While it is easy to idealize nonprofits as austere organizations that do not dirty their hands with boardroom wheelings and dealings, Jessica Ford, chief communications officer at the Arkansas Community Foundation in Little Rock, said the idea that nonprofits are separate from the world of business is one she would like to dispel.
Jessica Ford
“A nonprofit is a business,” she said. “I’d love to see a narrative change, really, in this topic because you can’t bifurcate nonprofit and for-profit when it comes to running a business.”
Nonprofits are a major component of the Arkansas economy, she said, adding that the state’s nonprofit sector generates more than $17 billion annually and employs almost 10 percent of the state’s workforce.
While nonprofit and for-profit businesses may have different kinds of revenue, she added, the same business principles apply to both when it comes to developing a business plan, handling cash flow, working efficiently, marketing effectively and managing staff.
She said she believes nonprofits that reinvest in themselves are the most long lasting, and she encouraged nonprofits to have a reserve of funds saved for a rainy day.
“You never know when a tornado or flood or shooting or pandemic is going to happen and you have to dig deep in your pockets to find resources,” she said.
While some donors may view low overhead as the mark of an effective nonprofit, that is not the case, she said, adding that operating expenses allow an organization to accomplish its mission. Marketing is one expense nonprofits often neglect, she added.
“Many nonprofits are hesitant to invest in marketing or to invest in fund development in that way because it feels like overhead, but it’s really one of those best practices in being able to have better program delivery because you can actually fund it,” she said. “You can’t have one without the other.”
Educating staff helps ensure nonprofits keep up with the latest trends, said Sherri Jones, president of the Arkansas chapter of the Association of Fundraising Professionals.
Sherri Jones
“Fundraising is ever evolving,” she said. “Just as technology is evolving across the nation in business, it is also evolving in the fundraising portion of the business, so there’s a lot of new technology in regard to digital fundraising.”
Most every nonprofit takes donations online, she said, and artificial intelligence can now be used to gauge a donor’s previous donation habits and modify the suggested donation amounts presented to each donor or encourage donors to make monthly commitments.
“If the nonprofit is not knowledgeable about technology and what’s coming up, they can actually be left behind when it comes to increasing their fundraising efforts and their donations coming in,” she said. “It’s going to impact, especially, smaller nonprofits.”
The AFP provides scholarships to nonprofits that may not have the funds to pay membership dues so the organizations can attend monthly education sessions hosted by the AFP, she added.
One of the most important ways nonprofits can ensure their financial well-being is to ensure they attract a diverse array of funding sources, including online donations, major gifts, grants and events, she said, adding that the COVID-19 pandemic highlighted the importance of diversified funding.
“A lot of nonprofits relied heavily on their events,” she said. “Well, when COVID hit, events couldn’t happen, and a lot of our nonprofits struggled during that time frame because they didn’t have a diversified portfolio.”
She added that she would like to see more workforce development specific to the nonprofit field, noting that while public service degrees have become more popular thanks to the University of Arkansas Clinton School of Public Service in Little Rock, nonprofit professionals often come from differing backgrounds.
“Nationwide, we’re going to have to do a better job of training fundraisers, recruiting individuals to go into this field to truly make a difference in our community because nonprofits are a huge need and a blessing to our communities, and if we don’t have them, our communities will struggle,” she said.
Jessica Clawson, executive director of United Way of Central Arkansas, said bringing in staff members and board members with business experience, including those from the private sector, can help fill in such knowledge gaps.
Jessica Clawson
“What I see, a lot of times, is new nonprofits are started from a place of passion, which is fantastic,” she said. “You have to have that, but they may or may not always have the business sense to go along with it, and so creating a board or an advisory board of people who do things really well in those areas, I would think, would be very important.”
A good understanding of the books is particularly important at United Way, she added.
“One of the things that is really important to me is understanding cash flow and how money goes in and how it comes out,” she said. “We operate as a funder and a provider of direct services, and so we really have to pay attention to our accounting and financial policy and procedure to make sure that we have a reserve and we can accommodate the outgo of money that we need to provide grants and things like that.”
Investing excess revenue in a way that generates additional income is key to those efforts, she said. She added that the organization has worked to diversify its income stream in recent years.
“When you think of United Way, probably, 20, 30, 40, 50-plus years ago, most of the funding came from what we call ‘workplace campaigns,’” she said. “That’s where we would go into large employers and basically tell them what we do as an organization, the organizations that we fund, the direct services that we provide, and they do a payroll deduction. As the years have gone on, industry’s changed and, for the most part, worldwide, that has gone down, and so we had to make a shift in revenue diversification.”
She credited the organization’s board and staff with managing the finances, adding that hiring the right people is important to a nonprofit’s success. In addition, United Way of Central Arkansas hires an outside firm to conduct its annual audit and handle its taxes. The organization completes an independent audit each year, the results of which are presented to board members and made public, and presents an annual report to donors in April.
“Anytime you are the steward of somebody else’s money, I think it is vital to make sure that they understand where their money’s going and what it’s doing and the impact that it’s making,” she said. “I don’t take a single dollar for granted, whether it’s a $50 gift or a $200,000 gift. I believe that we owe our donors and our stakeholders that level of transparency to be able to say, ‘Hey, this is exactly what your money did.’”
