Understanding and Changing Your Business Strategy Jan Masaoka
Blue Avocado • Unconventional, practical, fun • For community nonprofits • Finance & strategy, Ask Rita in HR, Board Café, First Person Nonprofit , 3-Minute Vacations, more • Every 3 weeks • Like public TV: free to read but there are pledge breaks
Agenda • What is a business model? Strategy? • Impact & finances; mission & money • Charting and analyzing your current business model • Strategic imperatives • A sustainable portfolio/strategy
• Lower cost goods, mid to upper middle consumers • Lots of free parking • Newsprint inserts in newspapers
• High priced, higher income customers • Downtown and high income mall locations • Full color catalogs mailed to high income zip codes
All too frequently heard . . . . Social media Product sales Look what THEY ’ RE doing! Benefit Concert We should do that! Online auction Yeah! Walk-a-thon Fees-for-service
Different strategies, both successful:
Revenue types & sources Total Revenue Contributed revenue Earned revenue
Revenue types & sources Total Revenue Contributed revenue Institutions Individuals: vehicles for asking Churches Mail: hot and cold lists Foundations Corporations Phone-a-thon Service clubs Annual gifts Major gifts (Rotary, Kiwanis) solicitations Planned gifts Pledges
Revenue types & sources Total Revenue Earned revenue Related income Un-related income Government contracts Fees charged to consumers Fees charged (clients, patrons) to third-party payers
Different business models, same mission:
Nonprofit Business Models Instead of strategic plans that are different from a fundraising plan or business plan: • Must consider financial viability and mission impact together Instead of considering activities individually: • Are about how activities fit together and leverage each other
The Nonprofit Business Model • Every organization has one whether you know it or not. • Explains how a nonprofit generates and allocates revenue to accomplish its mission and remain financially viable. • Nearly all nonprofits today are hybrids combining earned income with donations. • Business models change over time. • Businesses with the same services can have different business models.
Dual-Bottom Line Strategy Each activity has two kinds of impact: • Mission impact (external) and • Financial impact (internal) So a strategy for sustainability must be a strategy that combines both kinds of impact.
Matrix Map IMPACT PROFITABILITY
Matrix Map HIGH IMPACT HIGH PROFITABILITY IMPACT LOW IMPACT LOW PROFITABILITY PROFITABILITY
Matrix Map HIGH IMPACT HIGH PROFITABILITY IMPACT PROFITABILITY
Stars HIGH IMPACT HIGH PROFITABILITY Examples: • Important, foundation-funded program IMPACT • Fee-for-service program that makes money PROFITABILITY • Annual mail donations campaign • ?
Stop Signs LOW IMPACT LOW PROFITABILITY Examples: • Little-used Resource Library • Program that used to have funding IMPACT • Stale fundraising event • ? PROFITABILITY
Money Trees LOW IMPACT (other than money raised HIGH PROFITABILITY Examples: • Martini parties • Luncheon IMPACT • Raffle tickets • ? PROFITABILITY
Hearts HIGH IMPACT LOW PROFITABILITY Examples: • Advocacy at state level • Taking children to see parents in IMPACT prison • Show of experimental art PROFITABILITY • ?
