Thoughts on Nonprofit Business Entities

From Scott Chamberlain, August 2015:

“For a nonprofit, mission trumps all else.
Once the mission is secure, an arts organization can look at three additional layers of sustainability: financial, organizational, and programmatic.

  • Financial sustainability is marked by the ability to generate resources to meet the needs of the present without compromising the future.
  • The hallmark of organizational sustainability is the ability to build, adapt, and refresh an organization’s capacity to fulfill its mission within an ever-changing environment. This includes things like having the right number of staff members with the right skills, or the proper equipment.
  • Finally, programmatic sustainability is the ability to develop, mature, and sunset programs that meet the changing needs constituencies over time.”

Chamberlain mistakenly differentiates nonprofit businesses from for-profit business models. Again, the central error derives from the desire to elevate the artistic need above the financial one, as in the quote above. Some points:

  • For a nonprofit, “mission” is the product. The essential business model is the same as the for-profit business – your product (mission) has to appeal strongly to your customer (audience, clientele, donors, etc).
  • “Organizational sustainability” and “programmatic sustainability” are subsets of both Mission and Finance. They help to make them successful, but they are not equals. They work for Mission and Finance.
  • A nonprofit operates in exactly the same model as a for-profit. The difference is that it sells its product (mission, and as a subset of that, performances) to its’ customers at dramatically varying prices. A ticket buyer is a customer. But so is a ticket buyer who subsequently donates. So is a large-scale angel. So is a foundation making a grant. They are all “customers” who are buying the “product” (again, mission). Therefore…
  • “Mission” and “Finance” are on equal footing in the nonprofit world, in the same way that “product” and “business model” are in the for-profit. Having one without the other is useless. Having money in the bank is useless unless you have a mission that appeals to your “customers”. Having a great “product” is useless unless you have money in the bank.

“In other words, while it is important for a nonprofit’s finances to be sustainable, it is more important for the nonprofit’s mission to be sustainable.”

Not more important. Equally important.

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