Connecting with the right people, both to help spearhead the organization and as supporters, is essential, she added.
“I think the key is being clear in your communication of your mission and finding your advocates and finding the right organizations and businesses and individuals that align with your mission and to support it from an advocacy standpoint and a financial standpoint,” she said.
CASE STUDY 1:
ARGENTA CONTEMPORARY THEATRE
Argenta Contemporary Theatre in North Little Rock is setting itself up for long-term success with a rebranding and a new academy space, said Alyson Courtney, director of development.
To provide more opportunities for performing arts education after the COVID-19 pandemic, the theater hired a director of education and partnered with the Arkansas Repertory Theatre in Little Rock to provide theater training to children. When waitlists for the programs began to climb, it became clear it was time to expand, she added.
Alyson Courtney
“That showed us that we need to grow,” she said. “The other big indicator was ticket sales. We continue to sell out of every show. We have to add shows. Oftentimes, we sell out before the production run begins. Our season passes tripled this year, so all of that shows significant reason for growth and expansion.”
Last month, the theater opened the Benson/McAdams Argenta Contemporary Theatre Academy. A small group of people committed to paying the academy’s rent and insurance for the next five years, Courtney said, adding that long-term commitments are part of her strategy for securing donations.
“Then you know you can count on it because it’s really hard to do a budget when you don’t know exactly what money’s going to come in or what donor might show up or what donor might disappear,” she said.
Furthermore, rather than touting the shows themselves, she emphasizes the theater’s impact on the community when securing donors, she said.
“They don’t ever have to see a show, but I need you to recognize the value that the theater brings to the economy and the vibrancy of a community, and if you recognize that, then you want to pour in because you know that it’s really helping everyone,” she said.
Changing the theater’s name from Argenta Community Theater to Argenta Contemporary Theatre was essential to attracting more funding, she added.
“With community theater comes a sometimes negative connotation,” she said. “Sometimes people, in their heads, believe community theater is a group of friends getting together, doing some theater wherever they can find a space. We have an amazing facility. We’re putting on high-quality productions at a semiprofessional level.”
Ticket sales help pay for productions, but they only cover a fraction of the cost of running the theater, she said. Since donations are a crucial part of the theater’s funding, the staff keeps donors in mind when making decisions, she added.
“Every quote we get, we know it’s not our money,” she said. “We’re spending somebody else’s money, and we need to make sure our donor fidelity stays at the forefront and our fiduciary responsibility is incredible and stays that way always.”
CASE STUDY 2:
ARKANSAS MUSEUM OF FINE ARTS
Another notable transformation in central Arkansas’ nonprofit arts landscape was that of the Arkansas Museum of Fine Arts in Little Rock, previously the Arkansas Arts Center, which began an extensive renovation in 2019 and recently finished the first year after its reopening with a balanced budget.
“Nonprofit business priorities are like any other industry. Maintaining a balanced budget and ending the fiscal year in the black is always top of mind,” said Victoria Ramirez, executive director. “Creating and keeping a supportive internal culture where every staff member is able to work to their highest potential is also a priority.”
Victoria Ramirez
Having an array of revenue streams is key to ensuring adequate funding, she said, adding that funding for the museum is provided by an endowment allocated annually by the city of Little Rock; contributions from individuals, corporations and grants; and proceeds from facility rental, catering, the museum’s gift shop, Park Grill, and ticketed programs and events.
“Having a strategic plan that guides our philanthropic work not only helps keep the current fiscal year’s budget balanced, but we can begin to establish a path for future growth,” she said. “It is important that nonprofits consider their mission, assets and how they uniquely support the community when creating a strategy and plan for fundraising.”
Nonprofits must be realistic with their budgets and watch out for the tendency to pursue unexpected opportunities that may stretch the organization beyond its means, she said. At the same time, she added, growth is essential, and higher operating costs, maintaining competitive salaries and the desire to continue increasing the organization’s impact necessitate budget increases.
Inside the Arkansas Museum of Fine Arts in Little Rock.
“Understanding one’s revenue streams and identifying opportunities to increase revenue is critical,” she said.
Being transparent with the budget helps curtail operating expenses, she said, adding that stakeholders and staff should at least have a high-level understanding of the fiscal year’s budget, including fixed costs.
“Transparency helps set expectations, highlights limitations and, hopefully, helps to identify areas where operations could work more efficiently,” she said. “For AMFA, a monthly review of all department expenses to date and projected through the end of the fiscal year provides an opportunity to recalibrate spending or, in some cases, increase spending for continued growth.”
Although its work touches on tourism and education, AMFA is ultimately a part of the service industry, she said, so it is important to create and maintain an environment where every guest feels welcome, comfortable and eager to return.
“While staying true to one’s mission and purpose is essential, change is inevitable,” she added. “Communities change, business practices change, and the needs and interests of stakeholders and constituents change. For AMFA, many aspects of our work are built upon ideas and initiatives that have been part of the museum for decades, but we have reimagined those ideas to better serve today’s audiences.”
FEATURE IMAGE TOP: The Argenta Contemporary Theatre in North Little Rock. (Photos provided)
