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How do economic realities impact revenues?
Understandably, many organizations are thinking about the current and anticipated economic realities and how these could influence nearly all revenue streams in many different ways. Can one business model be more “recession-proof” than another? Particularly in the face of lingering inflation and the fact that we are, or will likely soon be, in a recession, is there a business model, or a certain mix of revenue streams, that feels best suited in helping organizations manage economic uncertainty?
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4 Replies
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I think the answer is situational, based on the organization’s mission, service model, geography, etc. The inflation/recession factors cited in the question are short-term or, at best/worst, medium-term in nature. Hence, the response to them should be more tactical than strategic; i.e., “How do we adapt to today and the next 12 months while keeping our eyes on the long-term sustainability of our organization and its mission?”
Arguably, the only “wrong” move is to focus on only one business model and ignore the others. Each business model is subject to change by external factors, and each business model is changeable based on an organization’s internal factors.
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Thanks for the insights, Michael. Regarding the changeability of business models, there was a lot of interest and questions around this during today’s webinar. For example, for an organization that’s looking to reduce dependency on government contracts and is seeking to increase individual and foundation contributions, what are some “case studies” and examples of organizations who have done this and how?
Would love to hear more from anyone who has experiences with pushing forward any big changes to your business model. What worked well? What challenges did you face (or continue to face)? What have you learned?
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Does anyone know of a resource that tracks nonprofit use of each business model? I’m curious about what proportion of nonprofits rely on a membership model versus government contracts, etc. Also I’d love to see how the funding mix varies within different mission areas.
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Holly: I don’t think you’ll find this. It’d take some lifting by researchers, and I don’t think there are either thorough or quick/dirty takes on these models as NFC has defined them. The one big source of mission and spending info is from Form 990s, and these would have some limitations in answering your question. For one, there’s no reliable indication of whether an organization is a membership association or not. For another, government revenue is notoriously difficult to suss out of the 990, since earned income from contracts isn’t divided by source. This is a road we may try to get down a bit, but the data presents an assortment of challenges.
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