A little more than a decade ago, NeighborWorks America staff worried affordable housing and community development organizations were in a precarious position. Their first concern was funding. If resources dried up, so did the ability to keep day-to-day operations going, to pay staff and to, quite literally, keep the lights on so that the organizations could serve their customers. They had to do something to make themselves stronger.
President & CEO Marietta Rodriguez, who then worked as vice president of National Homeownership and Lending, was in the NeighborWorks Achieving Excellence Program at the time. She was looking for a project that could make a real impact and turned her focus to what came to be known as the Sustainable Business Initiative (SBI). The goal was to strengthen organizations by helping them think outside the box, allowing them to expand earnings in a way that would keep them afloat in hard times – and allow for greater impact in better times. In the years since, SBI has expanded, integrating cohorts of NeighborWorks network organizations with staff and coaches to take an in-depth look at, well, everything.
That includes internal culture, workflows and processes, financial systems and customer engagement to learn and improve an organization's service delivery and expand their impact in their community, explains Amanda Kenny, manager of Operations and Entrepreneurial Design. In addition, "organizations work to grow an existing service line or start a new one to grow their earned revenue. Organizations learn to think outside of the box when challenges arise and be more agile and open to change."
The initiative's main goal is to create a nonprofit for the long haul.
"Organizations that are heavily grant-funded are typically at the will or whim of their funders," Kenny explains, a sentiment shared by both Rodriguez and Dr. Akilah Watkins when they discussed the financial future of nonprofits and the importance of philanthropy . "We want to flip the script so they can focus on their customers and their organization's mission, creating lines of business that are customer driven." When organizations earn more of their own revenue, they become more agile in the ways they can approach new opportunities – and in the ways they help customers and clients.
A different way of thinking
Within the NeighborWorks network, the SBI model has continued to grow. Currently, 76 organizations have woven SBI into their organizations, with two more joining the cohort last year, for a total of 32% of network organizations. In fiscal year 2023, SBI organizations reported that, on average, 63% of their total revenue was earned revenue. "This means that organizations are bringing in over half of their revenue outside of grants and philanthropy," underscores Alicia McCoy, director of SBI. "In addition to financial reporting, SBI collects narrative responses that allows our team to learn about innovations and current needs of SBI organizations."
Kenny describes the move to SBI as "a culture change." It looks different at every nonprofit. In one, it may mean thinking innovatively in response to change. In another, it might mean a whole new line of business. In a third, it might mean an increase in customer engagement. One organization, for instance, launched a new loan program. Another increased efficiency by going paperless.
Rethinking at Westside
Westside Housing Corp. joined the SBI cohort in 2019. "There was a lot of rethinking," shares Gloria Ortiz-Fisher, executive director of Westside Housing. In 2022, the organization executed $1 million of improvements on our properties. "It was through grants from the city that we wouldn't have gotten if it weren't for SBI."
The organization has focused on comprehensive asset management and rebranding, on moving to more earned revenue. "I think it's made a huge improvement," Ortiz-Fisher says. "I came from a corporate background and understood that we needed to adopt more business-like practices. For nonprofits, the need is great and the money is little. And there is so much need, post-COVID, for more health services and mental health services – there are wrap-around services that everyone needs."
Westside Housing had two strategies. Moving to more earned revenue and corporate strategies meant they could continue to apply for grants but not worry if they had enough money to make it through. She also wanted enough reserved cash in case of an emergency, so she could continue to operate. And she got it. "I'm focusing on the future because I'm not focused on how to make payroll next week," she says. "That's what SBI gave me."
SBI helps organizations figure out both what they should do more of and what they should do less of. In Westside's case, minor repairs – new roofs, new gutters and the like – was a revenue earner, especially with a city contract in hand. They've expanded that line of business, "upping the ante on earned revenue." They're also administering a tax abatement program, earning them another $75,000 to $100,000 a year.
And they still have the mission at heart, she says. "We still desperately care."
More analysis at Home Partners
"We're nimble," says Beth Hyser, chief program officer at NeighborWorks Home Partners, part of the very first SBI cohort. "We're innovative. I think SBI gave us a lot of tools that helped us adopt a different mindset about how we approach our work."
For Home Partners, that meant analyzing the locations of the homes their clients seemed to want. Suburban, they found. They worked with NeighborhoodLIFT , a NeighborWorks program, then with the state, receiving millions of dollars of support in down payment assistance.
Change has meant they are more analytical than they'd been in the past. They look at numbers, data and demographics, Hyser says. They project. "What does the next generation look like? We have to take a step back."
Hyser has appeared on panels about sustainable business, at brown bag lunches and more. She loves talking to peers about what they're doing and how they do it. She's learned from others in the network, too, she says, so it makes sense to pass it on.
SBI "is a change of culture in the biggest sense. How do we have a culture of collaboration? A culture of being curious? A culture of efficiency" Hyser asks, adding that there's a big difference in being efficient and being cheap. When she first came to Home Partners, they had one product, she says. "Now we have eight … I think it's setting the tone and the world view of how you approach your work. How do you treat your nonprofit as a business?"
Looking ahead
The nonprofit industry has changed a lot over the years, and with those changes there has been a need for new funders and new funds, says McCoy. "SBI helps organizations define and enhance their culture while addressing the need to diversify their revenue streams. This flexibility allows organizations to expand in new areas, seek non-traditional funders and ultimately serve more customers." And it keeps the organization's mission in the spotlight, she adds.
As NeighborWorks America observes its 45th anniversary, staff are looking to the future as well as the past, considering possibilities, planning for challenges and expanding on things that work. SBI itself was part of a plan to prepare for what was ahead.
In the future, says McCoy, "SBI will continue to invest in and stabilize organizations' foundations — stabilize operations so that organizations can grow, diversify, and achieve more for their communities. We will continue to partner with organizations to provide resources and technical assistance to address challenges and meet the needs of our communities and our network."
08/21/2024
