5 Nonprofit Economics Takeaways
In the Spring/Summer 2010 Mission Matters study by the Commonfund Institute, Verne Sedlacek, president and CEO of Commonfund, takes a look at the economics of nonprofits and offers five takeaways about the nonprofit economic landscape.
Sedlacek evaluated the current nonprofit economic scenario by researching the past and contemplating implications for the future to arrive at these takeaways.
- Stay the course over the long term — even through several generations of trustees and senior managers. "When we look at 'steering currents' that truly shape the nonprofit environment," Sedlacek writes, "they extend over decades. … Managing through these long cycles requires a different approach and skill set when times are good than are required in challenging periods."
- Focusing on enterprise risk management and lowering the correlation between market activity and giving revenue streams are challenges. "Not all nonprofits share the same revenue model," Sedlacek says. "Endowment-dependent foundations were heavily impacted by market losses. Other institutions have more diversified sources of revenue. But, when you study even varied sources of revenue, they are actually rather highly correlated."
- Managing expenses at all times is crucial. "Building flexibility into the expense base to match potential volatility of revenue will be critical going forward," according to Sedlacek.
- Take investment risks. "Taking investment risk is the only way nonprofits are going to fulfill their future obligations, but taking investment risk does not guarantee success, it only guarantees volatility," Sedlacek says.
- Take an organized, focused approach to fundraising. "Development and fundraising are critical," he says. "Like not taking risk, nonprofits cannot afford not to engage in a persistent and ongoing fundraising effort."
To download the full study, click here.