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Archive for July, 2011

We’ve all heard the expression “if you fail to plan, you plan to fail” …and this is certainly true when it comes to the operations of your nonprofit organization.  As in your personal life, planning for your organization’s fiscal health is a vital element in making sure that, for example, your expected revenues exceed your expenses.  In addition to determining how much money you REALLY need, a budget can help you in the execution of your organizational plan in general (e.g., how many employees do I need, should I buy or rent office space, etc.).

Before going further, it would be good to highlight some general terms that are often used [1]:

  • Fund Accounting – Nonprofit organizations aren’t in the business of making a profit (thus, it’s name :)), so they use an accounting system called fund accounting.  Fund accounting groups financial data together into funds or accounts that share a similar purpose.
  • Revenue – The amount of money that is brought into a company by its “business” activities (e.g., grants, income from programming, contributions, etc.).
  • Expense – Any expenses incurred in the ordinary course of business (e.g., salaries, office space rental fees, taxes, etc).
  • Operating expenses – A category of expenditure that a business incurs as a result of performing its normal business operations.
  • Non-operating expenses – An expense incurred by activities not relating to the core operations of the business (e.g., interest charges or other costs of borrowing funds).
  • Cash-flow – The cash generated from the operations of a company, generally defined as revenues less all operating expenses, but calculated through a series of adjustments to net income.  NOTE: It’s cash flow that pays the bills (“cash is king”)!

The financial statements for nonprofits relate to for-profit statements in the following way [2]:

Business Financial Statement Equivalent Nonprofit Statement
Income Statement Statement of Activities
Balance Sheet Statement of Financial Position
Cash Flow Statement of Cash Flows

Back to developing your budget…   It is recommended that the following steps be taken to methodically develop your budget [3]:

  1. List your monthly nonprofit operational expenses.
  2. List your monthly salaries and wages for each employee (if applicable).
  3. Identify and list your monthly expenses for your specific programs.
  4. Identify your monthly revenues.
  5. Assess the difference between your monthly revenue and expenses.

Please make sure that you are realistic and practical in your planning so that expectations are not set too high.  As with a for-profit business, sometimes an organization can get overwhelmed if it grows too fast too soon!

For more help in developing your budget, contact me or click here.

Be strong and be blessed!

[1] Source: Investopedia.com
[2] Source: http://tinyurl.com/3vyre8h
[3] Source: eHow.com

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In the starting phase of your organization, you may be able to provide services with little or no cost – primarily with board contributions and volunteers.  However, as demand for your services increases, you will find that additional financial resources are needed to buy equipment, to hire professional help, to rent office space, and for other necessary expenses.  At this point, a “resources development” plan is recommended to organize your fund raising efforts.

There are a number of issues to consider as you develop your plan, including:

  • What type of funding do I need (e.g., capacity-building, programming, etc.)?
  • Where can I find the type of funding I need (e.g., foundations, government, corporations, etc.)?
  • How much money do I need (i.e., budgeting)?
  • What expertise do I need to manage these resources?

Over the next few weeks, we will discuss these and other issues surrounding the process of securing financial resources for your organization.  If there are related issues you would like to see covered or have specific questions, please let us know and we’ll do our best to address them.

Be strong and be blessed!

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You have spent countless hours creating your organization’s programming to meet a need in your community.  You’ve developed key partnerships and your board is top-shelf.  Now you’re ready to approach funders for support – but wait (there’s more :))!  How will you know if what you’ve spent time developing will be successful?  In order to determine whether investments of time, money and energy were worth it, an evaluation of the program should be planned and performed.

It has been said that “(a) true measure of your worth includes all the benefits others have gained from your success.”[1]  Taking this thought a step further, there should be an objective way to account for these “benefits” so that the value (or “worth”) can be better determined.

Program evaluation is an important step in a program’s life cycle and it must be deliberately planned on the front end of the planning process.  Most, of not all, funders want to know how you propose to measure success.  Key questions that should be asked when determining how to evaluate your program include the following:

  • What are the desired outcomes of this program? What are the goals? What are we trying to accomplish within the next month/quarter/year(s)?
  • How will we get there? What activities will enable us to reach our outcomes? 
  • What will indicate to us that we are making progress toward the desired outcomes?

Nevertheless, even if you are already implementing your program, for evaluation purposes it is essential to identify and document the program outcomes, activities, and indicators that will be evaluated.  Think of the desired outcomes as what you ultimately want the program to accomplish, the activities as what you will do to get there, and the indicators as the gauge of whether, and to what degree, you are making progress. [2]

Outcomes should be consistent with what could reasonably be accomplished and not “pie in the sky.”  This doesn’t mean you won’t strive for more, but in terms of carrying out an evaluation the more clearly defined and measurable the outcome, the better.  For example, your outcome may be to reduce the high school drop-out rate among Hispanic students or to increase the number of African-American girls majoring in engineering.

The activities are the interventions that your program will provide in order to bring about the intended outcomes.  In general, program activities can be defined as any type of direct service or information that is provided to participants.  Continuing with the above example targeting African-American girls, you may provide direct tutoring services and mentoring opportunities to encourage more interest in the engineering fields.

Indicators act as the gauge of whether, and to what degree, your program is making progress. Your program’s progress needs to be examined in two distinct ways:

  1. the quantity and quality of the program activities you are delivering, and
  2. the quantity and quality of the outcomes that your program is achieving.

For example, one indicator may be to “increase the number of African-American girls successfully passing advanced math classes in high school by 50% over the next three years.”

