Understanding and Changing Your Business Strategy. Jan Masaoka

Transcription

1 Understanding and Changing Your Business Strategy Jan Masaoka

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3 Agenda What is a business model? Strategy? Impact & finances; mission & money Charting and analyzing your current business model Strategic imperatives A sustainable portfolio/strategy

4 Lower cost goods, mid to upper middle consumers Lots of free parking Newsprint inserts in newspapers

5 High priced, higher income customers Downtown and high income mall locations Full color catalogs mailed to high income zip codes

6 All too frequently heard.... Social media Product sales Look what THEY RE doing! We should do that! Benefit Concert Online auction Yeah! Walk-a-thon Fees-for-service

7 Different strategies, both successful:

8 Revenue types & sources Total Revenue Contributed revenue Earned revenue

9 Revenue types & sources Total Revenue Contributed revenue Institutions Corporations Churches Foundations Individuals: vehicles for asking Mail: hot and cold lists Phone-a-thon Service clubs (Rotary, Kiwanis) Major gifts solicitations Annual gifts Planned gifts Pledges

10 Revenue types & sources Total Revenue Earned revenue Related income Un-related income Government contracts Fees charged to third-party payers Fees charged to consumers (clients, patrons)

11 Different business models, same mission:

12 The Nonprofit Business Model Every organization has one whether you know it or not Explains how a nonprofit generates and allocates revenue to accomplish its mission and remain financially viable Nearly all nonprofits today are hybrids combining earned income with donations Business models change over time Businesses with the same services can have different business models

13 Dual-Bottom Line Strategy Each activity has two kinds of impact: Mission impact (external) and Financial impact (internal) So a strategy for sustainability must be a strategy that combines both kinds of impact.

14 Nonprofit Business Models Instead of strategic plans that are different from a fundraising plan or business plan: Must consider financial viability and mission impact together Instead of considering activities individually: Are about how activities fit together and leverage each other

15 Matrix Map IMPACT PROFITABILITY

16 Matrix Map HIGH IMPACT HIGH PROFITABILITY IMPACT LOW IMPACT LOW PROFITABILITY PROFITABILITY

17 Matrix Map HIGH IMPACT HIGH PROFITABILITY IMPACT PROFITABILITY

18 Stars HIGH IMPACT HIGH PROFITABILITY IMPACT PROFITABILITY Examples: Important, foundation-funded program Fee-for-service program that makes money Annual mail donations campaign?

19 Stop Signs LOW IMPACT LOW PROFITABILITY IMPACT PROFITABILITY Examples: Little-used Resource Library Program that used to have funding Stale fundraising event?

20 Money Trees LOW IMPACT (other than money raised HIGH PROFITABILITY IMPACT PROFITABILITY Examples: Martini parties Luncheon Raffle tickets?

21 Hearts HIGH IMPACT LOW PROFITABILITY IMPACT PROFITABILITY Examples: Advocacy at state level Taking children to see parents in prison Show of experimental art?

22 The Matrix Map

23 Impact A single compelling image 4.00 Film/Curriculum packages Film making 3.00 (250,000) (200,000) (150,000) (100,000) (50,000) - 50, , , Jewelry sales Direct Mail Major Donors Aha! Equip rentals Resource Library 1.00 Profitability -

24 Variables for Excel sheet Business line Profitability Impact rating Expenses Early childhood $5, $180,000 Facility rental ($12,000) 4.0 $25,000 Citizenship $18, $90,000 Foundations $80, $20,000 Note: assign restricted revenues to the business lines to which they are restricted. Assign Unrestricted revenue to the vehicle which brought them in (in the above case, foundations)

25 Relative Impact Examples of criteria Alignment with core mission Excellence in execution Scale or volume Depth Filling an important gap Community building Leverage

26 Example Criteria 1. Alignment with Core Mission: How much does the activity align with our core mission? 2. Excellence: To what degree does the activity reflect the best work we do? 3. Fills an Important Gap (FIG): To what extent is this important, and the only one of its kind available to the community? 4. Community & Constituency Building: To what degree does this build the movment in which our organization works? Environmental Education Restoration & Reforestation Nursery Resource Library Direct Mail Major Donors Annual Event Site Rentals / Birthday Parties

27 Determining Profitability Revenue Assign restricted and generated revenues to each business line Expenses Include full costs: Program Costs Shared Costs Admin Costs

