August 18, 2015 | Thoughts

Financial sustainability for nonprofits: the holy grail?

As a mission-driven organization, your goal should be, well, to focus on your mission. Financial sustainability can do wonders for an organization, considered by some as the holy grail for nonprofits, promising freedom from the shackles of fundraising, letting you and your organization focus on the important things: maximizing impact.

This sounds lovely, but pursuing sustainability comes at a cost. To become sustainable, an organization must charge its end users, which has several possible effects:

  • Impedes growth: Many nonprofit products and services are targeted toward those who could not afford paying full market price for a service, and charging for services almost certainly impedes growth. Charging a high enough rate to substantially affect financial sustainability can leave huge swathes of clients unable to pay, shutting out huge portions of your target market.
  • Mission drift: Reducing your organization’s reach also reduces your impact, and  can lead to mission drift, whereby an organization starts serving more upmarket customers rather than those who may be the most needy.
  • Time commitment: Creating and implementing an earned revenue strategy also takes time. While an earned revenue may reduce your time spent fundraising, ultimately the complications of implementing an earned revenue strategy may take up your time instead. Consider your fundraising efficiency and realize that it might be more efficient to find donor dollars rather than to chase earned revenue.

We don’t mean to suggest that you shouldn’t pursue sustainability, just that financial sustainability is a means to an end, not an end goal in itself. Tech nonprofit startups, perhaps even more than established organizations, should be focusing on growth and impact, which sometimes requires sustainability to wait. So let’s stop thinking about improving sustainability for its own right, and start thinking about sustainability as one tool for maximizing impact and fulfilling your mission.

Pro-tip for tech nonprofit startups: For good reason, for-profit tech companies are often told to focus on growth rather than generating revenue. Pushing for revenue too early can seriously impede growth and impact, and it’s often better to spread your technology widely before trying to get customers to pay for it. Like a for-profit spending venture capitalist money to grow, nonprofit tech startups should expect to have to spend donors dollars to grow as well.