Unraveling the Profitability in Your Nonprofit — Strategic Analysis

How does your organization measure whether a program is successful? What types of measures does your organization use to determine impact? Do all programs have to be profitable? How does your organization determine if a program should continue or if a new program should be introduced?

Nonprofits are focused on their mission and the impact they have on their community. It’s vital that board members and management ask these questions and think strategically about programs in order to achieve their mission.

Programs can be assessed based on (1) impact to the mission, and (2) profitability. The assessment can be completed separately by several individuals within the organization (e.g., board members, management, program directors, etc.) to provide for different viewpoints.

Based on the results of the assessment, the programs fall into four different categories.

1. Investing program — High impact and profitable

These programs should have high strategic importance as it is a mission-related activity that can generate funds for future investment and programing. The strategy for investment programs should be to continue to invest and grow the program.

2. Supporting program — Low impact and profitable

Common supporting programs are fundraising, endowment spending, rents and royalties. These programs are used to support mission programs or to grow investment programs. The strategy for supporting programs is to continue to grow the program to support other programs.

3. Mission program — High impact and not profitable

Organizations value these programs because they align with their mission. However, since they are not profitable, the strategy is to mitigate losses to the extent the organization can afford.

4. Reevaluate program — Low impact and not profitable

These programs need to be reevaluated as they are losing money and not meeting the mission of the organization. Often these are programs that were once investing or mission programs that have had challenges or changed over time. The strategies to consider for these programs are elimination of program, collaborating with another organization, or changing the scope to meet the mission.

Once the programs are broken into these four different categories, consider displaying them in a graph or matrix form. Use this information as a strategic tool to make informed decisions about which programs to continue, expand, or discontinue. These discussions and decisions can have a positive impact on your mission and the community your nonprofit serves.

How we can help

With decades in the nonprofit sector, we have experience serving a wide variety of organizations. Our committed nonprofit consultants can help you develop strategies rooted in sound business fundamentals, strengthen communication between staff and boards, and sharpen overall execution. We believe that helping nonprofits succeed means stronger and more vibrant communities for us all.