Equally important in this discussion are what information is being captured and how you capture information for evaluation.  If you are measuring progress for a particular indicator, you would want to determine the “base line” by obtaining data at the beginning of the program (e.g., how many African-American girls are successfully passing advanced math classes now).  In addition, consider using methods such as focus groups, surveys, and pre-/post-tests to capture relevant data.

As mentioned before, the more detailed you are in planning and executing program evaluation, the more confident you will be in communicating your program’s success (which could lead to increase support of your efforts).

Speaking of “increased support,” we will transition into a series of discussions focusing on obtaining financial support for your organization and programs.

Be strong and be blessed!

[1] – Quote by Cullin Hightower
[2] – Gajda, Rebecca & Jennifer Jewiss (2004).  Thinking about how to evaluate your program? these strategies will get you started. Practical Assessment, Research & Evaluation, 9(8). Source: http://pareonline.net/getvn.asp?v=9&n=8

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Let’s see…we’ve talked about assessing the needs of your community and matching these needs with your organization’s interests.  After assessing community needs, you would develop programming to address these needs.  We’ve talked about the importance of focusing your efforts to avoid trying to be all things to all people.  We’ve discussed the reasoning behind and necessity of knowing your target market (in other words, who you’re trying to reach to positively affect their lives in some way).  Now, let’s look at “needs assessment” from a different vantage point – what are the needs of YOUR ORGANIZATION to most effectively serve your target market with your programming.

When one begins to look at the needs of an organization, the focus usually sharpens very quickly on MONEY.  Now don’t get me wrong, having sufficient financial resources are vital for short- and long-term success, but it is not the first thing you need and it may not even be the most important!  As has been mentioned before, having the right PEOPLE on the team, I submit, is more important than money.  People help create the organization in its infancy…people can perform a preliminary community needs assessment…people develop the organization’s programming concepts…people help identify the MONEY! 

To expand this idea further, an organizational needs assessment should include answering the following questions:

  • Do we have the “right” board members?  Even though your board is enthusiastic and supportive, the experience and skill sets of the members may be very similar (e.g., members of the same church, neighbors, etc.) – on the surface, of course.  However, as you look at the make-up of your board, seek to identify members with experience in areas such as finance/accounting, management, legal, working with your target market(s), public relations, fundraising, city/county government, advocacy, and others.  Resources that can help include organizations such as Triangle BoardConnect (to identify potential board members) and BoardSource (building the board’s capacity).
  • How many volunteers do we need?  As you implement your programming, you cannot solely rely on board members to do the work.  You will need dedicated volunteers for program implementation and, ultimately, to become advocates and ambassadors on behalf of the organization.  (Possible resources:  United Way, Volunteer Match, and Senior Corps).
  • Are there other organizations in the community I can work with and how can I work with them?  You will learn about other organizations that do similar work and/or target similar markets as you perform your community needs assessment.  You will, also, get vital information from your board members because, in many cases, they are very familiar with these organizations and may even serve on their boards as well.  Feel free to reach out to these organizations to let them know what you plan to do, seek their advice and explore possible partnership opportunities.
  • How much money do I need and where can I find it?  You will need to determine your organizational and programming budget(s) as well as develop a strategy for securing these financial resources.  We’ll discuss this important topic in the near future.

You will find that by doing a thorough organizational needs assessment, you will identify YOUR needs to effective implement your programming that will address COMMUNITY needs.

Be strong and be blessed!

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As you develop your organization’s programming, who you are attempting to reach is just as important as what you will do when you reach them.  One would think that the “what” (your programming) is meant for particular “whos” (your target market).  However, this can be one of the hardest decisions to make because, invariably, when you target your efforts to a specific population or demographic, you are excluding other populations or demographics (and you don’t like leaving anyone out!).  However, this decision will help to narrow your focus and help to identify potential partners in delivering your programming.

The term “target market” has traditionally been used in business circles, but its use has become more and more commonplace in the nonprofit world.  According to Encarta® World English Dictionary, a target market is “a group of customers of a type considered likely to buy a particular product.”  Let’s break this down within our context:

  • “a group of customers…” – The number of persons you’re trying to reach is as important in “nonprofit world” as it is in the for-profit arena.  In business, investors want to maximize their return on investment.  In philanthropy, contributors want to know that their donation has as broad a reach as possible.  In addition, just like for-profits who want to reduce cost and increase efficiency in the delivery of products or services, the more people your services can reach SHOULD reduce your cost-per-person served, depending on how your services are delivered (e.g., one-on-one versus group settings). 
  • “…of a type considered likely to buy…” – Will a person living in a desert region want to purchase a fur coat?  Not likely.  Would a 15-year old desire to have a cell phone?  Highly likely.  These two examples highlight the fact that the product or service you offer should meet the needs and wants of a particular group of people.  For example, if it has been determined that a community is in need of more affordable housing, consideration should be given to the quality of housing, not just the bottom-line cost of development.  Individuals want to live in housing that safe, decent, and sanitary AND that they can be proud of.  “Affordable” does (and should) not mean “cheap.”
  • “…a particular product.” – As we’ve mentioned before, it is impossible to be all things to all people.  Your “product” may be tutoring…or housing development…or health care…or providing volunteers – whatever your “product” is, strive to be the BEST!

As you decide who you’re trying to reach, this will help you to make other decisions such as how to reach them (marketing), who can help (partners), and so on.

Be strong and be blessed!

P.S.:  I mentioned in my last blog that I would talk about partnerships this week.  Well, as you can see, I went in a different direction. 🙂   I hope to cover partnerships in an upcoming entry.  Have a great July 4th holiday weekend!!

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