Nonprofits all over the world are driven by love, passion and a desire to make something about the world better. However, even the most passionate nonprofits thrive only when strategy meets execution.
While there are fundamental differences between running a nonprofit organization (NPO) and a for-profit company, certain core strategic thinking is the same. Both require developing a strategic plan, being financially secure and properly leveraging a workforce. It’s the application of these principles where things diverge.
Lead with strategy, not just heart
While companies typically aim to maximize value for stakeholders, nonprofits aim to maximize impact — but both require a clear plan to deliver on their promises.
Companies and nonprofit organizations become successful by filling an unmet need and doing it better than anyone else. These core competencies do not happen by accident; they happen when vision is put into action with a clearly defined strategic plan. The strategic plan should guide all decisions and activities, such as where are you now? Where are you going? How will you get there?
Within the NPO world, a critical business success factor is often overlooked, which is merging with the competition. Either through buyouts, mergers, or strategic partnerships, businesses transform through consolidation. Too often, competing nonprofits barely survive on their own while chasing the same donor dollars. Together, they could achieve far more.
It’s also critical to avoid chasing funding that doesn’t align with the organization’s mission. Just because a grant is available doesn’t mean it’s the right fit — if it isn’t an absolute yes, it’s an absolute no. Businesses know something similar, which is that investors don’t invest where it isn’t a good fit for both them and the company.
Design finances to sustain impact
Once a strategic plan is in place, everything within the organization should support that plan, including the design of the finances. Business owners know they need to turn a profit to be successful. Meanwhile, NPOs often believe being a nonprofit means never making a profit.
This is not true. The most successful NPOs secure funding — whether through sales, government sources or private donations — to cover expenses and build reserves.
Nonprofits should aim to have sufficient net assets without donor restrictions to support future needs. A recommended minimum amount is six months’ worth of operating expenses in prudent investments, but having more is even better.
Correctly pricing products and services is also critical. For nonprofits, pricing may be below cost. For example, performance arts organizations, such as ballets or symphonies, rarely cover 100 percent of their expenses through ticket sales.
Still, pricing should reflect value. Underpricing can devalue offerings, while overpricing can limit access. Revenue from tickets, services, and events is usually not restricted funding, and optimizing its value is critical.
Business owners know they need timely, accurate financial statements and key performance indicators (KPIs) that track progress on strategic goals. While financial statements and KPIs of NPOs are different than the average business, the goal is the same: Understand them and use them to make the decisions that will drive the organization towards fulfilling its mission.
Align people, process and purpose
Morris Chang stated, “Without strategy, execution is aimless; without execution, strategy is useless.” This is true for NPOs and businesses alike. Board members, management and staff activities must be aligned with the strategic plan.
It’s not uncommon to hear employees, especially in development or programming, say they aren’t familiar with or even aware that their organization has a strategic plan. Without that knowledge, it’s impossible to work toward those goals effectively. For instance, the development team should be pursuing funding that directly supports the strategic goals, not just what’s available or convenient.
Unlike businesses, nonprofits often depend on volunteers, but those volunteers may not always have the right expertise. Too many NPOs rely on a neighbor “who once took an accounting class” to do free bookkeeping. While that may be generous and well-intentioned, it’s not sufficient when grant applications require audited, accrual-basis financial statements.
Areas like marketing, accounting, legal and grant writing are just as essential for nonprofits as they are for businesses. It takes money to make money. While volunteers are valuable, there is a time and place for investing in professional help.
The nonprofits that make the greatest impact are those that blend business discipline with mission-driven heart. When love meets strategy, good intentions become lasting change.
