Questions: A good starting point for learning about financial management for nonprofit organizations is to question whether money or mission guides the organization. Is having a purposeful mission sufficient for long-term financial sustainability? Should start-up nonprofit organizations focus on delivering programs and services or on operating reserves?
Answer: I strongly believe that a nonprofit cannot effectively execute on its mission without financial stability. A strong mission is necessary in to order to guide business activity and the future of a nonprofit, but it’s the finances that get your there. Essentially, a mission is the philosophy of a nonprofit and money is the only way to execute on the mission. The best mission and program staff out there cannot be successful with poor financial support. The quantity of the service, and more importantly, the quality of the service will suffer without the appropriate financial support. It is proven that with unhealthy finances, operational problems will be magnified (McLaughlin, 2009).
I would argue that a nonprofit organization can only execute on its mission effectively once there is stable finances, and ideally diversified income. Diversification minimizes risk by ensuring multiple income sources or what I like to call “not putting all your eggs in one basket” (Entrepreneur, 2013). I think it is important to build key relationships with foundations and corporate partners who can provide funds, but also diversify with other initiatives such as a proactive fundraising strategy, and a consistent and strategic outreach campaign to prospective funders. If you have a diverse income strategy and your #1 funder suddenly decided they will no longer provided you funds, your nonprofit may suffer a small set back, but will not be in jeopardy. This ideology will ultimately allow a nonprofit to execute on the mission with greater ease and allow opportunity to strategically plan for growth.
For start-up nonprofits, I think the key to success is to understand your market and have CLEAR and ATTAINABLE financial goals while beginning to build out program offerings. Don’t bite off more than you can chew! You do not want to jeopardize the brand of your start-up because you over committed to say 5 schools for an after school programs, even though you only have 2 employees out in the field. Only commit to what you know you can successfully achieve within your financial means; this will ensure your program offering is of high quality and within your means as a start-up.
Entrepreneur. (2013, September). Entrepreneur. Retrieved from Entrepreneur Web site: http://www.entrepreneur.com/encyclopedia/diversification
McLaughlin, T. A. (2009). Financial Basics for Nonprofit Managers. New Jersey: John Wiley & Sons, Inc.