The Matrix Map
A single compelling image 4.00 Film/Curriculum packages 3.00 Film making Impact (250,000) (200,000) (150,000) (100,000) (50,000) - 50,000 100,000 150,000 Major 2.00 Donors Direct Jewelry sales Mail Resource Equip Library rentals 1.00 Aha! - Profitability
Relative Impact Examples of criteria • Alignment with core mission • Excellence in execution • Scale or volume • Depth • Filling an important gap • Community building • Leverage
Example 1. Alignment with Core 2. Excellence: To 3. Fills an Important 4. Community & Mission: How much Gap (FIG): To what Constituency Building: To what degree does the does the activity align extent is this important, what degree does this build the activity reflect the Criteria with our core mission? and the only one of its movment in which our best work we do? kind available to the organization works? community? Environmental 4 4 3 2 Education Restoration & 4 3 1 4 Reforestation Nursery 3 1 1 2 Resource 2 1 1 2 Library Direct Mail 2 2 1 3 Major Donors 2 3 1 3 Annual Event 1 2 1 2 Site Rentals / 2 2 1 1 Birthday Parties
Determining Profitability Revenue Expenses • Assign restricted and • Include full costs: generated revenues to each business line Program Costs Shared Costs Admin Costs
Community Theater Matrix Map English / Spanish 4.00 Plays Spanish Language Plays 3.00 After-School Drama Workshops Impact (100,000) (80,000) (60,000) (40,000) (20,000) - 20,000 40,000 60,000 2.00 Special Events Newsletter 1.00 - Profitability
Everest Environmentalists Matrix Map 4.00 Environmental Education 3.00 Restoration & Reforestation Impact (250,000) (200,000) (150,000) (100,000) (50,000) - 50,000 100,000 150,000 Major 2.00 Donors Direct Site Mail Rentals Nursery Resource Annual Event Library 1.00 - Profitability
Career Closet Nonprofit Closet Service clubs Annual gala
Rural AIDS Nonprofit AIDS program (government funded) Individual donations
The Strategic Imperatives
Strategic imperatives for Stars HIGH IMPACT HIGH PROFITABILITY Instead of • Taking it for granted . . . • Not involving board . . . IMPACT • Turning your attention to problem areas . . . PROFITABILITY
Strategic imperatives for Stars HIGH IMPACT HIGH PROFITABILITY Pay attention. Keep it a star. Make sure the board is involved. Invest time and money. IMPACT Grow it. PROFITABILITY
Strategic imperatives for Stop Signs LOW IMPACT LOW PROFITABILITY Instead of •Trying once again to improve it . . . •Not thinking about it . . . IMPACT • Spin it off to another organization PROFITABILITY • Close it
Strategic imperatives for Hearts HIGH IMPACT LOW PROFITABILITY Instead of •Closing it because it ’ s not breaking even . . . •Making it a Sacred Cow that can ’ t be criticized . . . IMPACT PROFITABILITY • Keep it. Celebrate it. • Contain the costs.
. . . for Money Trees LOW IMPACT HIGH PROFITABILITY Instead of •Giving it second class status •Keeping it separate from programs . . . IMPACT PROFITABILITY • Water the tree. • Increase impact.
Strategic Imperatives
Portfolio: BEFORE Local legis Restoration State legis Schools News Scorecard events Dinner Newsletter Major donors Policy alerts
Grow slightly. Star. Grow decisions Drop except for given rare huge issues limitations. with high possible Star. impact. Grow. Increas Local legis HIGH IMPACT HIGH IMPACT e impact by LOW PROFITABILITY HIGH PROFITABILITY deepeni ng Restoration State legis quality. Drop. Lower impact all the Schools News time (newspapers). Scorecard events Task force to see if something new could achieve LOW IMPACT LOW IMPACT goals better at lower cost. HIGH PROFITABILITY LOW PROFITABILITY Breakeven, some impact. Give Dinner Newsletter away. Major donors Policy alerts Increase Change to e- impact. newsletter to Increase Drop. Being done Growth not increase impact. by others. likely. impact, Grow if Increase reduce costs possible. profitability .
Portfolio: AFTER Local legis Restoration Schools State legis Newsletter Dinner IMPACT Major donors PROFITABILITY
The Business Model Statement Mission Statement: Elm Prairie Preservationists works for the restoration and preservation of our prairies so future generations may benefit from their unvarnished beauty and bountiful natural resources. Business Model Statement: We educate children to be of stewards of our prairies, supported by government contracts and fees-for-service, and restore prairies with the support of corporations and foundations. When the generosity of individuals makes it possible, we advocate for policies that will protect and preserve our lands.
Looking at special events Event Impact $ Effort Senior high low medium lunch medium Crab medium but high feed growing New Year’s low low high mochi making Sake low high high festival Golf low high low Tourn.
Looking at special events Event Impact $ Effort Type Action Senior Keep. Contain high low medium costs. lunch medium Grow. Increase Crab feed medium but high impact. growing New Give to church Year’s low low high that also has mochi one. making Sake Grow. Increase low high high impact festival Increase Golf low high low impact. Age Tourn. changes?
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