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 organization 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 Financial & Program & Leadership Environment Administrative Impact

Nonprofit Sustainable Business Model Operating Financial & Program & Leadership Environment Administrative Impact

Nonprofit Sustainable Business Model Operating Financial & Program & Leadership Environment Administrative Impact

Nonprofit Sustainable Business Model Operating Financial & Program & Leadership Environment Administrative 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 operating expenses PLUS Opera&ng ¡ Fixed ¡Asset ¡ Deprecia&on ¡ Expenses ¡ Addi&ons ¡ Working ¡ Debt ¡ Reserves ¡ Capital ¡ 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 Mission Impact Financial Sustainability

Nonprofit Sustainable Business Model Operating Financial & Program & Leadership Environment Administrative Impact

A concise capture of mission and impact framework

Strategic vs. Business Planning. Do I need both? Strategic Plan Business Plan • Provides overall • Usually a new start up direction and focus for venture or specific the organization program • Usually 1-5 year • Primarily 1-2 years timeframe • Viability of a business • More strategic in opportunity-provide nature, overall tactical and sustainability operational components

Nonprofit Sustainable Business Model Operating Leadership Financial & Program & Impact Environment Administrative • Board understands their • A strategic framework is in fiduciary and governance place and reviewed • “Well versed” on policies • 3-6 months of liquid roles. regularly. and regulation affecting its unrestricted reserves are • 100% of board members • A theory of change with mission and clients. secured. contribute financially. impact measurements is • Actively assess, responds • No more than 50% of utilized. • Meaningful staff to, and stimulates internal funding is derived from a performance metrics are • Organization have a solid and external changes. single source. implemented and business plan that • Incorporates the latest • True cost of delivering reviewed annually. outlines key assumptions. technology and field services is known and • Staff actively engage in • Communication about innovations into carefully considered when professional development outcome data is shared management and applying for funding. activities. with stakeholders. program delivery. • Key financial reports are • Succession plans are in produced regularly and place for key leadership reviewed by leadership. transitions. • Technology infrastructure is current and maximized to its potential.

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)