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Aug 5, 2019

Measuring Nonprofit ROI

Sponsored Content provided by JC Lyle - Executive Director, Wilmington Area Rebuilding Ministry

Donations to nonprofits, by their very nature, provide a return on a community’s investment. In many cases, the return can be estimated in dollars.
 
NC WARM JC LYLEFor example, with the help of volunteers, WARM may spend $2,500 on the home of an older adult to build a wheelchair/walker ramp, install grab bars, and complete other accessibility upgrades. These fall prevention measures may enable the homeowner to remain safe and independent in their home for three years or longer. Falls can cause head, hip, or other serious injuries, requiring a costly emergency room visit and ultimately assisted care. The median annual cost of an assisted living facility in the Wilmington area (the highest in the state) is over $50,000. That $2,500 investment can save $150,000!
 
Savvy donors always ask nonprofit leaders to report back on the ROI, measured sometimes by dollars saved and always by impact in the world: homes rebuilt, acres conserved, children fed, patients seen.
 
I’ve observed four nonprofit investment approaches. If you are on a board or donate to a local charity, think about the characteristics you’ve observed.
 
Fixed
The organization is meeting the need for its services at its current capacity. Leaders have decided it is not necessary to grow. Maintenance, staffing, and other ongoing expenses are covered; investing in sophisticated technology, new/larger facilities, personnel, and other infrastructure is not needed.
 
Fearful
Many organizations cannot meet the demand for their services, but the leaders shy away from investments. They may look at a recommendation for a $2,000 database and think, “$2,000 could buy a lot of program supplies,” or assume donors don’t want to pay for indirect costs such as continuing education. They are afraid to make a mistake; so, they play it safe.
 
Foolish
Any investment decision requires a careful analysis of the expected benefits and risks. This becomes even more important when managing donated funds. Obviously, buying every shiny new toy or spending extravagantly on events and facilities can drain funds intended for the mission. This does not honor our donors or improve our service to the people who need us.
 
Fruitful
Investments in nonprofits have a high return when they build the capacity of the organization to fulfill its mission. Just as in the for-profit sector, the return can be measured in dollars. That $2,000 database may save $4,000 worth of staff administrative time over the next three years, leaving more resources for the program in the long run.
 
In the nonprofit sector, there is a second bottom line: How much more impact can we make? That continuing education may result in a stronger after school program or a more efficient building practice. Most donors expect charities to strive for excellence.  
 
At WARM our cost benefit analysis includes questions such as:

  1. How will this investment improve our services?
  2. How many more families can we serve?
  3. How will it enhance the volunteer experience and increase retention?
  4. How will it put us in a better position to attract and administer more funds?
Delivering a strong organizational ROI requires important investments in the nonprofit’s infrastructure, decisions that can be difficult to make. If you are not serving on a board of directors, consider reaching out to a charity you believe in. Nonprofit boards need shrewd businesspeople like you to help develop a wise investment strategy and ultimately do more good in the world.

JC Lyle has served as WARM’s Executive Director since January 2009. Under her leadership, WARM's annual revenue and productivity have more than quadrupled. Prior to working in the nonprofit sector, Lyle worked at McKim & Creed on subdivision design, rezoning and permitting throughout coastal North Carolina. Lyle earned her Master of Business Administration from UNCW's Cameron School of Business and has presented workshops on affordable housing issues and nonprofit management at state-level conferences. Lyle serves on the Planning Commission for the City of Wilmington and the North Carolina Housing Partnership, the board that oversees the state's housing trust fund. In 2012, Lyle was named Wilma Magazine's first Woman to Watch in the Nonprofit Category. In 2014, she accepted WARM's Coastal Entrepreneur Award in the Nonprofit Category, given by the Greater Wilmington Business Journal and UNCW’s Center for Innovation and Entrepreneurship. In 2018, the Association of Fundraising Professionals, Cape Fear Chapter named her Outstanding Fundraiser of the Year.

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