Transcript Episode 167 – Stop Spending Money on These Six Things on The Prosperous Nonprofit

[00:00:00] Stephanie Skryzowski: Welcome to the prosperous nonprofit, the podcast for leaders who are building financially sustainable and impactful nonprofits and changing the world. I’m Stephanie Skrzewski, a chief financial officer and founder and CEO of 100 degrees consulting. My personal mission is to empower leaders to better understand their numbers, to grow their impact and their income.

On this show, we talk to people who are leading the nonprofit sector in new ways. Innovative, disruptive, and entrepreneurial ways, creating organizations that fuel their lives, their hearts, and their communities. Let’s dive in.

Hey everybody. Welcome back to the Prosperous Nonprofit. I’m excited to be here with you today as I always am, and maybe I have like a hot take for you. I don’t know if these are going to be hot takes, but today we are talking about what nonprofits [00:01:00] need to stop wasting money on. All right, what do we need to stop wasting money on?

So the first thing I got a whole list for you, y’all, I have a whole list for you. Yeah, before we go into it, you know, this is exactly what I like to do when I’m working with a nonprofit. I’m looking at how they’re spending their money and listen, not all expenses are bad, right? We are not talking about this because we are trying to get expenses as low as possible.

That’s not what we’re doing here, but what we are doing is trying to figure out how can we reallocate resources so that. We are using them as effectively as possible. And so one way to do that is to stop spending money on a bunch of things. Okay. So the first thing that we want to stop spending money on are unproductive programs or initiatives and, or maybe, maybe, big asterisk here, [00:02:00] Not profitable programs or initiatives.

Okay. So let’s go back to the first thing I said, unproductive programs or initiatives. So a lot of times I have seen organizations continuing to execute legacy programs, programs that have been around for a long time, but they are no longer having the impact or the results that they once had, but they’re continuing to do them for some reason or another, right?

This is the way that we’ve always done it. Kind of mentality. And so, however, organizations over time grow and shift and change and priorities change and the strategic vision even sometimes changes. Actually, I was just talking with an organization who has recently adopted a brand new strategic plan with a brand new priority.

And so that means that They are having to sunset a lot of existing programs have been around for a long time. And while that can be difficult, it’s also really important for them to do so they can focus [00:03:00] on their new priority. So instead of continuing to spend money on areas that are not aligned with their strategic focus, they’re stopping spending money on that.

Right? So the other thing I mentioned was unprofitable programs or initiatives. Now listen. I know that we are nonprofits, right? And we are not existing to make a profit per se. However, I have worked with an organization before who is seeing that constantly, they had one program that was consistently underfunded and That meant that it was draining resources from, um, their unrestricted funds in order to cover this.

And it was also just not having the impact that they wanted it to have. So it wasn’t just that it was not profitable. And again, when I say profitable, I just mean that like, do we have revenue to match our expenses? And if we don’t, then we’re likely running a deficit on that program and we’re having to pull funds from elsewhere.

And so if we [00:04:00] have an unprofitable program where we just don’t have the revenue stream to keep up with it, we may need to make a decision and say, listen, do we need to cut if, if it’s also not having an impact, do we need to cut this program and, you know, find another way to have the impact that we want to have?

Okay. So that’s the first thing I want you all to stop spending money on is unproductive or maybe unprofitable programs. The second thing I want you to stop spending money on is unproductive. Unfocused marketing and branding efforts. Y’all, this is where I feel like shiny object syndrome comes in, right?

We’re online. We’re looking at everybody else out there. I’m like, Oh, well, this nonprofit just did this really cool marketing campaign with such and such celebrity. And they ran all these Facebook ads and they did this and they did that. So let’s do that too. Well, first of all, you do not know if that is going to work for you.

And so we don’t want to just chase the shiny object and do what everybody else is doing [00:05:00] because it seems like that’s the right thing to do, right? We need to stop spending our money on unfocused marketing and branding stuff that we don’t know if it’s going to work for us. We don’t have a strategy behind it, but maybe we saw somebody else do it or we read somewhere that this is what all nonprofits should be doing for marketing in 2024 and then we’re just following suit, right?

We need to spend our money on things that we know. Or that we have a pretty strong idea are going to serve our organization well, right? We need to make smart, strategic investments and not chase the shiny objects. Okay. Number three, inefficient technology. Okay. We got to stop spending money on inefficient technology.

