Money is King

Money is king, whether you are a for-profit, non-profit or government agency.  Without money you can’t pay salaries, you can’t pay the rent, and you certainly can’t deliver products or services.  This is a truth that often masquerades as a dirty word in the social change sector…but it’s still a truth.  Managing cash flow is the only way to keep the doors open at any organization.  I’d argue, however, that running a non-profit presents unique challenges, because not only do you need to meet payroll, you have to run programs for which it is inherently difficult to charge.

This creates a fundamental tension between the need to raise money and the need to change lives. How to maintain a balance between the two?  For me, it comes down to asking three questions every time we make a decision: Will this have an impact on the client’s life?  Will this make the client happy?  And will this bring in revenue?  These questions form a decision matrix: programs on which we lose money better have tremendous social impact; programs that don’t have impact better make money; and regardless of what we do our customers better have a good experience.

Intuition Versus Reality

Something I’ve learned over the years is that the difference between our intuition and the actual data can be surprising, which is why we decided to take a look at the average household income of our clients across product lines.  We found the following:

For the Financial Coaching + Employer Program, wherein we deliver Coaching to employeees of partner employer on a fee-for-service, average income is just above $56,000. 

For the Lending Program average income is $29,000.

For our Free Tax Preparation average income is $18,000.

And for the Financial Coaching + Schools Program, wherein we deliver our Coaching to parents of elementary schoolchildren, average income is $16,000.

This data is fascinating.  The Employer program is a strong revenue generator, yet though it is tremendously beneficial for the participants, the participant’s income puts them just above our target market.  Our lending program breaks-even (revenues roughly equal expenses) and reaches those we seek to serve; still, a loan’s impact can sometimes be negated by external forces. Free tax preparation inherently loses money (we are forbidden from charging for it), but the benefit is enormous: we’ve already returned nearly a million dollars to the community in the form of tax credits and refunds.  And finally, our Schools program, for now, is our biggest money loser, but the families are all living below the poverty line; and here, the loss of money is worth the upside–we believe this program has the greatest potential to tackle intergenerational poverty.

Conclusion

Money matters.  So does the mission.  It’s possible to balance the two, but a hard look at the data is critical.  Understanding who you are actually serving, the impact you’re having on them and the impact the program is having on your bottom line is a prerequisite to building an organization that meets its mission and is able to grow year after year.  At the end of the day, it can be tempting–and easy–to move away from serving the poor because of the cost and other challenges of doing so.  Unfortunately, this means that marginalized populations continue to be marginalized.  To reverse this trend, we must constantly calibrate our work so as to ensure that we keep the lights on AND continue to better the world.