28 Impact Community Theater Matrix Map English / Spanish Plays 4.00 Spanish Language Plays 3.00 After-School Drama Workshops (100,000) (80,000) (60,000) (40,000) (20,000) - 20,000 40,000 60, Newsletter 1.00 Special Events Profitability -

29 Impact Everest Environmentalists Matrix Map 4.00 Environmental Education Restoration & Reforestation 3.00 (250,000) (200,000) (150,000) (100,000) (50,000) - 50, , ,000 Nursery 2.00 Resource Library 1.00 Site Rentals Direct Mail Annual Event Major Donors Profitability -

30 Career Closet Nonprofit Closet Service clubs Annual gala

31 Rural AIDS Nonprofit AIDS program (government funded) Individual donations

32 The Strategic Imperatives

33 Strategic imperatives for Stars HIGH IMPACT HIGH PROFITABILITY IMPACT PROFITABILITY Instead of Taking it for granted... Not involving board... Turning your attention to problem areas...

34 Strategic imperatives for Stars HIGH IMPACT HIGH PROFITABILITY IMPACT Pay attention. Keep it a star. Make sure the board is involved. Invest time and money. Grow it. PROFITABILITY

35 Strategic imperatives for Stop Signs LOW IMPACT LOW PROFITABILITY Instead of Trying once again to improve it... Not thinking about it... IMPACT PROFITABILITY Spin it off to another organization Close it

36 Strategic imperatives for Hearts IMPACT HIGH IMPACT LOW PROFITABILITY Instead of Closing it because it s not breaking even... Making it a Sacred Cow that can t be criticized... PROFITABILITY Keep it. Celebrate it. Contain the costs.

37 ... for Money Trees LOW IMPACT HIGH PROFITABILITY Instead of Giving it second class status Keeping it separate from programs... IMPACT PROFITABILITY Water the tree. Increase impact.

38 Strategic Imperatives

39 Portfolio: BEFORE Local legis State legis News events Scorecard Restoration Schools Policy alerts Newsletter Major donors Dinner

40 Drop except for rare huge issues with high possible impact. Drop. Lower impact all the time (newspapers). Task force to see if something new could achieve goals better at lower cost. Drop. Being done by others. HIGH IMPACT LOW PROFITABILITY State legis Grow slightly. Local legis LOW IMPACT LOW PROFITABILITY Policy alerts News events Newsletter decisions Change to e- newsletter to increase impact, reduce costs Scorecard HIGH IMPACT HIGH PROFITABILITY Restoration LOW IMPACT HIGH PROFITABILITY Major donors Increase impact. Grow if possible. Star. Grow given limitations. Schools Dinner Increase impact. Growth not likely. Increase profitability. Star. Grow. Increas e impact by deepeni ng quality. Breakeven, some impact. Give away.

41 Portfolio: AFTER State legis Newsletter Local legis Restoration Schools IMPACT Dinner Major donors PROFITABILITY

42 The Business Model Statement Mission Statement: Elm Prairie Preservationists works for the restoration and preservation of our prairies so future generations may benefit from their unvarnished beauty and bountiful natural resources. Business Model Statement: We educate children to be of stewards of our prairies, supported by government contracts and fees-for-service, and restore prairies with the support of corporations and foundations. When the generosity of individuals makes it possible, we advocate for policies that will protect and preserve our lands.

43 Looking at special events Event Impact $ Effort Senior lunch Crab feed New Year s mochi making Sake festival Golf Tourn. high low medium medium medium but growing high low low high low high high low high low

44 Looking at special events Event Impact $ Effort Type Action Senior lunch Crab feed New Year s mochi making Sake festival Golf Tourn. high low medium medium medium but growing high low low high low high high low high low Keep. Contain costs. Grow. Increase impact. Give to church that also has one. Grow. Increase impact Increase impact. Age changes?

45 Fast summary 1 2 Make an impact strategy Identify activities, and that s financially viable, analyze them. and right for YOU. 3 4 Challenge yourself with the Strategic Imperatives. If we re not following them, why not? Use the Matrix Map as an ongoing decision-making tool.

46 Each successful strategy is unique. For many organizations, the most precious and scarcest resource is the time and attention of its senior leaders: Be ruthless about investing this valuable resource in the right efforts.

47 Nonprofit Sustainability josseybass.com amazon.com