Strong Financial Health Opens the Door to Collaborations with Other Nonprofits

There are many advantages to participating in joint ventures, coalitions, strategic alliances, or other types of collaborations with other like-minded nonprofit organizations. These types of formal and informal partnerships enable organizations to share programs, capabilities, and gain access to a wider array of members, constituents, and geographic regions. These opportunities multiply if your nonprofit has strong financial health.

To be a sustainable nonprofit, your organization must evolve and change to keep pace with the changing world. Your organization must always be looking to expand on mission delivery, advance your brand, and search for new ways to increase your footprint and service capacity. The status quo can be worse than shrinking operations, as it fosters complacency.

I believe that forming working relationships with other organizations is one of the most promising paths to enhance sustainability and ensure your organization stays relevant.

Yes, your organization will always have its own core programing, activities, and grants to manage and grow. But solely relying on your own expertise, capacity, and comfort areas will be limiting. Working and partnering with other organizations is usually a faster, more efficient, and safer path to expand your organization’s footprint. As a group you will be able to share knowledge and networks, increase capacity, expand programs and services, and spread risk.

Initial exploration into working arrangements with other organizations will be based on your organization’s mission, reputation, and past performance. These are the key drivers that attract interest. However, as the discussions move to the next due diligence level, the door will slam shut quickly if your organization is not in a healthy financial position.

Organizations that have strong financial health are more likely to be considered a low-risk partner. Trust and confidence will be higher. Also, you will be in better position to act as the lead organization for these joint efforts, handling most of the financial transactions while managing shared program efforts. There are advantages to being the lead organization. However, there will be additional responsibilities and risks that must be considered before taking on the lead organization role.

Begin by assessing your current financial health picture. How solid is your balance sheet? This is where financial health is most transparent. Do you have operating reserves? Is your current cash position strong enough to meet current liabilities? Do you have debt? The other participating organizations will be searching for answers to these questions.

If you are in a strong financial health position, that is great but still be prepared to explain in detail key elements of your balance sheet and how your organization works to maintain robust financial health.

If your organization is not in a very good financial position, do not despair. Identify where your organization is weak and show your plans to shore up your financial position. Include an explanation of how a new joint working agreement will help in the future. Remember to be fully transparent and offer as much financial information as possible on the front-end of discussions.

Planning Tip – Use the potential for joint ventures and similar collaborations with other nonprofits as motivation to protect and improve your financial health. Establish an operating reserve policy benchmark goal to maintain 6 to 12 months of operating reserves as the key performance indicator (KPI) of financial health for your balance sheet.

Setting a goal to expand horizons and opportunities for your organization by working with other nonprofits will open doors to new worlds and a brighter future while enhancing sustainability.