As nonprofits grow their operations and services, many are using business models as a blueprint for developing financially and structurally sound organizations. Two Stamford-based companies at a recent Westport event shared important factors nonprofits should consider as they build long-term business and financial strategies.
Nonprofits today are placed under a higher level of scrutiny and accountability for their services, said event speaker Cynthia L. Russell, principal of CrossSector Partners, a Stamford-based consulting firm that provides services to nonprofits. She added that there is an expectation for nonprofits to be “more businesslike and professional.”
Whether a nonprofit is young or old, each is accountable for sustaining its operations and delivering quality services while maintaining good relationships with its donors and clients, Russell said. But a big challenge is finding the proper finances to stay in business.
Angela Andersen, executive director of International Institute of Connecticut in Stamford, shared her experiences of managing a 95-year-old nonprofit that provides services to immigrants and refugees. During financially difficult times, she said her organization had the resources and finances, but they weren”™t using them as effectively as possible.
“At the end of the day, it was about financial management and diversifying funding,” said Andersen, another speaker at the event. “After taking a look at our earned revenue ”” we have certain programs that generate income ”” we identified ways to make that more profitable. We knew that by doing that, we”™d be promoting our mission more effectively.”
Andersen said she had to set high standards and aggressive goals to help her nonprofit close the loops that caused deficits in funding. Her solution was to launch a business plan and hire accountants to operate a financial management software system.
“We invested a lot of resources in retaining a new accounting firm,” Andersen said. “We outsourced our financial management, revamped our financial reports and developed cash flow projections and quarterly forecasting using the accounting software QuickBooks.”
Since installing the new technology and working with accountants last year, Andersen said she knew more about her finances than she ever thought she could understand.
“We now have a strong sense of where the money is coming from, where it”™s going, where we”™re losing money and where our vulnerabilities are,” Andersen said. “This then allows us to make the case to everyone on the board of directors and helps them understand our challenges and do so in a way that gives us greater transparency.”
Joan Carty, president and CEO of Stamford-based Housing Development Fund Inc. with offices in Danbury and Bridgeport, said her nonprofit has served about 300 households every year. As an organization that helps people who earn a low-to-moderate income become first-time homebuyers, its services require petitioning other lenders for loans.
Since 2007, Carty”™s nonprofit has been using a variety of technologies to electronically share documents with other lenders who help provide financial assistance for its clients. One big concern was keeping confidential information protected from email hackers. To combat that problem and instill trust in her clients and lenders, Carty examined a business plan that helped her save money and use new technology to keep those emails protected.
“We discovered ZixMail, which allows you to zip and unzip files,” Carty said. “This was a tremendous help in protecting clients”™ confidentiality and reduced the cost of not FedExing, which is subject to time delays. It allowed us to take a quantum leap.”
Using this software platform in her company”™s business model resulted in a 30 percent increase in loans that the nonprofit was able to close, adding millions of dollars in funds, Carty said. But not only does incorporating technology in nonprofits”™ business models help them better budget and serve their clients, but it”™s also an avenue for fundraising.
This month, several local corporations, including Fairfield County Community Foundation and Bank of America, sponsored a countywide online giving event. Community members were encouraged to donate to their favorite nonprofits during a 24-hour period, attaching a financial incentive to nonprofits who received the most donations. The event raised $745,000, benefitting more than 250 nonprofits.
“The online Giving Day really attracts a younger crowd,” Carty said. “Although the average 22-to-30-year-old is not giving $5,000 donations, if we can cultivate them in a way where they go from giving $25 a year to $100, by the time they”™re in their 30s and 40s, they”™ll be loyal donors, and they”™ll want to engage differently.”
As nonprofits engage their donors and incorporate technology in their business models to help generate finances, the challenge is still how to find a steady funding stream.
“The government is always coming out with different grant programs, but that doesn”™t mean a nonprofit can apply for it,” Russell said. “Sometimes, you don”™t even know if there”™s going to be a new funding source available. A foundation you always got a grant from can change their priorities. You have to be very adaptable in this sector.”
Through CrossSector Partners, Russell is working on creating an efficient approach to match nonprofits with donors, but she said the solution will take time to develop.
“I”™m still trying to figure out how to get it pulled together, and I do think finding a consistent stream of funding is one of the big remaining challenges for a nonprofit to address,” she said. “You have to have a sustainable model or you can”™t stay in business.”
