Outcomes-Based Planning for Associations: Financial Sustainability and Income Strategy
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1 Outcomes-Based Planning for Associations: Financial Sustainability and Income Strategy AIBS COUNCIL MEETING December 7 2011 Richard Brewster National Center on Nonprofit Enterprise
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Outcomes-Based Planning for Associations: Financial Sustainability and Income Strategy. AIBS COUNCIL MEETING December 7 2011. Richard Brewster National Center on Nonprofit Enterprise. Financial Sustainability and Income Strategy. What makes for a sustainable organization? - PowerPoint PPT Presentation
Transcript of Outcomes-Based Planning for Associations: Financial Sustainability and Income Strategy
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Outcomes-Based Planning for Associations: Financial Sustainability and Income Strategy
AIBS COUNCIL MEETINGDecember 7 2011
Richard BrewsterNational Center on Nonprofit Enterprise
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Financial Sustainability and Income Strategy What makes for a sustainable organization?
Balance between Mission and Money Characteristics of a sustainable nonprofit organization
Income Strategy: Diversification Identifying funding streams
Association Entrepreneurship
Association Sustainability
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Publication
Common admissionsprocess
Advocacy
Meetings
Professional Development
Association Sustainability
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Association Sustainability
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Association Income: Forms of Support
Contributions GovernmentFunds
Earned (Fee) Income
In-Kind Support Investment Income
Individual giving; some memberships
Grants Fees for service, some memberships
Volunteer & pro bono work
Returns on endowment
Bequests Contracts Sales/commercial venture income
Gifts of real estate Interest on operating funds
Corporate and Foundation grants
Reimbursements Royalties and license fees
Art and other collections
Program-related investments
Special events Credits & vouchers Rental income Partnerships with others
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Income Sources: Self-selected ASAE AssociationsFROM SURVEY OF ASAE MEMBERS:
Type of Revenue
All respondents
Members mainly organizations
Members mainly individuals
501c6 associations
501c3 associations
Contributions, gifts, grants 9.8% 7.2% 10.5% 4.2% 19.4%
Program Service Revenue (Fees)
43.7% 38.8% 48.0% 41.0% 57.3%
Membership Dues and Assessments
38.8% 46.7% 33.4% 46.3% 25.7%
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Income StrategyStages in developing an Income Strategy Define programs that are most likely to achieve mission Define their start-up and operating costs Identify most likely forms of support Screen these forms of support: prevalence and nonprofit’s
values Do market research: $ value and direct costs Develop investment cases: “real” value and costs as well as $
value and costs Balance the portfolio: optimum overall value vs costs and
protection against risk Make decisions: Invest….or quit.
Mission Servicesoffered
Nature of benefits
IncomePortfolio
Who will pay?
Secure FundingIdentifying the Nonprofit’s Likely Sources of Support
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Identifying the most likely sources of support The Roots of Association Income: the Nature of Benefits Private benefits
Group benefits
Public benefits
Trade or exchange benefits
Accrue to individual consumers willing and able to pay fees
Accrue to specific constituencies associated with causes that donors wish to support with gifts and grants
Accrue to the general public, supportable by public financing
Accrue to organizational partners in a quid pro quo relationship
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The Roots of Association Income: the Nature of Benefits Private benefits Service or activity generates direct benefit to
individual Individual can be excluded from service Examples: Member services
Health care Journal Career development advice
Type of payment: fee/price in direct exchange for service
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The Roots of Association Income: the Nature of Benefits Public benefits Activity or service generates benefit that, once produced,
everyone gets. Clean air National Defense
Association activity produces benefits that have political support and mandate: Education in public health Support for veterans
Types of payment: Federal/State/Local grants and contracts
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The Roots of Association Income: the Nature of Benefits Group Benefits Number of people or a community benefit, and difficult to
exclude, but.. benefits not sufficiently widespread or popular to attract public funds
Examples: Research into treatment of PTSD Support for victims of disasters
Who pays?: people with affinity or interest, or brief/policy to support a given area.
