Building a sustainable nonprofit organization
Wednesday, March 01, 2017
According to the United Nations report, "Our Common Future," a sustainable nonprofit organization is one that "meets the needs of the present without compromising the well-being of future generations."
This quote truly struck the chord of what is at the center of sustainability in any organization: not compromising the future for short-term gains.
Where do dues fit into the equation?
A sustainable organization cannot survive or even thrive on membership dues alone. In most organizations, dues make up a significant piece of the income pie. Percentages vary greatly from organization to organization, but it is not uncommon to see at least 25 percent of a nonprofit's income generated by membership dues.
A strategy employed by some nonprofit organizations is to specify that dues will not exceed income by a certain percentage. For example, specifying that no one source of income will be greater than X percent will help to a) diversify income and b) reduce the overall risk to the organization.
Do you have tiered membership options?
As well all know, our members and nonmembers buy memberships and other services from our organizations, and their needs are different from member to member.
If we price membership at one level, the expectation is that everything is included in the membership fee. Also, if we don't have varying levels of membership dues, we are potentially missing other members who may a) want to pay less and get less or b) want to pay more and get more.
Here are three potential options where you can review your programs and services and assign which level gets what level of service. Use this in combination with a list of services:
- Level I (basic, free) — Basic-level access; low membership fee or free
- Level II (intermediate) — Basic-level plus additional benefits
- Level III (high) — Basic and intermediate with extra benefits
Once you have established a set of tiers, then assigning benefits to tiers is the next task. Even if Level I is a basic/free membership, the strategy at this level may be to increase market share and to also increase potential consumption of other programs and services. The key is to provide enough commensurate value at every level to keep retention levels high.
We have tiers, but what are other potential sources of income?
There are too many to list here but as we work with nonprofits, the following are eight common ones:
- website-generated revenue (ads, listing, marketplaces, etc.)
- conferences/fundraisers and events
- sponsorships and exhibits
- certification programs
- product sales
In reviewing the American Society of Association Executives' Operating Ratios Report (2012 report), they identified these top five nondues revenue streams:
- meeting/convention registration fees
- exhibit/tradeshow booth fees
- certification, accreditation, contributions, grants, contracts
- meeting sponsorship revenue
- educational program fees
Before developing any revenue streams, it is important to conduct a member value study that asks members what they value the most around the programs and services in your organization.
Most importantly, ask the question, "What keeps you up at night as it relates to your profession or business?" This question is a veritable "gold mine" for any organization as it helps to identify areas of great need.
The worst question to ask is, "What do you need from our organization?" In this question, we are asking the member to come up with a solution to a problem. In many cases, the response will be either left blank or will be something the organization already offers as most members don't know what they need (i.e. think of the first iPhone as an unidentified need that everyone needed).
The first question touches upon the pain points of a member who is easier to describe and for your organization to assess and determine a solution if it is widespread. A methodical approach is required as it has to appeal to a large number of members in order for resources to be expended (human and financial).
What is the nonprofit organization's value proposition?
The question that we should always be ready to answer is, "Why should I join your organization?" If we cannot answer it succinctly, then there is a need to examine the overall value proposition.
Also, determine if one member type's value proposition is different from another member's value proposition. This is an excellent question to ask in a member value study.
What is the process for building a sustainability plan for my organization?
I have included the beginnings of a sustainability plan that can be modified/expanded for your organization:
Conduct member value survey
- What is valuable; identify the "value proposition"
- What is needed and they will pay extra for
- What is not needed
- Identify the key "pain points"
- Identify level of effort vs. benefit to members
- Eliminate programs that are not identified as valuable
- Put more resources in programs that are valuable to members to make them even more valuable
Create your strategic plan
- Use the member value study to guide priorities
- Identify mission, goals, strategies and performance measures
Create your budget
- Understand current income
- Identify additional money needed to create new programs
- Consider raising dues; implement tiered dues options
- Secure funding that fits the mission
- Consider charging extra for newhigh-value programs
- Add KPIs or targets to achieve for each program (income, member satisfaction, utilization, etc.)
Promote your organization
- Through influential members
- Through partnerships with other organizations
- Through website and social media; deliberate and interactive
Going back to the beginning of this article, sustainability "meets the needs of the present without compromising the well-being of future generations." Sustainability is more than a word but a way of life for nonprofit organizations.
Deliberately evolving high-impact services and creating new ones is the essence of success. Creating a sustainability plan that lives within your strategic plan is the only way to provide sustainable value to your members. If your organization thrives, so do your members.
What does sustainability look like in your organization? And how well-positioned is it to provide maximum value and relevance to all of your constituencies?
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