Run Your Nonprofit Like a Startup

“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.” – Eric Ries

I had this quote in my mind as I prepared to moderate the student panel at the SOURCE Summit on February 27th, 2015. I’ve always believed in the idea that nonprofits ought to give themselves permission to run like for-profit businesses. During the panel, I was able to introduce our nonprofit attendees to three students who shared a similar viewpoint.

Peter Fankuchen, Jess Davis and Milly Fotso’s organizations neatly fall under three business models. Jess runs Everybody Dance Now! a traditional 501(c)3 nonprofit entity, Milly runs a hybrid organization, both a nonprofit (SHARE), backed by a for-profit social enterprise (SHARE Scrubs). Peter’s organization, Second Nature Aquaponics is a commercial business.

Yet, despite the vast differences in their respective industries, Jess, Peter, and Milly all had remarkably similar views on the best practices for nonprofits. Here are a few key takeaways:

Understand what success looks like for your business, and keep trying to hit that target. 

When Peter, Jess, and Milly fell below their versions of success, they changed something, either surface level (such as the specific methods they used to fundraise, or advertise), or organizational level (reorganization or restructuring the organization) in order to achieve that desired effect. They would keep experimenting until that effect was achieved. 

Choosing between being a for-profit institution and a nonprofit institution is a question of branding and audience, not revenue.

Peter made his considerations not out of a desire to make more money, or more profits, but rather, a desire to execute his mission in the best way possible. Nonprofits must understand that for-profit businesses and social enterprises also have missions that go beyond profits, and sometimes, changing the status of your organization allows you to reach stakeholders that may be more effective to advancing your purpose.

Understanding the responsibilities of the people you work with is critical. 

Many nonprofit entities, especially newer organizations, have a tendency to hire people who handle and make decisions along every aspect of the business. Milly Fotso says that could be damaging. In the initial phases of SHARE / SHARE Scrubs, it was incredibly difficult to decide who had the final authority on both the nonprofit and for-profit ends of the business. They resolved this by restructuring the organization so the responsibilities of every employee were made more clear. This allowed the organization to run smoother moving forward.

Only take the volunteers that you can manage effectively.

Jess emphasized that its preferable to have no chapter at all, instead of a chapter where a student leader isn’t contributing to making that organization the best it can possibly be. As a result, EDN! has made the screening process for their volunteers more selective. When Milly was hiring for SHARE and SHARE Scrubs, she took advantage of the large pool of applicants, and hired 11 people, which tripled the size of the institution almost overnight. That change was more jarring than they anticipated. The key: be aware of your current capacity to manage other people, and hire only the amount of people that keeps you from being overwhelmed.

Regardless of whether you’re in charge of a nonprofit, social enterprise, or commercial venture, run your organization like a business.

This means understanding that the only way you’re going to make revenue is by adding value to the lives of the people that are giving you money. All three student leaders echoed this statement. Understanding that the best way to fundraise is to sell your mission to your constituents is the difference between institutions that are highly successful and institutions that fail. The best nonprofits are the ones that are cognizant of their nonprofit status, but don’t use their designation as a nonprofit to hinder their most effective business activities.

If you want to learn more about nonprofit business model generation, please reach out to SOURCE at SOURCE@cmc.edu. We look forward to hearing from you.

by kenny cunanan