The same tools and practices that enable businesses to prosper also help charities fulfill their missions.
Of the 1.6 million nonprofits registered with the Internal Revenue Service, about one million are charitable organizations, also known as 501(c)(3) charities for the section of the tax code that applies to them. And all of them have one thing in common, though some may not realize it: They are real businesses.
Did you know that a nonprofit must first register as a business corporation with the state before applying to the IRS to be granted tax-exempt status? The same rules that apply to business corporations also apply to nonprofits, including maintaining good internal records, submitting reports to the government and having a board of directors. However, a charity exists to serve a mission that benefits the public interest, while a business corporation exists for the benefit of its shareholders (or owner). Having said that, a successful charity is run very much like a successful business.
Taking Care of Business
First, a written business plan exists and is followed. The business plan defines a focused mission statement, a needs assessment, services to be offered, sources of funding, organizational structure, financial plan and more. In addition to defining a “bottom line,” as for-profit businesses do, to ensure that revenue/income exceeds costs, charities also should define (and later measure) the outcomes they expect to deliver as a result of their activities. A written business plan helps a charity to be successful from the beginning, rather than starting their work only to encounter problems.
Some charities may not believe they need a business plan because their specific mission is their top priority: feeding the hungry, protecting the environment, providing music performances, etc. But they readily agree that they want to be sustainable—to be able to continue to meet the needs described by their mission for years to come—and for that, their business needs to be successful.
A marketing plan is used by a charity for at least three purposes: to help those who would benefit from the services to be able to find the services, to attract and engage volunteers, and to attract donors. An important part of any marketing plan is to think in terms of market segments: the major categories of people to be reached, the characteristics shared by the people in each segment, and ultimately, the methods that can effectively engage each group.
Leadership is another key area. Charities attract people who are passionate about the mission and want to support it. But because a charity is a business, its leaders—both the board of directors and staff—must also have leadership skills, just as business leaders need skills to enable them to manage people, direct projects, guide the activities to achieve the organization’s mission, respond to challenges and more. Often, the executive director and other senior staff are experienced and degreed professionals, but many leaders (volunteer or paid, board or staff) can benefit from training and other assistance.
Mastering the Fundamentals
Fortunately, help is available locally. The Community Foundation of Central Illinois (CFCI), in partnership with Chuck Weaver’s Leaders Change Peoria and local nonprofit consultants Ruby & Associates, is hosting a series of training seminars titled The Fundamentals of Nonprofit Business, which are open to nonprofit board members, staff and volunteers.
“Nonprofit leadership is much more challenging than one might imagine because you must balance the mission with the bottom line,” says CFCI CEO Mark Roberts. “At the end of the day, you are running a business. We created the Fundamentals series to help provide the training and tools to make our local nonprofits stronger.”
Each session of The Fundamentals of Nonprofit Business series offers a different topic relating to a specific aspect of nonprofit management and administration. For example, the August session focused on strategic planning, while earlier sessions discussed fundraising, legal issues and effective boards. As a result of the positive response from past attendees, future sessions are being planned.
SCORE Peoria also offers assistance to nonprofits. SCORE is a national nonprofit association dedicated to helping small businesses get started, grow and achieve their goals through education and mentorship. “Nonprofits can have many of the same challenges as for-profit businesses, such as lack of revenue or income, not understanding their costs, or struggling to communicate or market themselves effectively,” says John Amdall, incoming co-chair of SCORE Peoria. “They may also have other issues, such as a board of good-hearted people who passionately support the mission, but may not have the experience necessary to be effective leaders. SCORE can help. In fact, in the first six months of 2013, SCORE Peoria has mentored 17 nonprofit organizations.”
Sometimes a charity can face a real challenge when a leader or volunteer must tackle an unexpected task. A volunteer with a passion for protecting the environment might be asked to write a grant application to gain financial support, or a good-hearted leader who wants to help people might find herself leading a building project.
Cindy Shuford, president and co-founder of Threads, Hope & Love, found herself in this situation recently when the organization learned it would have to find a different location to operate its ministry of collecting and distributing clothing and personal items for families in need in more than 50 communities in central Illinois. The board members, leaders, staff and volunteers were excited about their mission, but leading a project to purchase and renovate a building was not something that came naturally to anyone.
“SCORE Peoria really helped us with this challenge,” says Shuford. “Using SCORE’s tools, and with the help of two SCORE mentors, we were able to develop a marketing plan for raising the money for the new building. As part of this, we analyzed our potential donors in terms of market segments to better understand their interests and, as a result, how best to communicate with them. We also developed a written business plan that incorporated the new challenge of buying and renovating a building. SCORE got us to where we are today—we could not have done this building project without their help.”
Charities are also businesses… with missions to serve their communities, society or the world. The same tools and practices that help businesses to be successful will also help charities find success in fulfilling their missions. iBi