COVID-19 has ravaged the world. Businesses now face an unprecedented challenge and are forced into business turnaround situations. We hear in the news about failing businesses, but what about the charities? Charities are businesses too and are in the same predicament as most. According to Third Sector, 1 in 10 charities are set to close within the next year due to Covid 19. In this post, I’m going to show you how to conduct a charity turnaround.
Treat The Charity As A Business
I have worked with many charities, non-profits and social enterprises. The one common trend I see is that when a charity is struggling, it’s because the leaders do not treat it as a business. But in a charity turnaround, that’s exactly what you need to do.
“But we’re not a business! We’re a charity!” they often exclaim.
This kind of thinking is dangerous to your survival. A charity is still an organisation like a normal business. The last time I checked, charities have bills and running costs; and the last time I checked, charities pay their bills with money. If your charity runs on air and well-wishes, then great. But if your charity (like everyone else) requires money to run, then you need to change your mindset and treat it like a business. Charities need money to survive. Charities ask for money donations – not hugs and kisses.
Understand the Financials of your Charity
The starting point in any charity turnaround (or business turnaround) is to know your numbers. By this, I mean you need to understand the financial numbers of your charity. This comes from understanding the 3 financial statements:
- Profit and Loss Statement (P&L)
- Cash Flow Statement
- Balance Sheet
Each statement has a purpose and tells you a story. It’s your job to understand what each one is telling you. Click the links to get a more basic knowledge of each statement. Check this post out to understand how to understand the economic health of your business and why it’s so important. In that, you’ll also find a series of super-useful next actions and key questions you need to ask your Finance Manager or Accountant.
Paint A Financial Picture
Once you’ve understood the numbers, you will have a financial picture. Now it’s time to paint a different financial picture.
- How many donations do you want to collect per month?
- How many donors do you want?
- When do you want to pay those debts off?
On and on it goes. By asking questions like the above, you begin to paint a financial picture of where you want to go as a charity.
Create Financial Goals
Now that you have a financial picture, it’s time to set some goals. Remember, the picture alone is a dream. Goals will make those dreams a reality.
I advocate using the goal-setting formula outlined in the book, “The 4 Disciplines of Execution” by the Franklin Covey Institute.
Move [X] to [Y] by [WHEN]
Check this post out for an in-depth look at how to set goals with practical examples that will be perfect for your charity turnaround.
The 3 Options For Charity Turnaround
In a business turnaround you have 3 options:
- Increase turnover (or donations)
- Decrease expenses
- Do both
When setting your financial goals, I would advocate you have goals that increase your donations and decrease your expenses.
If you want to know how to increase your donations then I would strongly recommend you check out John Haydon who is a master at non-profit marketing. His content will show you how to define your messages even more clearly, and how to use digital marketing to communicate, automate and collect donations. Fantastic resources and a great guy!
To decrease expenses, you will need to review your expenses section contained in the cash flow. Check this post out to see 3 expenses that you can cut quickly.
Charity Turnaround Strategy
It’s always quicker to decrease expenses than increase turnover. It’s more than likely that increasing your donations will take time. Therefore the quicker option to stabilise the ship is to cut expenses. Therefore I would start with cutting expenses to create as lean a model as possible, stabilise and then focus your efforts on increasing your donations.
Execute With Excellence
Most businesses do not have a strategy or planning problem; they have an execution problem. Think about it, how many plans have you created? What happened to them? The truth is that the plan isn’t the whole piece. You could have the best plan in the world, but if you don’t execute it, then it’s worthless. I’ve always believed that a business should have a decent, simple plan which is executed to a high standard.
It’s always good to talk and bounce ideas around. That’s why I’ve set up a remote Business Turnaround Consultancy arm to this blog. If you feel like you want to talk things through and have a coach who will cheer you on then contact me directly or click the banner below to book in a session with me.