Financing good will: How charities are innovating to survive

On his first day as chief executive officer of Valley Services Inc., a nonprofit work placement program for disabled and needy persons, Jeremy Christensen fired eight people.

It was a tough decision, but the recession and a cutback in funding meant the organization was no longer able to provide those eight with temporary work.

"There's definitely been tears," Christensen, a 36-year-old social worker and Utah native, said in a phone interview. "There were times when I lost sleep and was up at night trying to figure out how to reorganize and make this work."

But, something changed at Valley Services that made their story a successful one.

Many organizations, like Valley Services, are abandoning old methods of financing, like grant writing and fundraising, and becoming self-sustaining by developing marketable products and services.

A struggle for funding

The number of charities and foundations in the U.S. has dropped by .4 percent to 1.6 million since 2009, according to the National Center for Charitable Statistics.

Nonprofits in Utah have dropped by 38 percent to 3,568 since 2009 as many are struggling to find finances for already struggling budgets, according to a study by The Community Foundation of Utah.

"One of the things nonprofits can do is understand how to generate revenue," Fraser Nelson, executive director of The Community Foundation of Utah, said.

Over the past three years, nonprofits like The Head Start Program and Valley Services have learned how to generate revenue by innovating the products and services they offer, Nelson said.

Finding the solution

When the recession hit, many companies cut back on jobs that Valley Services offered, such as janitorial and painting, causing the group to nearly close its doors in 2009. In two years, 50 people receiving temporary work were laid off.

After introducing new offerings, like grounds work for Salt Lake Community College and event support for the City of Salt Lake, Valley Services is on track to raise its revenue this year by 69 percent to $5.4 million from $3.2 million in 2009.

The nonprofit more than doubled its workforce and brought back 40 percent of those who were originally laid off.

Christensen says the success is in the innovations.

"This is really big," said Christensen, who is married with two children. "A lot of nonprofits are talking about it now especially."

Nonprofits are evolving beyond simple fund seeking into organizations providing community service with revenue streams rather than donations, Christensen said.

The Special Olympics of Utah was able to raise its grants from $65,000 to $132,000 for the 2013 school year by focusing efforts on the organization's unified sports program, said Amy Hansen, CEO of the Special Olympics of Utah. The program integrates intellectually disabled athletes with those who are not in order to create a more accepting environment in high schools in the state.

A changing landscape

Philadelphia-based Singing City, which maintains a 100-person volunteer choir and offers instruction services to elementary schools that have cut music budgets, has also learned to find revenue through innovation.

The group created an online rental service for sheet music and has started selling CDs and T-shirts at concerts.

"Nonprofits are going to be much more businesslike," said Scott Hughes, Singing City's office manager who has served on multiple grant panels. "I think, in the future, organizations will be providing services that people will be willing to pay for."