And I mean getting the latest, you know, donor CRM and spending, you know, tens of thousands of dollars. for a consultant to set it up for you only to realize that actually this is probably not really what we need and it’s not going to [00:06:00] talk to or connect with any of the other platforms that we’re using.

And so now we have to build this like third party extension to connect everything together and it just becomes this tangled up web of messiness, messy technology that then we’re going to probably have to pay for again in a couple of years and just like unravel the whole thing. So we really don’t want to do that.

Right. We really want to make sure that we are not investing in inefficient technology. So making sure that we’re only purchasing software that we know that we’re going to use, that we know is going to work for us and connect with other pieces of software that we’re already using. And also there’s this sort of balance here, right?

Because I always believe that we should set ourselves up for success. So today for the organization that we’re going to be five years from now, right? Let’s not put a whole new system in place and just need to replace it when we grow in 365 days, [00:07:00] right? That’s not efficient. We really need to be forward thinking and also at the same time, we need to balance that with not taking on too much technology, right?

Let’s be realistic about what we need right now. And let’s be realistic about the organization that we’re going to be in five years or, you know, I was going to say, or 10 years, but I think 10 years with technology is like way too long, a time horizon to be thinking about at this point. So let’s think about who we are today and who we’re going to be in five years and make sure that we are not sort of over Soft wearing ourselves beyond that.

Right. I think we just, we get excited and we’re like, Oh yeah, we can use this feature and that feature. And then it just becomes way too much that we don’t actually need right now. And we probably won’t need for like eight years. So that’s the third thing. I want us to stop wasting money on is inefficient technology.

Right? So the next thing I want us to stop [00:08:00] wasting money on is the Excessive fundraising expenses. Now, hear me out. Do not turn off your podcast player right now, because what I’m talking about is this. So I was talking to an organization who had an annual event that they hosted every single year. I don’t even remember what kind of event it was.

If it was a gala or a golf tournament or more of like a community event, it doesn’t matter. But the point So they spent a couple hundred thousand dollars on this event every single year, a couple hundred thousand dollars went out the door, not even including all of the staff time that went into that. If you added the staff time, it was probably, you know, a few tens of thousands of dollars even more.

So like not a small sum of money to put on this event. And um, there were definitely benefits, right? It, they brought the community together and their supporters together, I think in a fun way. But when all is said [00:09:00] and done, they made like 30, 000 from the event. So they walked away with 30 grand. And this is an organization that was maybe like a 10 million organization.

So 30, 000, while not a small sum of money, also seems like a pretty, uh, Um, and so when a new CEO came on board, they were like, why are we doing this? This is a lot of work. This is a lot of effort, a lot of costs for. a pretty low return. And so they started thinking about ways that they could generate that 30, 000 in a much less expensive way.

And I think they, you know, wrote a couple grants that were really strategically aligned with their work and they got one of them and boom, there’s your 30 grand, right? So they kind of proved it to themselves. Oh yeah, we can easily raise this money in a much more streamlined way than, putting on a 200, 000 plus event.

And so I am not [00:10:00] saying don’t do events. I am not saying don’t spend money on fundraising. I am saying to think about this, right? Think about what is going in, what resources are going in versus what is the outcome or what is the impact, right? And this impact for this event could have been that like, Well, it was a, you know, donor bring a friend event and they were able to, you know, get 150 new donors from that event alone.

Okay. Well, maybe that is worth the investment then. Right. But if you’re thinking about some activity that you’re doing. Think about that. Maybe there’s not a monetary ROI or maybe I hope there is at least at least a little bit, but I want you to think about that. And so what I want us to stop spending money on is sort of unanalyzed fundraising expenses, right?

I don’t want to just do things because this is the way that we’ve always done it. I’ve done them. I want to do things because we know that we’re going to get the return that we are aiming for. So think about that. Let’s stop spending [00:11:00] money on excessive fundraising expenses that are unanalyzed. And y’all do not come at me for saying, Stephanie said we shouldn’t spend money on fundraising because that is not what I’m saying.

Y’all know the overhead myth is just that it is a myth.

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And the last thing, maybe second to last, maybe second to last. Okay. The second to last thing I want us to stop spending money on are inflated compensation. Um, we got to pay our people and we need to pay our people, not just a living wage, but a thriving wage. And I got that from, um, Dr. Mark Scott who works at the OSHI foundation here in Buffalo, New York.

