How to Reach Financial Sustainability as a Nonprofit and Strengthen Your Mission Impact

Part 2 in Our Series on Nonprofit Sustainability

There’s no way around it: achieving your mission and making lasting impacts requires a healthy bank balance.

As we continue our series on nonprofit sustainability, it’s time to tackle financial stability head-on. 

First, let’s put this financial sustainability deep dive into context with a quick financial health quiz.

Nonprofit Financial Sustainability Quiz

• Have you ever struggled to convince a donor about the necessity of operating funds?

• Have you ever felt your compensation was too low to attract or keep top performers?

• Have you ever had to employ some creative accounting to achieve a balanced budget?

• Are there waiting lists for your programs or services because you lack the funds to expand or hire additional staff?

• If you lost a program funder tomorrow, would that program be in danger of closing?

If you answered yes to even one of these questions, chances are you’ve encountered the sometimes-tricky balancing act of meeting your mission while having the financial means to keep the impact ball rolling.

3 Considerations for Achieving Financial Sustainability as a Nonprofit

Organizations without a clear plan for financial sustainability often end up chasing their tail, left
wondering why they never seem to have what they need to achieve their impact.

We’re here to solve this mystery, offering three considerations for your organization to help you manage your finances.

1. Align Your Services and Programs with Your Core Mission — While Still Maintaining a Healthy Cash Flow

   As organizations grow, it’s common to add new programs along the way to meet evolving community needs or seize funding opportunities. It’s also common for programs to eventually drift from the core mission. And that’s okay. Often, the way to meet the mission changes over time, which can lead to legacy programs becoming less effective. 

   Other times, an organization may have added a revenue-generating program or service, knowing full well that it wasn’t aligned with the core mission from the start. That’s okay, too. 

   There’s nothing wrong with having one or two programs that exist purely to support a healthy cash flow, especially if you need to offset the costs of other mission-aligned programs that aren’t sustainable on their own. 

   The trick is to limit the number of programs and services that do not align with your core mission while having enough programs in place to sustain adequate revenue.

2. Thriving Organizations Have Figured Out the Revenue Diversification Game

   Just like healthy diets require a mix of fruits, vegetables, grains, and proteins, healthy organizations depend on funding diversity.

   At Beam Consulting, our team believes in having a healthy mix of three sources of capital:

   1. Earned-Income Channels. Lots of nonprofits have fee-for-service models that generate revenue. Many are also figuring out how to add social enterprises that operate alongside their programs. For instance, Habitat for Humanity generates its ReStore retail locations selling secondhand home goods to drive revenue in addition to seeking out private philanthropic dollars.

   2. Reduced Costs via Strategic Partnerships. Collaborating with other organizations can help spread costs across multiple balance sheets. This strategy lets you more easily reduce expenses, so you’re keeping more of your earned income.

   3. Multiple Donor Sources. Seek donor dollars from a diverse mix of funders: individual donors at all levels of the gift pyramid, grants, public funds, and corporate contributions can lead to a financially stable organization.

3. Smart Planning Can Help Weather Just About Any Financial Storm

   Implementing some financial basics is one of the best things you can do for the health of your organization. This means initiating and maintaining financial management practices, including budgeting, forecasting, and financial reporting.

   A knowledgeable and experienced finance committee of accountants, financial planners, lenders, and investors who can guide the financial decision-making for your organization is priceless. The entire board of directors should also be well-trained to read financial statements and hold thoughtful conversations about how best to manage the financials.

You’ll Reach Financial Sustainability When You Can Effectively Safeguard and Strategically Deploy Your Capital to Make the Greatest Impact

Nonprofits that have achieved financial sustainability balance these three considerations and ensure they work harmoniously. 

If you haven’t conducted a financial review recently, the time is now! Like most aspects of nonprofit strategic planning, financial reviews coupled with the implementation of strategies to help grow an organization truly benefit from outside eyes and ears. If you’re looking for some guidance — and a little motivation — to kick-start your next review and achieve financial sustainability, contact us. We’re here to help.

Happy Planning!

Dani

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About The Author

For the past 25 years, Dani has helped nonprofits at local, regional, and global levels find sustainable solutions to tricky growth and funding issues. She works with leaders and teams to optimize their approach to fundraising, strategic planning, marketing, and more! Dani is passionate about helping motivated people build vibrant and effective nonprofit organizations—so they can make a meaningful impact in the world!