Not-for-profits use money in a completely different way from our for-profit siblings. Our goal isn't to maximize profit and we don't use the "industry standard" to measure return on investment. So why should you listen to us not-for-profits?
Simply, the best not-for-profits have incredible fiscal policies that are great at navigating through fiscal shakiness and emerging unscathed.
Here are three simple lessons from terrific not-for-profits that will help you build a better corporate fiscal policy.
1. Strive for diversified revenue. General Motors was heavily invested in gas-guzzling SUV's and investment banks felt home-mortgage gravy train had no end. We all know how the latest down turn went for GM and Bear Sterns. On the converse, the Greater Boston Food Bank (TGBFB), the largest hunger relief organization in New England, is an excellent example of a not-for-profit with diverse income streams. Not a single income stream accounts for more than 45% of income. I'm not advocating product diversity but income-stream diversity. Do you have income diversity or does your revenue come from one source?
2. Transparency is vital. Everyone remembers Enron, WorldCom, and more recently Bernard L. Madoff Investment Securities. Transparency is a way of life for not-for-profits. The IRS Form 990, our public financial information, goes far beyond anything you'll find in a 10K or 10Q SEC filing. All of our expenses are itemized and public - literally, you can see what we pay for postage, telephone, everything. I suggest you move toward a high degree of transparency -- this engenders trust and your company will think long and hard about how every dollar is allocated.
3. Live in fear of overhead. Not-for-profits fear overhead - it's a monster we work hard to avoid. Every person at a well-run not-for-profit is diligent about limiting his or her contribution to overhead. Imagine if literally everyone in your ginormous for-profit company felt personally responsible for corporate spending. My advice - Live in fear of overhead and instead of thinking about what is necessary, think in terms of what is and is not directly related to your product or service.
Nancy's latest book Zilch: The Power of Zero in Business is now available.
Written with James C. Elbaor