Nonprofit Business Planning

Nonprofit Demonstrates Value of Acquisition

In what is proving to be a more frequent event within the nonprofit sector, although not usually at this scale, one very large nonprofit has just acquired another very large nonprofit providing program expansion opportunities for the buyer and financial stability (according to the New York Times) for the buyee.

Specifically, WGBH (Boston Public Television) has purchased Public Radio International.  If you listen to public radio at all, you are familiar with PRI whose shows include This American Life.  This is a big deal for both stations and possibly the public and may prove to be a market strategy enriching both stations.

Nonprofit Business Planning Marketing Strategy

A marketing plan consists of five strategies: a description of the benefits and features of the offering; the pricing; access (sometimes referred to as distribution); communications; and, positioning (also referred to as value proposition).  A common theme for an effective implementable marketing plan is that all the strategies reflect and are focused on understanding and satisfying the target "customer's" needs.  Satisfying the customer's needs will in the end ensure demand and demand will in the end, contribute to a nonprofit's achieving it's mission.

A Washington Post article by Michelle Sinletary serves to remind us that not all, even the largest, of nonprofits develop and implement marketing strategies that are customer focused.  On the contrary, sometimes these entities are so bad at it, the US Congress must step-in and mandate customer responsiveness.  Thus is the case about the cost of college and colleges themselves telling the story clearly so that customers can understand and make a choice. 

I would have thought that sophisticated nonprofits like colleges would just do this -- appears I'm wrong.

Nonprofit Business Planning Test

Recently a group of parents in California won a court case to keep the school their kids go to open -- likely reconsitituted as a Charter but being closed because the school administration had effectively failed the students (Wasthington Post).

First, kudos to the parents.  They have stood up in defense of their kids and won.  But have they really won?  How much do they really understand about the business side, not to mention the academic side of running a school?  Many public schools can testify that it's tough enough to keep the Parent-Teacher Associations active (likely for a number of reasons), but, responsible for a whole school? 

And then there's one of the classic business planning questions: what makes these parents think that their school will actually be more successful than the school that was publicly run?  This is a business question you ask?  Yes!  This is the question that comes a hundred times when for instance you see a restaurant go out of business and someone else thinks its the perfect spot and they fail and then another and another and the truth be told -- it's just not a good market or location.

Can this be applied to a school?  And what about the sustainability questions etc. etc.  Again, kudos to the parents.  Now the real work of building a business, somewhat from the ground up begins and all the questions, from market demand to market strategy to financing must be answered.

 

Nonprofit business planning For the Cause

I received an announcement today from a jewlery maker that has a foundation and has committed to offering specific pieces it produces to raise money for the foundation and subsequently for its six "causes".

On the one hand I approve.  It's fine when a manufacturer wants to divert its profits for charitable purposes.

On the other hand the idea moves me to what if any business plan/model exists around these items.  Is the donor satisfied with the opportunity to promote his intent even if the amount of money raised is small?  Or does the manufacturer / donor really intend to make money for its causes and has worked out a full plan that defines its target audience, product, price, communications, and distribution strategies? 

Why do I think the answer is (a) not (b)?

Nonprofit Business Planning Risk Analysis

When I am assisting a nonprofit with the development of a business or program plan, the final section I complete in a business plan, prior to the appendices, is called the risk analysis.  In the risk analysis I like to run the business planning team through a series of questions that identify all the possible "issues", some neglible but some huge, that could affect the prospective business' success. 

The most frequent risks like: the economy could sink, there's no demand, there's not enough cash. 

But the exercise doesn't end with identification.  Once completed, a question must be asked: are there mitigating steps that can be taken to reduce or avert the identified risks?  And if no, the team must answer the question, is this project really a "go"?

For some time now, I have questioned the plan of one nonprofit social venture, and have maintained it should be much further along than it has ever progressed, suggesting that maybe this effort would be better accomplished by the government or the private sector.  The nonprofit is "one laptop for all".  Please note that I am not against the idea that every kid everywhere should have or have access to a computer no matter the socio-economic conditions.  I just question both the capacity and planning of "one laptop for all".

That said, the New York Times had a great review of this organization's effort just assessed in Peru.  The verdict: the organization has failed due to ill-prepared rural teachers and administrators who were too often unable to fathom much less teach with the machines, compounded by, software bugs, poor internet access and cultural disconnects.

Now, back to business planning.  My question: were these issues uncovered through a risk analysis exercise and what did the plan for addressing look like?

To see the article, go here.

Nonprofit Acquired By For Profit After A Year in Business

In the health care world when for-profit hospitals buy a nonproft hospital  they normally are required to create a nonprofit foundation to hold and distribute the nonprofit's assets to the community.  These "conversion" entitites are created because the nonprofit hospital assets, or at least those assets created via philanthropy, must by law continue to be used for philanthropic purposes. 

The nonprofit Jumo, an on-line intermediary to promote and support philanthropic transactions, has just been acquired by GOOD, a for-profit that has similar but a deeper and wider offering than Jumo. 

One unanswered question: what happens to the philanthropically acquired assets? 

But the bigger questions for me:

• What exactly was the business model for these folks that they should operate for only a year and be ready to sell? 
• Why were foundations and others willing to invest when there were stronger for-profits in the market place? 
• How much work had Jumo done to fully project where the market was going and understand the gap that it would fill (for-profit or nonprofit, I believe that institutional success is reliant on finding a market).

If nothing else Jumo is a "funder's beware" lesson.  But Jumo is also a lesson for those developing and executing their business plans.  Know your market.  Know what the right solution is to serve that market and then manage your delivery to ensure success.  It appears that Jumo may have only failed in the management category because GOOD appears to believe there is a market demand for Jumo's offerings.  But how correct GOOD is remains to be seen.