Strategic and financial planning Read the headlines today and you might be thankful that you’re with a nonprofit organization rather than a for-profit business. While stories of corporate fraud and mismanagement seem to dominate the news, there are still lessons to be learned from business if you want your organization to have a strong future. Creating an overall plan To ensure they’re moving toward where they want to be in the future, successful businesses create and implement strategic plans. And while some nonprofits also take this route, many do not — at least not as seriously as do many businesses. Just as for-profit business boards and owners do, your board needs to think through where it wants to see the organization in three to five years. In the nonprofit world this translates to such questions as: Is your mission still relevant? Do the programs that you now deliver support your goals? Should any programs be transitioned or abandoned? Although it’s easy to linger at status quo, top-performing organizations of all kinds set out long-term goals in a strategic plan and then reorganize their operations to meet them. A strategic plan should address:
Thinking through such initiatives, and then putting them in writing, will help keep your board from investing resources — both financial and nonfinancial — in opportunities that won’t provide the returns you anticipate over the long term. Developing a financial roadmap In addition to your overall strategic plan (and budgets), a strategic financial plan should express your organization’s financial goals and provide a methodology for monitoring progress. A well-thought-out plan will help ensure you have enough funds to handle program activities. Your plan should include objectives that tie into the strategic plan, such as improving areas that impact cash flow. To achieve its strategic goal of developing better member relations, for example, an association might set these objectives: to increase net new members by 15%, to boost dues revenue by 12% and to increase the gross margin on education activities to 25%. Your plan should include calculated returns on investment (ROI). It also should list significant initiatives and outline methods for projecting and monitoring cash flow needs. This will ensure that your organization’s accounts receivable are current and programs can be funded as needed. Break-even analysis is a useful tool to determine what would be the minimum level of operating income required for the organization to cover its fixed and variable expenses (including payroll, rent and utilities) in full so that it’s essentially at a break-even point. Break-even analysis also serves as an early warning system for programs that aren’t working. By monitoring program outcome measures and understanding your organization’s break-even point, you will have the ability to quickly determine whether or not a particular program will require additional funding sources in order to sustain it for a certain number of clients. If additional sources of funding or mission reserve funds are unavailable, the break-even analysis would enable your organization to easily determine the necessary cuts in program spending. Sticking with it All in all, your organization must do its work to create a sound strategic plan — and then follow it, flexing it as necessary. Without this commitment, like poorly managed for-profit businesses, your organization is likely to flounder. • |