What Lessons Can Small Businesses Learn From Non-Profits During These Uncertain Economic Times?

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Though it may be difficult to imagine, small businesses have many of the same needs as non-profit organizations. The goal of many non-profits is to help solve the urgent social problems faced by communities. Nonprofits require business savvy just like private companies; they simply follow a different set of accounting and tax principles in order to measure profit. While non-profits and small businesses have very different purposes and corporate structures, during tough economic times, small businesses should consider incorporating some of the business tactics non-profits utilize on an ongoing basis.

In today’s economic climate, nonprofits, like many small businesses, face the overwhelming challenge of continuing to provide the same level of service with potentially less revenue. This requires exceptional planning and creativity, especially when it comes to development and funding increases.

Currently, it’s essential for non-profits to run their organizations more efficiently. They must properly allocate their resources and ensure there are no redundancies in activities. They must also strive to exceed the standards of other agencies. This may require determining which activities should be expanded and which should be scaled back. Tough economic times provide a means for non-profit managers to create more dynamic and collaborative models for delivering services and generating revenue for their programs.

As a small business owner, you can learn from the way non-profits operate in three basis areas: strategic planning, marketing and cost control procedures.

Strategic planning
Non-profits: A non-profit must evaluate its strategies, services and future goals on a continual basis to make certain the organization is heading in the right direction. The establishment of the organization’s mission and vision is crucial. Furthermore, the mission statement must be disseminated and articulated across the entire organization. This will help management achieve success in areas such as service, delivery and optimization of return on investment (ROI).

Non-profits primarily focus on doing whatever it takes to continue to build their organizations and serve their causes. Today, many non-profits are restructuring their business models to make their organizations more competitive in the marketplace.

Small business lesson: You can learn from non-profits in the way you approach strategic planning.

When developing a strategic plan, you must evaluate every aspect of your business including: mission and vision, revenue sources, existing products and services, cost and staffing strategies, as well as any other areas that may be tailored to your particular type of business or industry. Keep in mind that a little strategic planning can go a long way.

The following are several strategic planning questions you should ask when developing your ideal plan:

  • What elements are used to define yourmission statement and company vision?
  • How do you incorporate your mission inyour business model?
  • Do you need to restructure your businessmodel?
  • Given the current economic environment, is your business model consistentwith your business plan?
  • Does your plan match attainable goals?Are they too high or too low?
  • What action plan will you use in order tomeet attainable goals?
  • How do you measure your actualachievements compared to your goals?
  • Can you control your activities to get them in line with your goals andobjectives?

Once you’ve created a strategic plan, the recommended changes should be implemented as soon as possible.

Marketing
Non-profits: In order to be successful, non-profits must be skilled at establishing methods to retain and grow contributions. A certain level of enthusiasm must be maintained amongst donors in relation to the non-profit’s mission. Many non-profits choose direct marketing methods to build relationships with past and future donors, as donor relationship management is key in achieving a successful long-term strategy. Donors must be consistently kept up-to-date on the ways their contributions are benefiting the organization’s mission and vision. By using various methods of marketing and communication, such as newsletters, e-mails and social networking, non-profits help to keep their donors intertwined in the organization.

Small business lesson: You can learn from successful marketing and communication strategies used regularly by non-profits.

You must find ways to keep customers informed about your products and services. This can be accomplished via speaking engagements, published articles and other visible means. The goal is to have customers appreciate your product knowledge and know-how. More importantly, you can market your products and services free using these techniques.

Also, take a look at where your customers are coming from. Tracking and measuring the source of new and potential business can help determine your markets. New customers are out there – you simply need to target prospects for new business.

The following are non-profit marketing strategies that transfer to small businesses:

  • Enhance skills to establish networks and referrals. Your customers can be the best advocates of your products and services.
  • Develop new sources that will improve your goals and objectives and lead to greater revenue.
  • Find new and related markets to expand distribution of products and services.
  • Research and develop new products and services compatible with the needs of your customers.
  • Make quality and service a major focus with both new and existing customers.

Cost control procedures
Non-profits: Even when times are good, non-profit organizations have tight financial constraints that require the implementation of strict cost control procedures. Many non-profit managers face the constant challenge of having to increase revenue, while reducing expenses.

As non-profit managers also report to directors and board members, they must deal with a variety of agendas that sometimes make it difficult to effectively cut costs without sacrificing the valuable programs and services their organization is required to provide. These agendas require non-profit managers to implement creative strategies in their cost control procedures while, at the same time, maintaining the integrity of their programs. During times of economic turmoil, it becomes even more important for non-profits to control their costs—not doing so could severely impact their financial conditions.

Small business lesson: When times are tough, you can learn from non-profits in the way you handle your cost controls.

When faced with a financial crunch, there are a number of cost control options available to you as a small business owner. Your ultimate goal should be making normal operations as efficient as possible. This may require taking a good hard look at what expenses can be trimmed or eliminated entirely.

It’s also important to keep in mind that collection activities must be adjusted based on the economic climate. When times are tough, it becomes increasingly necessary for small business owners to be persistent when contacting slow payers. This alone could make a difference when trying to meet monthly obligations and expenses.

You must also exercise good judgment and care when determining what to cut and by how much. For example, if you cut costs too drastically, your business may never recover. If you don’t make enough cuts, cash flow problems may eventually force you out of business. By making several adjustments to your cost control procedures, you can survive and thrive during challenging financial times.

You can implement the following non-profit cost control procedures in your business.

  • Keep a close eye on cash flow. Focus on areas where cash is being held up, such as inventory, equipment purchases and accounts receivable. This helps put you in a position to improve current cash flow and predict a future shortfall.
  • Ask cost-saving questions such as: Can you move to a cheaper space? Can staff work from home? Can your lease be renegotiated? (For example, your landlord may rather give you a better deal than try to rent out an empty space in today’s real estate market.)
  • Try negotiating payment schedules with your suppliers. For example, you could offer smaller, more regular payments and, in doing so, remind suppliers that you are a loyal customer.
  • Outsource services wherever practical. Instead of increasing your labor costs and fringe benefits, try outsourcing services wherever it’s economically and strategically beneficial to do so. This will keep fixed personnel costs under control, and outsourcing costs will only be incurred when necessary.
  • Consider consolidating or restructuring debts. Creditors may be willing to negotiate a longer repayment period.

Surviving uncertain times requires a healthy outlook, as well as a solid plan. However, you shouldn’t just look to survive, you should look for opportunities. To do so, shift your mindset from being in a down economy with little opportunity, to being in a flourishing economy with endless possibilities. Tough times run in cycles, but if you put a sound strategic, marketing and cost control plan into action, your business will be able to weather the ups and downs. Remember: bad times don’t last forever.

About Bruce and Pamela Sansone 1 Article
Bruce Sansone, CPA, MBA, CFP, has been a senior tax consultant for STA for nine years. Prior to joining STA, Bruce owned a successful firm focusing on tax, wealth management and management consulting for both small businesses and non-profits. He has also worked for Fortune 500 companies in executive positions, as well as Big 4 accounting firms. Bruce received his undergraduate degree from the University of Illinois and received his MBA from the University of Chicago. Pamela Sansone, CPA, is a chief financial officer for Child Link, Inc., a non-profit organization. She maintains more than 25 years of experience in both corporate and public accounting, with a strong emphasis on small- to medium-size businesses. Pamela is a CPA and received her bachelor of science in accounting and management from Columbia College. To learn more about Child Link, visit www.childlnk.org.

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