If your organization believes any of the three myths below, you may be struggling financially but you don’t know why.
Myth One: Endowments are the best route to financial sustainability.
Endowments are typically seen as a safe solution for nonprofits looking to bolster financial sustainability. Funds in an endowment are permanently restricted and invested to produce an ongoing income stream for an organization —
It may be difficult—if not impossible—for the average community-based nonprofit to raise the funds necessary to generate the required income on an annual basis. There is a better way.
These funds can be put in the same accounts and earn the same interest as endowment funds but these types of resources provide more flexibility, which is critical for leaders of ever-changing organizations. Rather than raised in a full scale capital campaign, operating reserves are either built up slowly over time—by generating modest operating surpluses each year—or, increasingly, the result of foundation grants targeted for the purpose of building a reserve.
Myth Two: Nonprofits can’t make a profit
We meet many nonprofit leaders who subscribe to the general sentiment that nonprofits should never make a “profit” on the services they provide. Not only can nonprofits take in more money than they spend, they must do so to be sustainable over time.
The first step toward building a financial reserve is to create an organizational culture that accepts and strives to generate operating surpluses.
Myth Three: Building reserves is not a priority for organizations with chronic cash challenges.
For organizations facing chronic cash flow shortages, building an operating reserve can feel not only daunting, but perhaps even unrealistic.
It is possible for a cash-strapped organization to come to an understanding of what needs to be done to restore stability and commit to a rigorous financial fitness plan.
Operating reserves — liquid savings readily available for opportunities and emergencies alike — can be a game changer for nonprofit organizations.
Join Gretchen for one or both of her upcoming workshops on March 6, Telling Your Organization's Financial Story (9:30am-4:30pm) and March 7. Operational Excellence (9:30am-12:30pm). Visit c4npr.org to learn more!
Gretchen Upholt, an experienced staff and program manager, has expertise in training, capacity building, research, and program and volunteer management. Before joining the FMA team, Gretchen served as the head of the Volunteer Department at the Thabyay Education Network in Thailand. In that role Gretchen developed a strategic plan to improve monitoring and evaluation and program management in her department. Gretchen holds a Masters of Public Administration in Public and Nonprofit Management from NYU’s Wagner School of Public Service, where she was a Head Teaching Colleague for the core finance and management classes.
Heather is responsible for the overall management and operations of The Center, and technical assistance
supporting area nonprofits.
419-241-9513 Ext. 104