In my recent Financial Times column on VolunteerMatch’s “growth capital offering”, I state that the organization’s prospectus says that the new capital will fund a plan to make VolunteerMatch self-sustaining and generating an operating surplus by 2012. Reader Jeremy Gregg, who writes the blog The Raiser’s Razor, leaves a comment asking about this claim:
I would be very interested to know how a non-profit can design a plan that meets these standards: we are so used to annual operations plans and short-term proposals that it is hard to envision such a concept. Are they tied to social enterprise and earned income strategies that can make the organization self-sustaining?
The VolunteerMatch prospectus does a good job laying out their self-sustaining operating model. Before I proceed, I should note that other than reading the prospectus and speaking with their president as well as some other related parties, I am not intimately familiar with VolunteerMatch. So please take my comments as my own personal opinion and realize that I am not speaking on behalf of VolunteerMatch in any way.
The VolunteerMatch proposal does not suggest that their model will earn a profit. There are three core areas where they will receive support, 1) payments from corporations that use their corporate volunteer program services, 2) payments from nonprofits who pay for premium access, and 3) reliable ongoing contributions from volunteers who use the network. This is not a “profitable” model, but it is a sustainable model. VolunteerMatch should be able to track what level of donations they can expect from the users of their service (the volunteers) and then count on that fundraising as they bring more users to the network.
A sustainable nonprofit operating model does not mean that the organization must charge for their services. I do not agree with the idea that nonprofits should seek to build models that earn income unless that model is the most effective way to further the nonprofit’s mission. Fundraising can and should be part of a sustainable operating model. Unfortunately, I too often hear of a nonprofit who will generate a loss (as is expected) and then “make up the difference with fundraising”. That is not sustainable. A sustainable fundraising plan should be built into the operating model. Note that VolunteerMatch does not just say that they will raise money; they relate their goals to their experience with their actual user base and then make projections based on certain growth plans.
Fundraising is something that organizations can invest in. The growth capital that VolunteerMatch is looking for is not sustainable funding. It is a onetime investment that will be used in part to build a sustainable stream of fees and donations.
A sustainable operating model that relies on fundraising (as most all nonprofits must, otherwise they should ask why they are not a for-profit), must be able to budget on certain fundraising goals. Not a fundraising budget that is whatever size fills the gap between expenses and revenue, but a budget that is based on reliable projections.