Building a For-Profit Model to Help Your Nonprofit’s Cash Flow. Nonprofit MBA Podcast 3.4
Summary: In today’s podcast episode, Stephen Halasnik and his guest John Sessa discuss how nonprofits can increase cash flow projections by integrating a for-profit model into your nonprofit organization. For many nonprofits, donations change over time, costs may start to increase, and overall financial management can become a stress factor. This is normal as many nonprofits go through changes over time. However, just because this happens doesn’t mean you can’t manage to have a revenue-producing nonprofit. Today’s podcast will help your nonprofit, board of directors, and board members have a better understanding of for-profit model integration.
Have a Revenue-Producing Model
In order to avoid shortfalls in your nonprofit organization, it is imperative to be able to have a for-profit brain with a nonprofit heart. This means that in order to have your nonprofit be long-lasting and withstand any hardships such as economic downfalls, you need to be able to switch gears when needed. It can oftentimes be difficult for nonprofits to have a healthy and steady cash balance without any for-profit integrations.
In order to combat or avoid this pitfall, consider a model that produces enough revenue to maintain the organization’s basic needs such as employees, and keeping the lights on, while also being able to achieve your mission statement.
There are many different ways that not-for-profit models can be integrated with a business for-profit model. Consider selling merchandise at fundraising events, hosting webinars, or selling anything that is connected with your mission statement. If your nonprofit’s mission supports sustainability, maybe you sell products that enable your donors or regular folks to support living in a sustainable way in their day-to-day life. If your products are closely tied to and align with your mission statement, your donors and stakeholders are going to be more likely to support both your nonprofit and for-profit efforts in order to make sure your organization doesn’t fail.
Integrate Your Revenue-Based Model With Your Nonprofit Mission
Once you have established a way to produce additional revenue for your organization, you want to make sure you have proper cash flow management for your new cash inflows. Ensure that you are able to keep track of your bookkeeping including income statements, balance sheets, cash flow statements, and your annual budgets. Once your board members are familiar with the new integration of additional income coming in, you can better manage your operating expenses and operating budget to meet the needs of your mission statement.
It is often a misconception that organizations that are for-profit and nonprofit are seen as “greedy,” and people may assume that members are looking to simply pocket the additional money that comes in from selling that extra t-shirt or water bottle. However, it is quite the opposite. Organizations that take an integrated approach typically invest all additional cash flow back into their mission.
It can be easy to not understand how this works, but once you are in it yourself, you will understand how having extra cash can truly improve the financial health of the organization and prevent your organization from failing. Additionally, if you host fundraising events that also sell merchandise, your biggest donors may feel more inclined to make a greater donation because they don’t want to see their donated money crumble. Donors don’t want your organization to fail, especially if they are passionate about your mission. They will be able to recognize and see that even an extra $50,000- $100,000 will help you tremendously.
The Power of Nonprofit and Forprofit Partnerships
If your nonprofit is looking for additional ways to increase your working capital, don’t forget the power of strategic partnerships. Partnerships are a very common and powerful way to increase an organization’s cash flow while helping accelerate your positive effects on a shared community. These partnerships can also be helpful to nonprofit directors and executives who are not familiar with business concepts.
Finding partnerships can seem daunting at first, but with the right connections and network, finding people who have the shared values in a community is not as hard as it seems. Working together to benefit your shared community helps focus attention greatly on creativity and coming up with new ideas. When brainstorming ideas with a for-profit, there is undoubtedly going to be a surplus of creativity. Partnerships to increase cash flow can be short-term and don’t have to last forever. These partnerships can help bridge the gap between for-profits and nonprofits, while also help introduce you to prospects and donors.
For example, maybe you choose to host events every couple of months with a for-profit business organization that closely aligns with your mission. Your donors should have no issue with this, as all the proceeds get reinvested into your nonprofit’s community. After you have had multiple partnerships, you will be able to analyze the financial reports of the events, and this will help give you a better idea of finances in terms of forecasting for future collaborations. Having a for-profit and nonprofit sector collaboration can help lessen the burden when your cash outflows are higher than expected. It is no secret that random additional expenses come up frequently, and sometimes this can cause a financial burden when it comes to accounts payable. The benefits of business partnerships essentially have many benefits and help benefits your statement of a financial position greatly.
So often the for-profit sector gets seen as something negative and gets associated with being negative. However, there are so many benefits that can be positive to incorporating a for-profit mechanism and model into your nonprofit organization. There are so many benefits to for-profit integrations, and the biggest one is simply helping your organization survive. If you are hesitant to start a for-profit approach but are on the brink of having your non-profit fail, you should ask yourself if you would rather have your mission fail or take on for-profit.
For-profit integrations do not take away the philanthropy and value that your nonprofit has, it will just allow you to accelerate your mission and make sure it doesn’t fail. At the end of the day, incorporating a for-profit model is not a “selfish” or “greedy” act, because, at the end of the day, your mission and proceeds are going right back into the organization. Especially if you are a startup nonprofit, getting your hands on extra funds to help reach your goals is not a bad thing.
About the Guest John Sessa, The Vanderpump Dog Foundation
Currently, Dr. John Sessa is the Executive Director of The Vanderpump Dog Foundation and co-founder of Vanderpump Pets with Lisa Vanderpump and Ken Todd and has released the documentary The Road to Yulin (2017), which is Dr. Sessa’s directorial, writing, and producing debut highlighting the tortuous journey many dogs and cats endure on their road to the slaughterhouses in Asia. Dr. Sessa also founded Organics of Chicago, a non-profit that works with growing healthy neighborhoods, lives, and lifestyles through the best of green innovation and social responsibility.
Dr. Sessa has a BA, MBA, and Doctorate of Business Administration degree.
As a first-generation American, John speaks several languages (Italian, Spanish, and English) and has always been passionate about international cultures, as well as renewable energy and animal rights.
About The Host Stephen Halasnik, Financing Solutions
Stephen Halasnik is the host of the popular, The Nonprofit MBA Podcast. The Nonprofit MBA podcast’s purpose is to help nonprofit leaders. Mr. Halasnik is the Co-founder and Managing Partner of Financing Solutions. Financing Solutions is a leading provider of Lines of Credit to nonprofits and small businesses.
Mr. Halasnik is a graduate of Rutgers University and has an Executive Masters from the MIT Birthing of Giants Entrepreneurship program. Mr. Halasnik is a best selling Amazon author and is considered a leading authority on building great, purpose-driven businesses. Mr. Halasnik lives in New Jersey with his best friend, his wife Gina. Mr. Halasnik’s number one purpose is raising his two boys, Michael and Maxwell, to be good men.
About Financing Solutions Nonprofit Line of Credit
Financing Solutions nonprofit financing product is a great alternative to a traditional bank line of credit because it costs nothing to set up, nothing until used, and when used, is inexpensive. The credit line requires no collateral and no personal guarantees.
Nonprofit Organizations use their line of credit to help with emergencies or opportunities when cash flow is temporarily down (i.e. Payroll funding)
Please feel free to fill out the no-obligation, 2-minute nonprofit line of credit application here. The time to set up a credit line is when you don’t need it so that it is ready to be used, just in case.
Note: Financing Solutions donates 10% of its profits to various nonprofit charities