SUSTAINABILITY ASSESSMENT & PLANNING March 17, 2015 Agenda 1. - - PowerPoint PPT Presentation

SUSTAINABILITY ASSESSMENT & PLANNING

March 17, 2015

Agenda

• 1. Introductions
• 2. State of the sector
• 3. Overview of terms
• 4. Pillars of Sustainability

– Operating Environment – Leadership – Finance/Admin – Program/Impact

In 2013, 41% of organizations said “achieving financial sustainability was a top challenge”

YET…

• More than half have less than 3 month of

cash on hand

• 28% ended the year with a deficit
• Only 9% have real open conversations

with funders about developing a reserve for operating needs

Nonprofits are taking action to survive and succeed

• 49% collaborated with another
• rganization to improve or increase

services

• 48% invested money or time in

professional development

• 40% upgrade technology to improve

efficiencies

• 39% conducted strategic or financial

planning

Nonprofits are important businesses…

• Nonprofit share of the GDP is 6%
• 1.5 million registered with the IRS
• 9% of the economy’s wages/10% of all

jobs

What does sustainability mean?

Sustainability is more than revenue Nonprofit sustainability requires a complete change of thinking, a revised approach to nonprofit leadership and a total mindset transformation. I see sustainability as an integrated approach to remain vital and relevant in the community

Lifecycle of an organization…at what point is sustainability?

Nonprofit Sustainable Business Model

Operating Environment Leadership Financial & Administrative Program & Impact

Nonprofit Sustainable Business Model

Operating Environment Leadership Financial & Administrative Program & Impact

Nonprofit Sustainable Business Model

Operating Environment Leadership Financial & Administrative Program & Impact

Nonprofit Sustainable Business Model

Operating Environment Leadership Financial & Administrative Program & Impact

Financial metrics are critical for understanding your business model and sustainability

• Summarize organizational performance
• Snapshots that are easy to understand
• Used in benchmarking
• Helpful in identifying trends
• CAN BE HELPFUL IN MAKING

DECISIONS

Key Ratios

• Days of cash on hand

– How many days can the organization operate without receiving additional funds or having to liquidate investments.

• Burn Rate

– The value of expenses that your organization uses every month.

• Current Ratio

– The ability of the organization to cover current liabilities with current assets.

• Aging Payables and Receivables

– Both metrics are important for determining cash flow

• Debt Ratio

– Measures liquidity and the proportion of assets to debt

• Liquid Unrestricted Net Assets

– The portion of funds that an organization can use to start building a reserve

Financial Reports are key to leadership understanding

Breaking even is never enough, budget for a surplus All organizations need to cover their

• perating expenses PLUS

Opera&ng ¡ Expenses ¡ Fixed ¡Asset ¡ Addi&ons ¡ Deprecia&on ¡ Working ¡ Capital ¡ Reserves ¡ Debt ¡ Principal ¡

Do you know the fully loaded cost to deliver your organizations’ services?

What’s in a $3, 12oz. Starbucks Latte? $2.23, 300% markup/profit $.32 Espresso shots $.20 Steamed milk (extra for soy) $.15 Cup, Lid and stirrer $.05-$.10 Rent, Labor, utilities

Sustainability Matrix

Financial Sustainability Mission Impact

Nonprofit Sustainable Business Model

Operating Environment Leadership Financial & Administrative Program & Impact

A concise capture of mission and impact framework

Strategic vs. Business Planning. Do I need both?

Strategic Plan

• Provides overall

direction and focus for the organization

• Usually 1-5 year

timeframe

• More strategic in

nature, overall sustainability Business Plan

• Usually a new start up

venture or specific program

• Primarily 1-2 years
• Viability of a business
• pportunity-provide

tactical and

• perational

components

Nonprofit Sustainable Business Model

Operating Environment

• “Well versed” on policies

and regulation affecting its mission and clients.

• Actively assess, responds

to, and stimulates internal and external changes.

• Incorporates the latest

technology and field innovations into management and program delivery.

Leadership

• Board understands their

fiduciary and governance roles.

• 100% of board members

contribute financially.

• Meaningful staff

performance metrics are implemented and reviewed annually.

• Staff actively engage in

professional development activities.

• Succession plans are in

place for key leadership transitions.

Financial & Administrative

• 3-6 months of liquid

unrestricted reserves are secured.

• No more than 50% of

funding is derived from a single source.

• True cost of delivering

services is known and carefully considered when applying for funding.

• Key financial reports are

produced regularly and reviewed by leadership.

• Technology infrastructure

is current and maximized to its potential.

Program & Impact

• A strategic framework is in

place and reviewed regularly.

• A theory of change with

impact measurements is utilized.

• Organization have a solid

business plan that

• utlines key assumptions.
• Communication about
• utcome data is shared

with stakeholders.

Resources/Articles

“Collapse of Famous Hull House” https://philanthropy.com/article/Collapse-of-Famous-Hull-House/157181 “Sustainability, not a myth but not what you may think” https://nonprofitsassistancefund.org/blog/2012/11/sustainability-not-myth-but-not- what-you-may-think “Operating Reserve Policy Toolkit” http://usaswimming.org/_Rainbow/Documents/ 6e294a6c-4cd5-49f8-81f8-84b9f0098e54/Operating%20Reserve%20Policy %20Toolkit.pdf Nonprofit Starvation Cycle http://www.ssireview.org/articles/entry/the_nonprofit_starvation_cycle/ Nonprofit Assistance Fund-Variety of Financial Resources https://nonprofitsassistancefund.org/

Studio Watershed

Amy Gudgeon agudgeon@studiowatershed.com 773.485.1155 www.studiowatershed.com Studio Watershed helps organizations find that break through moment - by building sustainable business models, guiding informed strategic decisions and identifying a path to growth. Services focus on helping social sector organizations build fiscally sound, sustainable business models.

• Business and growth planning
• True cost analysis
• Building financial capacity (coaching, budget support, dashboard

development)

• Sustainability analysis (assessing organizations on leadership, operating

environment, business model and impact)