Nonprofits must consider the costs of a commercial transformation and how to handle them. There is a potential to create a short-term or long-term impact on the nonprofit's charitable mission goals while your organization is trying to establish new revenue streams and business opportunities. Some funds may have to be diverted to these organizational activities with the understanding that future revenues will increase and benefit the nonprofit's overall mission.
Many nonprofits struggle with costs before undergoing any changes, so a commercial transformation can highlight problem areas and bring them to the surface. For example, some nonprofits barely survive from quarter to quarter and lack a clear understanding of their actual costs. Others don't evaluate which programs are financially successful and how to improve them while reducing costs. When nonprofits feel the constant pressure of fundraising and paperwork, they can neglect to look at their real costs. Evaluating every dollar of a nonprofit's costs is the key to having a successful transformation.
Examining the true costs of a Commercial Transformation requires data. Nonprofits may keep good records of donor contributions and spending, but commercial transformations require more information. The costs of administrative tasks, software, hardware, apps, and other programs must be examined. Every aspect of the organization that costs money has to be evaluated to discover if it's possible to save money.
One area that may create some cost savings during a commercial transformation is nurturing existing business partnerships instead of developing new ones. It's often easier to work on expanding a partnership with a for-profit organization that already works with your organization and leads to lower costs.
Nonprofits must also think about spend management, which is often a major challenge for organizations. Spend management focuses on supplier relationships and all the purchases your nonprofit makes, so every dollar is counted. When examining the spend management, it's crucial to look at both the operating budget, which includes programs and operating costs and the capital campaigns. Having the right tools can help nonprofits control their spending better, which leads to more money being directed toward their missions.