General Business

Nonprofits Should Change Their Thinking to Increase Revenues 

Revenue growth is one of the most important factors for any business. It is a key metric for measuring the health of an organization and serves as a foundation for its future success.

For nonprofit organizations, increasing revenue is just as vital, despite their misleading name.

Joseph J. Perez, CPA, partner at WithumSmith+Brown, PC., spoke yesterday at NJBIA’s Not-for-Profit Summit at Pines Manor in Edison, and harkened back to a conversation he had with a friend who was a CFO at a nonprofit hospital.

“We are not a not-for-profit organization,” the CFO friend said. “We are a tax-exempt organization. We are a business, and we need to sustain ourselves.”

Perez said that in order for nonprofits to increase their sustainability and increase their revenues, they need to start thinking differently, including how they think about the people they recruit for their boards, and how to harness and effectively utilize their data.

Typically, nonprofit organizations are funded by government grants.

“This almost makes not-for-profit organizations quasi-government agencies,” Perez said. “The difference is, governments receive money in the form of tax revenue, which they don’t have to ask for. Not-for-profits do have to ask for their [money].”

This “asking” is a challenge.

“My business is no different. If I want to grow my business, I also have to ask. I am asking for someone to have trust in me to provide a service to them that they find valuable, whereas you all are asking for donations to support the missions that everyone knows are already valuable,” said Perez.

He added that it is important to identify who within an organization is good at asking, and utilize their skillset.

“This can be anywhere in your organization, from a business development person to a board member. The biggest thing is you don’t want to try to turn someone into something they are not,” said Perez.

To that end, he said that when building an organization’s board, adding someone with a sales background who is good at, “the ask,” is a good idea.

“What are [these types of people] good at getting? They are good at going out, finding the donors, making the ask, and promoting your mission,” said Perez.

Data is also an important factor in increasing a nonprofit’s revenue.

“Data is part of everything,” Perez said, adding that, in the case of any given nonprofit, there is a data profile of every donor – recurring and new – that has contributed.

“You can harness this data to continue to market to them and expand your relationship with them,” said Perez.

Internal data, such as managing each grant and being effective with your time, is also vital.

“If a for-profit-business doesn’t spend all of its budget, it gets to keep the money and is considered efficient,” Perez said. “If a nonprofit doesn’t spend all the money it gets from a grant, it has to give it back.”

Perez added that if you are tracking your time, you can properly allocate that time to all of the grants your nonprofit has. Understanding and utilizing your data allows you to effectively do this.

“Monetizing one’s data in this way will allow you to justify not having to give grant money back,” he said.

“Overall, you need to change the way you think about your business,” Perez added.

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