What revenue model is your non-profit agency using?

More than a year ago, I stumbled upon a fun article published in the Stanford Social Innovation Review (SSIR)  titled “Ten Nonprofit Funding Models“. It provided clarity for me around what I was seeing in the non-profit sector. So, I bookmarked it and re-read it from time-to-time. Recently, I’ve found myself talking to a number of different non-profit professionals and board volunteers about this article, which is usually a sure sign that I better blog about it.

As you know, there are many different types of organizations calling themselves members of the non-profit sector.

• Churches
• Universities
• Hospitals
• Arts organizations
• Membership organizations (e.g. chamber of commerce, etc)
• Human Services/Social Services

Each of these types of non-profit organizations look very different. Each board has different wrinkles, and their revenue models also take on a different complexion.

The SSIR article by William Landes Foster, Peter Kim, & Barbara Christiansen names and describes ten different funding models:

1. Heartfelt Connector
2. Beneficiary Builder
3. Member Motivator
4. Big Bettor
5. Public Provider
6. Policy Innovator
7. Beneficiary Broker
8. Resource Recycler
9. Market Maker
10. Local Nationalizer

Some of you are probably wondering what each of these models means. I encourage you to click-through to the SSIR article and read it for yourself. Those authors do a great job of breaking down each of the models.

What I’ve found myself talking to many non-profit professionals and board members about lately isn’t which revenue model they’re using. My conversations have been rooted in what the authors of this article say in their final few paragraphs:

“In the current economic climate it is tempting for nonprofit leaders to seek money wherever they can find it, causing some nonprofits to veer off course. That would be a mistake. During tough times it is more important than ever for nonprofit leaders to examine their funding strategy closely and to be disciplined about the way that they raise money. We hope that this article provides a framework for nonprofit leaders to do just that.”

In my opinion, it is so true that many non-profit organizations have sought money wherever they can find it, especially once they realized that the economy isn’t going to just snap back into place and we now find ourselves in a “New Normal”.

So, the conversations I’ve been referencing throughout this post have to do with board development and not the actual revenue models.

I believe that non-profit organizations build their boards around their revenue model. For example, if your agency is highly dependent on fees, then you probably haven’t recruited world-class fundraising volunteers to sit on your board. The same holds true for organizations with a government funding revenue model.

So, when you start tinkering with your revenue model (e.g. adding an event, pledge drive, direct mail, etc), I believe it creates tension in the boardroom for two reasons:

1. You’re asking people to do something that wasn’t part of the original deal.
2. You’re also asking people to do something they aren’t likely good at doing.

If you find yourself in the position of having to tweak your revenue model, I suggest the following:

• Facilitate a conversation in the boardroom and build consensus around the idea of changing or tweaking your revenue model. Make sure all consequences are understood and appreciated.
• Ask your board governance committee to complete a new gap assessment based upon some of the new roles you’re asking board members to take on.
• Focus your board recruitment efforts on bringing in new board volunteers to help fill your newly identified gaps.
• Allow current board members to step off the board gracefully and help them find a new seat on the bus where they can still participate in your mission.
• If you need a blended board to make your blended revenue model work, then deliberately talk about roles and responsibilities in the board room to avoid misunderstandings between volunteers.

The New Normal may have thrown your organization a curveball, but it doesn’t mean you need to go through a dysfunctional transition. A little bit of thoughtfulness and board engagement can go a long way.

Did you click-through and read the Stanford Social Innovation Review article? If so, what were your thoughts? Which revenue model is your agency using? Do you find yourself tweaking your revenue model in an effort to adapt to The New Normal? How is your board handling the transition?

Please scroll down and share your thoughts and observations in the comment box below. We can all learn from each other.

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com 
erik@thehealthynonprofit.com
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