Non-profit is a money game for long term financial sustainability

The statement that non-profit is a money game for long term sustainability needs explanation, because the simple fact is there is a general misconception amongst the general public that these organisations should not and indeed can not make money.  Notice I said money and not profit.  It is not about profit, but running a surplus (that is making extra money) so that they have long term sustainability.

Sustainability is a very important point to consider particularly in an uncertain global financial climate.

The difference between non-profit organisations can be categorised in many ways.  From a financial perspective it is simple – those that are sustainable and those that are not.  The sustainable ones are led by those larger non-profits, usually charities, who have been around for a long time.  These big charities have built a steady stream of income over a period of time that is a mixture of fundraising, bequests, fee for service, sponsorship, grants and government funding.  Added to this though is income from investments and capital.  For many of these big charities, their long term future is somewhat guaranteed by smart investments that mean they have money in the bank.

Now we come to the others.  These are the non-profits, again I am largely talking about charities here, who have very little if any investments.  They spend every dollar they generate on services.  While this is admirable, it puts these services at risk when you are in such uncertain financial times.

When you consider that often it is government funding that constitutes the majority of income for these non-profits, again particularly charities but broadly the not-for-profit sector, the dangers can be even greater.  Governments change and funding directives along with them.  Of course when times are tougher financially you can also expect government to adjust its funding strategies.  Add in significant changes in policy and you have a very volatile situation.  For example, the upcoming likely introduction of a National Disability Insurance Scheme into Australia will mean that funding is directed initially to families of people with a disability.  They will then decide where to spend this money.  Charities who could rely on a certain amount of money coming directly from the government will no longer have that luxury.  The implications are, cutting back on service to manage the risk, or increasing risk by delving into deficit budgets.  All this could be avoided if these organisations had a reasonable investment strategy.

Charities need to have a long term sustainability strategy.  They need to start thinking like businesses in terms of being able to guarantee their long term future.  Unlike businesses though the aim is not ‘profit’, it is about service.  Remember though, you can’t have service without money.  To attract the best professionals to provide the service you need to pay them competitive salaries and provide them with a competitive work environment with the facilities that help them do their job to the best of their ability.

The sector needs more influence from people who have operated businesses and know about sustainability and managing risk. By the same token, the general public also needs to understand that when you ‘give’ to a charity / non-profit / not-for-profit organisation it can not and should not always be about being directed to a service or program.  There is no magic number for how much to be putting away for a rainy day and how much to put aside for administration, but whichever way you look at it these are all areas that must be addressed with each dollar received by these organisations, no matter the source.

It’s a money game.  There is nothing wrong with that.  It’s not about profit, it’s about long term sustainability to provide the best possible service.  If you believe in your cause / charity / non-profit / not-for-profit then you should believe they deserve a long term future.

In a very real sense this all comes down to quality communications and marketing.  It can make all the difference if you want to guarantee long term survival if you are a charity / non-profit / not-for-profit / non-government organisation.  CommTogether provides a model that can help so contact us today.