How Entrepreneurial Spirit is Critical to Nonprofit Success

Perhaps the most significant competency required by today’s nonprofit leaders is having an “entrepreneurial spirit.” Whereas in the past executives had to manage their organization’s revenues, mostly from publicly funded sources, today you will need to creatively build your revenue base by generating investments for your organization through a deeper understanding of philanthropy, by being more “business minded” and increasing your nonprofit stock price.

In today’s nonprofit sector, it is a whole new ballgame! In the for-profit world, chief executive officers are paid for increasing their stock price and improving the net worth of their investors. The nonprofit executive leaders of today need to do something very similar.

Two important ways entrepreneurial leadership can improve the mission of a non-profit organization include:

• Becoming more “business minded”
• Seek Investors not just Funders

Being Business Minded

Absolutely nothing sets an organization back more than constantly operating in the red. Your entire focus becomes centered on turning around your negative operating margin. Maintaining your current programs, developing new programs, etc. are all derailed when you cannot operate a positive bottom line.

Yet far too often, people who work in nonprofit organizations think of themselves as not having to make a profit. However, as you know, the reality is that for your organization to further your mission and achieve your strategic vision, you MUST generate and maintain a positive operating margin. To lead your organization to achieve greater social impact, you must develop a new mind-set, a new way of thinking about the business side of your organization. You must become what I call “Business minded.”

To become a high-performing nonprofit executive leader I want you to remember one statement:

Nonprofit is your tax status, not your business plan.

There are several things that I want you to become focused on to be more business minded.

No Margin, No Mission

Very simply, you need to focus on both your mission and margin. It is no longer enough to say, “Only my mission is important.”

Years ago, I was a very young executive for a large Catholic medical center that was very mission-oriented, as it should be. I was recruited because of my strong operations and financial background. The president of the medical center, a nationally prominent Catholic nun who ruled with an iron fist, taught me the importance of mission. She also taught me the importance of patient care and taking responsibility for the care of those who could not afford to pay.

Though I agreed with her in principle, my job was to remind the religious order that “without a margin, there would be no mission.” When I began working there, the financial situation was not positive; they were losing a lot of money. We had to develop and implement sound business principles in our budgeting, revenue projections, expense management, and accounts receivable.

These sound business practices enabled our medical center to achieve a positive operating margin every year. These “business minded” practices allowed us to maintain our mission for caring for the less fortunate in our community.

Mission and margin go hand and hand. Without one, you cannot have the other.

Grow the Top Line

As a nonprofit leader today, focus on revenue growth. Improving your bottom line is more than just managing and cutting expenses. You cannot cut your way to success: you must grow your way to success. With the growing demand for your services and the costs of labor and benefits, equipment, etc. you must grow your revenue.

QUESTIONS:

• Is your organization heavily dependent upon government funding?
• Is your philanthropy plan centered around special events?
• What new revenue sources have you explored in the last 12 months?

Think of all possible sources of revenues and set a realistic goal for increasing your operating revenue each year. Many corporations and foundations no longer support bricks and mortar campaigns, but they might invest and support programs that they can identify with which will help them with their community branding.

When I was the president of another medical center, the president of our foundation and myself had cultivated a strong relationship with a major pharmaceutical company for a $5 million capital campaign contribution for the naming rights to our new emergency room. When the company executives told us they no longer contributed to bricks and mortar, we developed a new solicitation strategy. We proposed three different programs that they could support that were related to their product lines. As a result, we received a $2 million donation over four years for our breast care center. $500,000 went directly to our budget line since our entire annual operating budget for the breast care program was $500,000.

What individuals, families, corporations or foundations can you consider cultivating and soliciting to support your revenue needs?

Perhaps it is time to develop your entrepreneurial spirit. Give it a try!!

Dennis C. Miller’s online board and executive leadership courses can help your board acquire the competencies required to do amazing things for your mission and your beneficiaries. If you’re ready to take the challenge, discover our online courses today!