NonProft Organizations Thinking Smart -The Art of NPO Business Modeling

Nonprofits Organizations are appropriately viewed primarily as mission-driven organizations. Evaluations of success focus on an organization’s impact in the community, such as job placements, academic achievement, and family stability. However, nonprofits are business enterprises as well, built on an underlying business model that makes the programs, projects, and organizations operate and succeed. The recent economic downturn stressed many nonprofits and led to questions about the sustainability of prevailing nonprofit models. Leaders of every nonprofit must carefully assess the effectiveness of their particular structure and prepare for a potentially different approach in the future.

Business models at nonprofit organizations have never been static. The structure and composition of revenues, expenses, and capital evolves over life stages and in response to external events and internal strategy. Rather than worry if “the model is broken,” nonprofit leaders must prepare for their next business model and invest resources to sustain the mission and serve the community.

This preparation consists of four steps:

• Understand the current operating model;

• Diagnose any critical weaknesses;

• Forecast and plan a structure that will address the weaknesses and be effective in the short and midterm future;

• Implement the needed, and possibly difficult, changes.

Seeking an ideal or permanent answer is not productive, nor is it likely to be successful. Organizations grow, change, contract, and change again. This is not a simple process, and it will require the commitment of staff and board leadership and a shared vision of the ultimate, mission-driven goal.

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