How Financial Sustainability is So Misunderstood

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Sections of this topic

    Finances Are Just a Symptom, Not a Solution

    When people think of financial sustainability, they usually think of getting enough money to pay bills for the long-term. Then they focus on strategies to keep getting enough money. That’s the wrong approach.

    1. Strategy for Sustainability — Be Realistic

    If an organization is trying to do far too much, it will likely not have enough resources, including not enough money to do what it wants to do. The solution is not to keep trying to get more money, the solution is to do less. Yeah, that’s right, do less. Cut back on the number of goals and priorities to address OR extend deadlines in which to address them.

    2. Strategy for Sustainability — Ensure High-Quality Programs

    If your organization does not have high-quality programs and services, then clients’ participation will eventually decline as will funding. That’s why it’s so important to do a few things very well, rather than a lot of things not so well. The solution is not to keep trying to get more money to offset deficits. The solution is to pick which programs you can do very well, do them — and keep proving your strong results.

    3. Strategy for Sustainability — Financial Planning

    Two of the best practices are achieving a financial reserve and doing contingency planning. Many leaders even laugh when they hear suggestions to establish a reserve. Too often, that’s from a mindset that all money must soon be spent because that will accomplish even more positive results for the community. The irony is that that approach too often hurts the community because the nonprofit remains in financial crises, which can hurt programs and services.

    4. Strategy for Sustainability — Think “Organizational Sustainability”

    When Board members and other nonprofit leaders talk about sustainability, they’re ultimately worried about having enough money to continue to support the organization. So remind them that financial sustainability is really just part of organizational sustainability. Help them talk about being realistic, ensuring strong programs, and doing financial planning for reserves and contingencies.

    What do you think?

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    For more resources, see our Library topic Nonprofit Capacity Building.

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    Carter McNamara, MBA, PhD – Authenticity Consulting, LLC – 800-971-2250
    Read my weekly blogs: Boards, Consulting and OD, Nonprofits and Strategic Planning.