Financing good will: How charities are innovating to survive

Published: Monday, Oct. 1 2012 4:00 p.m. MDT

The innovations Singing City made, along with minimal funds from an endowment, allowed the group to weather the recession.

"I think there is a blurring in the line between for-profit and nonprofit anyway," Hughes said. "I see them converging, and the only thing that will be different is tax status."

Nelsen says entrepreneurship is the nature of nonprofits and can help them overcome financial struggles.

"Entrepreneurs are really good at seeing a problem and solving it," Nelsen said. "That is the kind of thinking that organizations have seen as an opportunity to rethink their business model — not to become more like a business, but to respond to market needs."

The old method of applying for grants, using those funds and repeating may not be enough anymore.

"Entrepreneurs say, 'When things change, you change,'" Nelsen said.

Helping bring the change

Because business is associated with cold decision-making, there may be resistance to change in the nonprofit community, said John Brady, chief operating officer of HigherNext.

Brady has previously worked for nonprofits like The College Board and Franklin Institute in Boston.

"I have found that there are many people in the nonprofit world who believe that you're only doing a public good if you are living month-to-month and hand-to-mouth," Brady said. "That isn't necessarily true."

Four out of every five nonprofit organizations in Utah work with budgets less than $100,000 while employing more than 5 percent of the state's workforce.

"At the beginning of the recession, corporate giving in Utah tanked," Nelsen said. "There is no doubt that the worst nonprofits hit were in rural areas. Our data has showed this consistently."

Beginning in 2012, 31 percent of organizations in Utah had less than 3 months of operating capital, according to the study.

Brady compared nonprofits to a family, saying that in order to be successful and serve the people in a home, breadwinners have to save and plan for the future.

"A nonprofit is the same way," Brady said. "There is no value in being impoverished in order to be home all the time. Ask any parent that can't make ends meet. They'd do anything to provide the things they want to provide. Nonprofits are the exact same way if they are run right, and they are thinking about their future."

Brady says that often nonprofits will choose to reinvent themselves when it's already too late, making it too costly to innovate.

The return of philanthropy

Though the recession has led many to quit giving, experts say that won't be a permanent problem.

Charitable contributions were up $298.42 billion last year, which is a 4 percent increase from 2010, according to a study for The Giving USA Foundation. However, giving is still lower than pre-recession levels when Americans were donating $314 billion in 2007.

"The belief is that the drop we're seeing is related to the economy and that people will come back and give more again," said Allan Luks, author of the book "The Healing Power of Doing Good" and founder of The Center for Nonprofit Leadership at Fordham University in New York. "America, along with Canada and England, has very high rates of philanthropy. The U.S. tends to lead."

Email: jferguson@desnews.com Twitter: joeyferguson

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