Nonprofit leaders consistently report that their biggest pain points are revenue related – and that was before a pandemic disrupted the global economy, communities, and organizations.
Consider this. In a survey of nonprofit leaders:
– 86% say demand for their services is rising and 57% say they can’t meet it
– 62% say sustainability is a top challenge
– 66% say their ability to pay staff competitively is a top pain point
– 57% say raising funding that covers full costs is a major challenge
(“State of the Nonprofit Sector Survey,” Nonprofit Finance Fund, 2018)
Let’s look at those pain points for what they are — symptoms of a greater problem. The root cause? Many organizations are crippled or limited by a lack of revenue capacity.
While no nonprofit could have fully planned for the challenges of 2020, these times are revealing cracks in the revenue infrastructure of many organizations that require immediate attention.
It’s different for every organization, but EVERY revenue stream is taking a hit. For many, earned revenue has dried up, government funding is shifting, and philanthropy is all over the place. Some organizations are even ahead of planned revenue this year as supporters step in or pay early, but what does that mean for 2021? To lead through this, we have to get back to revenue fundamentals, be willing to let go of old models, and get creative to find the opportunity in the chaos.
That’s why at RevJen we’ve redoubled our focus on helping nonprofit leaders peel back the layers to find and address the root causes of revenue challenges and build revenue capacity from the ground up using the RevJen Framework.
Setting the foundation: The foundational and strategic senior leadership decisions from which an organization builds revenue capacity.
Building the walls: The skills, processes, tools, and reporting needed for successful day-to-day management of revenue activities.
Finishing the roof: The skills and techniques needed for day-to-day, frontline revenue generation designed to build individual capabilities.
Back in 2010, we were working with a small start-up that was coming off of the effects of the financial collapse when their primary funder told them they needed to build a revenue model that didn’t include the funder. Their first inclination was to try fee-for-service with schools, but that was a non-starter because schools were already facing major shortfalls. Still, demand for their services was outpacing supply, and the team had a vision to expand. We started with them on the first element of the foundation in our framework: revenue model.
We helped them analyze their existing revenue model and found:
90% of their $800,000 budget was from a single institutional funder
Their growth was limited by the size of their operating budget (other funders expressed concern about major investment because of their small size)
Their current revenue model could not support their vision for growth
As they worked through RevJen’s revenue model process, they determined they needed to get creative and not hold on to old models. They decided to:
Preserve and leverage relationships to build and diversify contributed income
Increase growth capital by crafting a growth plan for funders
Expand to create new earned income opportunities from corporations
The results? As they worked through the rest of the RevJen Framework, the organization grew to $3 million in five years, they began building a separate change capital fund, and they added a significant earned income stream to diversify their revenue model.
And, lest you think their work was done – they came back to RevJen and the framework again this year as they work on their next growth plan. You see, this revenue capacity work isn’t a one-time thing. It is the ongoing revenue culture, structure, and systems in place to drive the revenue that drives the big change your organization is trying to make in the world. In short, revenue capacity fuels the greater good.
That’s work worth doing, and it’s worth doing strategically and intentionally. Through our Fuel Series workshops, R-Squared Executive Forums, webinars, and other tools, we commit to helping nonprofit leaders go beyond treating symptoms and address the root causes of revenue challenges.
Join us for our July 7 webinar titled: What Now? Rebuilding Your Revenue Model During the Revenue Disaster of 2020. In this webinar, we’ll walk you through steps for rethinking and rebuilding your revenue model for this new reality and we’ll look to leaders who did just that in previous economic crises for examples and inspiration. For more info or to register, click here.
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