When you hear the term "nonprofit" organization, do you envision people who do good things for the community but don’t make money?
Well, you’d be half right. Fortunately Alaska has many talented nonprofit professionals who do vital work in the community. We depend on them for our social services, performing arts, environmental projects, health care and education.
But you’d also be half wrong. Nonprofit organizations can and do "make money." They have to. That money is not a profit, but it’s an important part of their cash picture and essential to keeping the organizations healthy, strong and able to deliver their services.
Nonprofits can’t rely solely on grants and donations to meet all their money needs. In fact, groups like the symphony, opera and museum have been making money through ticket sales for as long as they’ve been around. They couldn’t survive without it.
For others, though, the step into what’s known as "earned income" is an alien one, and one that can be intimidating. A good way to reduce the fear of venturing into unknown territory is to have a map. And when that adventure involves making money, the map should be a business plan.
Most nonprofit professionals and board members have considerable experience in strategic planning -- conducting research, analyzing strengths and weaknesses and forming goals and objectives for guidance in fulfilling their missions.
But a business plan -- that’s something else. Yet all nonprofits really need one. Unlike the strategic plan that articulates the broad vision of what the organization wants to accomplish, the business plan provides a clear, detailed road map for use by management every day.
For instance, if an organization charges for anything -- from the price of a ticket to a fee for services, from selling goods to serving food in a cafe -- it’s vital to assure that the pricing is appropriate, both for the value of the goods or services delivered and for the cost of delivering them.
That requires doing a realistic assessment of costs and developing fees high enough to offset a pre-determined portion of those costs. It also requires setting such fees low enough to attract and serve your intended customers. Meeting both objectives requires a thoughtful balancing act.
The business plan is specific. It details financial projections, whether from grants, donations, government support or earned-income projects, and it sets revenue targets. The plan also defines markets, identifies and manages risk and establishes criteria for measuring outcomes. In short, it focuses on the bottom line, which equals financial stability.
Achieving that bottom line -- achieving a group’s financial goals -- is important to donors and others who give their time, talent and cash to support the organization.
It’s important because success there makes possible success with the other bottom line, service to the community. And that all-important community service is where each nonprofit organization truly defines itself. It’s the place where all the lines and number columns come together and enable each group to succeed in its overall mission.
In the for-profit world, businesses primarily focus on a bottom line measured in dollars and cents. But our colleagues in the nonprofit world have two interdependent bottom lines. One assures financial stability, the other a healthier, more vibrant community. They can’t have one without the other.
The challenge for nonprofit managers is in some ways more complex than it is for profit-oriented business executives. It’s important for the nonprofits to keep the two bottom lines in balance and make sure one doesn’t overpower the other.
A well-conceived business plan provides a map and one part of the balance; passion for the mission and a vision for the future take care of the rest.
Nancy Schoephoester is manager of philanthropy and community services for Phillips Alaska Inc.