How to Thrive In Hard Times

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These are the best of times for youth-serving nonprofits – and the worst.

On one hand, we’ve never had more public awareness about the value of mentoring, after-school programs and national service. On the other hand, the recession is crippling many youth-serving agencies and will put others out of business.

That makes this the right time to make fundamental changes in the way many youth-serving nonprofits operate. Perhaps the most important change of all is deciding what we are.

Many youth-serving nonprofits have long waffled between branding themselves primarily as social enterprises – businesses with the twist of having a social mission – and presenting themselves as charities. We cannot continue to have it both ways. More than ever, survival depends on deciding which of these we are.

A charitable organization can almost always count on a community to pass the collection plate. In the bad economy, agencies that emphasize their social mission have gotten back in close touch with the large numbers of people who tend to give a small amount on a regular basis. But those donors are aging into retirement, and many nonprofits have watched this happen without connecting to the younger generations.

As Gen X-ers and Gen Y-ers, the sons and daughters of the older generation want to be more involved with the causes they support, in new and different ways. Think about all those young leaders who pooled small contributions that contributed to a fortune for the Obama presidential campaign. Each person invests in the charitable organization personally, using technology (such as texting and online contributions) as a part of an affinity group experience.

We should use interactive technology to organize young donors into networks that open our nonprofits to wide participation. We have got to stop sending newsletters through snail mail, and start blogging, or even Twittering, instead. The goal should be to start dialogues in which one supporter contacts another to take action.

For example, the Friends of National Service website organized many young leaders – who had done service but did not know each other – into a powerful force that helped push the recent passage of the Serve America Act. How many of those who have been served by your nonprofit do not know each other and could contribute in major ways if they did?

Other youth-focused nonprofits flirt with the look and feel of a business, but never leap fully into profit-producing services. These organizations need to break with their charitable pasts and figure out what products can be sold to pay the costs of the youth services they provide. While many of these nonprofits give some attention to business concepts, few actually produce enough income to support their bottom lines fully. We should not be bashful about making money if it can pay the cost of activities and programs for youth.

Successful enterprises owned by nonprofits contribute to the local economy with survey services, family financial services, publishing and information products, and subcontracting to operate public sports and recreational programs. For example, the United Community Center of Milwaukee not only provides counseling but organizes concerts that celebrate culture, draw community participation and help pay the bills of the agency. The Search Institute arms community leaders who want to make changes for youth with an array of books and toolkits. Sales of those products help pay for research to understand better how communities help youth to thrive.

To survive the downturn, nonprofits need to choose one approach or the other. If you are going to be a charity, go full force to re-bond with donors and get rid of your side businesses that are limping along. If you are going to be a social enterprise, stop dabbling with the idea that donors will send checks when you overrun the budget, and instead secure investment capital that can take your enterprises to scale.

Tight times give us the opportunity to search our souls and decide what we want to be. Is your agency a charity or a social enterprise?

Answering that question now will shape your program for years to come. For far too long, even good nonprofits have overrun their financial projections on a wing and a prayer that some angel would swoop in, or that financial losses could be made up on the back end by running a side business. You need to match your budget to revenue.

From there, the key to success is to hug your donors closely, or leave them behind for investors.

Andy Munoz is vice president for the AED Center of Youth Development and a certified youth worker.