Types of payment: Donation Bequest Foundation Grant
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The Roots of Association Income: the Nature of Benefits Trade benefits Activity generates economic or social benefit for third party (other
organization or individual) Examples:
Member society benefits: Advocacy support: exchange of one association’s resources for another’s
staff Healthcare insurance Consulting
Corporations that buy association’s reputation to increase their own sales: Crest and dental association scholarships
Types of payment: Contract Membership/affiliation dues Barter Sponsorship
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Private Benefits
Trade Benefits
Public Benefits
Group Benefits
Benefit Combinations and Income Portfolios
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Identifying the most likely forms of support: AIBS
BENEFIT ANALYSIS OF PROGRAM ACTIVITY: E.G. BioScience
Who benefits How they benefit Who might pay Form of payment
Private benefits Individual biologists
Public benefits The general public
Group benefits University biology students
Trade Benefits Research equipment suppliers
Keep up-to-date
Enhanced quality of scientific knowledge
Supplements learning; research ideas
Customers become more aware of products
The individual biologist
Federal Govt.
University Science Dept.
The suppliers
Subscription
Grant
Subscription; allowance for students
The price of an advertisement
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Nonprofit Income StrategyStages in developing an Income Strategy Define programs that are most likely to achieve mission Define their start-up and operating costs Identify most likely forms of support Screen these forms of support: prevalence and nonprofit’s
values Do market research: $ value and direct costs Develop investment cases: “real” value and costs as well as $
value and costs Balance the portfolio: optimum overall value vs costs and
protection against risk Make decisions: Invest….or quit.
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Framework for Decision-Making: Value vs Cost For each potential new source, or each potential expansion in income
generation from a source:
Value: direct $ value, ‘crowd-in’ value, added mission value, minus ‘crowd-out’
versus Costs:
direct operating expenses, start-up capital and working capital hidden transaction costs.
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Framework for Decision-Making: Value vs Cost
For the income of the nonprofit as a whole:
Best overall combination of Value versus Costs….
Adjusted for: Protection against risk Overall viability
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Protection against riskCurrent thinking on income strategy risk mitigation Diversified revenues:
More than one type of financing (e.g. Govt. contracts, private foundation grants)
Several payers in each type (e.g. members, different govt. streams)
One dominant source, buttressed by 2 – 3 ‘supporting streams’
Unrestricted/unconstrained as part of the mix
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Mission Servicesoffered
Nature of benefits
IncomePortfolio
Who will pay?
Secure FundingIdentifying the Nonprofit’s Likely Sources of Support: Association Entrepreneurship
Association Entrepreneurship
Entrepreneur:An innovator who implements change within markets through the carrying out of new combinations:The introduction of a new good or standard of qualityThe introduction of a novel method of productionThe opening of a new marketThe acquisition of a new source of supplyThe carrying out of new organization in any industry.
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Association Sustainability
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Association Entrepreneurship
Clarity about mission and desired outcomes Clarity about who constitutes the association’s
important stakeholders Laser-like focus on what they really need,
including what they don’t yet know they need: benefits
Understanding of ability and willingness to pay. i.e. become customers
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Association Entrepreneurship
If able and willing to pay:
Laser-like focus on creating value and justifying prices that make services viable over time.Align all association’s resources to the interests of these stakeholders
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Association Entrepreneurship
If this market doesn’t exist, revenue from customers insufficient,Combine different revenue streams to produce servicesInnovate activities tangentially related to missionShift mission……
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Association Entrepreneurship
Change in Association’s culture:Time and encouragement to think about new ways of combining resources
In programs In generating income Across the nonprofit With other agencies
Rewards and encouragement for considered risk-takingDelegated authority to make decisions and act
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Association Entrepreneurship:
Change in Association’s culture:Optimistic—feeling that the business will work Visionary—imaginative, creative Passionate—to make a difference in the world; able to turn passion into practice; transform dreams to realityPurposeful, Driven, determinedCalculated risk-takersKnowledge seeking—learn by doingPrincipled, reliable
Able to institute change by disrupting the status quo or bringing something new to marketAble to bring resources together; create value
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Outcomes-Based Planning for Associations: Financial Sustainability and Income Strategy
AIBS COUNCIL MEETINGDecember 7 2011
Richard BrewsterNational Center on Nonprofit [email protected]
