering the Myth About Diversified Revenue” Chronicle of Philanthropy, September 2010 14 Revenue Analysis Revenue Analysis What facilitates growth Foundation Grants T. Rowe Price Baltimore Abell Foundation France-Merrick Foundation Community Foundation Foundation 15 5

2/17/2020 Foster, W. & Fine, G. (2007). How Nonprofits Get Really Big. Stanford Social Innovation Review . 16 17 Revenue Analysis Revenue Analysis Identify and explain a strategic approach to nonprofit revenue analysis 18 6

2/17/2020 Revenue Analysis Revenue Analysis Three Actions to Take Align revenue mix with impact Produce flexible income Leverage the organization’s capacities 19 Alignment with Impact Alignment with Impact Align Revenue Mix with Impact Funding Opportunities / •Resources •Interests Funder Constituents and Needs Interests Program Program •Operations •Operations Design Design and Impact Funder •Resources Constituents •Impact Interests 20 Alignment with Impact Alignment with Impact Finding Reliable Funding Partners 21 7

2/17/2020 Reliability 22 Alignment with Impact Alignment with Impact Benefits Theory Benefit Who Benefits? Example Who could pay? How? Type Individual Private Bakery; Arts Fees Consumers Specific Donors through gifts; members Disability Services; Group communities / through fees; philanthropic Racial Equity individuals foundations with vested interest Education; Government; general philanthropy; Public General Public Tourism contracts, subsidies, etc. 23 Alignment with Impact Alignment with Impact Sample: Afterschool Youth Organization What is our organization’s impact? W HO I MPACT M EASURE H OW L ONG -T ERM V ALUE 24 8

2/17/2020 Alignment with Impact Alignment with Impact Sample: Afterschool Youth Organization What is our organization’s impact? Businesses Who benefits from our organization’s impact? Schools Families Youth 25 Alignment with Impact Alignment with Impact Complete the Template for Your Organization 26 Alignment with Impact Alignment with Impact Sample: Afterschool Youth Organization What is our organization’s impact? Who benefits from our organization’s impact? How do they benefit? 27 9

2/17/2020 Alignment with Impact Alignment with Impact Sample: Afterschool Youth Organization What is our organization’s impact? Who benefits from our organization’s impact? How do they benefit? How can they contribute? 28 Revenue Analysis Revenue Analysis Three Actions to Take Align revenue mix with impact Produce flexible income Leverage the organization’s capacities 29 Flexibility 30 10

2/17/2020 Produce Flexible Income Produce Flexible Income Donor Restrictions Fee-for- Government Service Individuals Corporation Foundation 31 Produce Flexible Income Produce Flexible Income Complete the Template for Your Organization 32 Produce Flexible Income Produce Flexible Income Scenario: Government Grant Unallowable Flexible Funding Costs • Unrestricted gifts • Fee-for-Service • Operating grant Allowable Costs 33 11

2/17/2020 Produce Flexible Income Produce Flexible Income Scenario: Building Reserves 34 Revenue Analysis Revenue Analysis Three Actions to Take Align revenue mix with impact Produce flexible income Leverage the organization’s capacities 35 Leverage Capacities Leverage Capacities Programmatic Capacities Ex: Domestic Violence Shelter Facility Partnerships with job Appropriately placement agencies certified staff Emergency health skills Relationships with Compliance employers 36 12

2/17/2020 Leverage Capacities Leverage Capacities Programmatic Capacities Ex: Domestic Violence Shelter Membership Government Dues Contract Corporate Individual Sponsorship Gifts Event Tickets 37 Fund development efforts have distinct capacities too! 38 Necessary Characteristics Leverage Capacities Leverage Capacities Overall Government Foundation Individual Fee-for- Corporate Revenue Contracts & Grants & Giving Service Contributions Generation Grants Contributions Sells goods / Access to, services that Generates relationships A mission that Effective consumers additional with, and aligns with impact want to buy unrestricted stewardship of corporations’ messaging Understanding and that funds. foundation priorities of true program advance the personnel costs mission Ability to Uses clear A mission that Mission-based advertise metrics to Relational aligns with entrepreneurial relationships monitor stewardship foundations’ qualities with progress priorities corporation Access to working capital Strong / reserves Strong Ability to Product contacts / Culture of accounting demonstrate marketing relationships philanthropy function impact expertise with corporations 39 13

2/17/2020 Leverage Capacities Leverage Capacities Self-Assessment 40 Leverage Capacities Leverage Capacities Questions to Ask • What capacities do you • What capacities do you need? have? • What will be the • In which revenue tradeoff for investing in streams might you this area? invest based on your impact? 41 Revenue Analysis Revenue Analysis Three Actions to Take Align revenue mix with impact Produce flexible income Leverage the organization’s capacities 42 14

2/17/2020 Revenue Analysis Revenue Analysis Connect revenue analysis to the nonprofit business model 43 The Matrix Map The Matrix Map 44 Matrix Map Social Service Agency 4.00 Career Prep Teen Program Youth Development 3.00 Vocational Skills $(80,000) $(60,000) $(40,000) $(20,000) $- $20,000 $40,000 $60,000 Profitability Individual Giving Grants 2.00 Family Found. Special Events Impact Estate / Planned Giving 1.00 45 45 15

2/17/2020 Revenue Matrix Map Social Service Agency 4.00 • What currently pays for our Career Prep impact? Teen Program Youth Development • What revenue streams are driving our financial viability? • Where might we invest resources? 3.00 Vocational Skills $(80,000) $(60,000) $(40,000) $(20,000) $- $20,000 $40,000 $60,000 Profitability Individual Giving Grants 2.00 Family Found. Special Events Government Contracts Estate / Planned Giving Fee-For-Service Impact Events Individuals 1.00 Foundations 46 46 47 Revenue Analysis Revenue Analysis “True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success.” -Roger Martin 48 16