Nonprofits: The Evolution to the Business Model

By John Burnett, SDSVP Partner

There’s a rumor going around that nonprofits are in big trouble. Recent numbers seem to bear this out. For instance, according to Giving USA, the total estimated charitable giving in the U.S. dropped 3.6 percent in 2009. The Center for Wealth and Philanthropy at Boston College said in its report that individual giving fell 4.6 percent in 2009 but for the rest of 2010 will likely grow to up to $227 billion. This sounds good until you realize that U.S. nonprofits need $1 trillion to operate fully.

There is also the other side of the coin. The needs for the services provided by nonprofits have increased by 30-40 percent during the period since 2008. This trend will continue as more individuals lose their unemployment benefits and suffer greater problems.

The response from nonprofits has been predictable. When-in-doubt cut costs – limit travel, count paper clips, reduce benefits; and, most painfully, cut staff, cut salaries/time, and eliminate programs. All these cuts threaten the Mission of the organization and the reason for its being. The assumption made by many Executive Directors is to wait, and things will turn around- they always have before.

Of course, there is always the possibility that the nonprofit can take action. Learning about social media is the current hot button; hiring a fundraiser, who, in turn, puts in place an elaborate program that includes finding 2-3 angel givers; recreating the Board so that it gets and gives; and organizing a new gala, are all potential components. Even a bit of token Marketing is possible. “All these changes will allow us to operate a couple more years, and then the economy will be better.”

Based on my twenty years working with nonprofits in a number of capacities, I have concluded that these band-aids are not the solutions needed. It is not the bad economy, or the donor who quit giving; it is a fundamental flaw in the nonprofit model. Organizations cannot endure if their fundamental goal is to breakeven every year or they are not allowed to delete programs/services that don’t make sense. The world has changed and nonprofits must adapt to a business model that is relevant, implementable and realistic. The process of creating such a model is well established. It starts with a review of your situation including the mission, a SWOT, objectives, strategies, tactics, budgeting, and evaluation. However, the challenge is the lack of resources necessary to create this document and implement it fully.

One possible solution for this lack of resources is for the nonprofit to connect with an organization that can guide them through this process and keep them on track. Although there are many possibilities, San Diego Social Venture Partners is one that I have recently joined and feel offers all the elements to help nonprofits succeed and sustain. Check them out at http://www.sdsvp.org/.


Click here to read more about John Burnett.