He always says that we need to do better than a living wage. We need to pay people a thriving wage. And I could not agree more. You all, our nonprofit leaders are doing incredible work and we are often, y’all are often so underpaid. Um, and, and there are, I have, I’ve worked with a few organizations where I’ve come in and looked at some of the executive salaries and just been like, Ooh, that seems very high compared to the size of the organization and the scope of work that this person is responsible [00:13:00] for.

And while I, again, I don’t see that a ton with our clients, I know that it’s been a Prevalent in the sector where there are excessive executive salaries and they’re just not proportionate to the size and scope of the organization. And so I want us to stop doing this, right? Let’s stop. Um, paying our people extraordinary wages that are so far beyond the norms of, um, not just our sector, right?

We need to raise the norms of our sector, but so far beyond what the scope of their work entails. Um, and again, I’m thinking of just a couple examples that I have seen, um, with our clients where the executive salary is just so far, um, were outpaced the size of the organization. So what can we do instead?

Well, one thing I really like to do is do an executive compensation review. And y’all know, this is a question on the 990, that tax return asks you if you are analyzing your executive compensation. And so I [00:14:00] hope that we are checking. Yes. And I hope that you actually are right. So GuideStar, you all know, has all nonprofits 990s on there.

That’s a great source of information for, Executive compensation that you can go pull similar organizations to you doing similar work, a similar size and a similar geographic area and see what other nonprofits are paying, right? And then use that to determine what is the 50th percentile of these sample organizations?

What is the 75th percentile and see where, where you fall at your organization. And if you’re a finance person, you can certainly help your, your team put together this sort of analysis. This is something that I do for a few of our clients every single year is put together an executive compensation analysis using peer data so that they can really see, ok well where do we fall when it.

We’re looking at organizations of similar revenue and expense and asset size. Where do our salaries fall in, you know, in line with that. And again, you know, we don’t want to [00:15:00] bring ourselves down to sort of the lowest common denominator. So I’m not in any way whatsoever advocating for lowering salaries.

Y’all nonprofit leaders certainly deserve to be paid a thriving wage, like I said, but I will say I have seen some organizations paying the Um, salary that sort of far exceeds what I would expect to see for an organization of that size and scope. So let’s stop spending money on unnecessarily high executive compensation.

Now do not come at me saying, Stephanie said we shouldn’t pay our nonprofit leaders. No, no, no. That’s not what I’m saying. When I do an episode on what you all should be spending money on, paying your people is going to be number one. So you can mark my words. That will absolutely be number one. Okay. And the last thing that I want to add, the last thing that we need to stop wasting money on is unnecessary either board meeting or travel expenses.

So I have [00:16:00] even sort of encountered this in my own company, right? I’ve gone to a lot of conferences and I’ve spoken at a lot of conferences and I’ve really spent some time, especially this year, thinking about. Okay. What is the best, highest, most strategic use of my time and our resources when it comes to travel?

Right? So, rather than going to every single conference where I’ve been invited to speak or every single conference that seems like it would be a good fit for us, we’ve been a lot more Selective and strategic about which conferences, which events really are aligned with our goals for this year, right?

And so I’ve already said no to a couple of speaking opportunities this year, because as much as I would love to go and, um, support the conference organizers and just see people that I, you know, that I know I really need to be focused and strategic and think about my own goals. And so again, in the [00:17:00] past, we spent a lot of money on travel going to things that maybe weren’t as aligned as they could be.

And so if that’s your organization, if y’all are like at every single conference, I love that for you. And also maybe there’s ways that you could be more strategic about how you’re spending your time and resources. So it’s aligned with your highest and best priorities. And so, yeah, I, if we don’t need to try, I think travel is super important.

I think going to conferences is super important. I think making connections is super important, but sometimes again, we just kind of get into this habit of like, well, I’ve always gone to that conference. Yeah. But what’d you really get out of it? Right. So I think just thinking about that and again, being much more intentional, um, I think, You know, will really help.

So that’s it. So what did we talk about? We talked about unproductive or unprofitable programs. We talked about inefficient technology, unfocused marketing. We talked about excessive fundraising or sort of not strategic [00:18:00] fundraising. We talked about, um, high compensation, Like unnecessarily high compensation and we talked about ineffective travel expenses.

So think about this, think about a lot of like how have we always done it and maybe there’s a way that we can shift things around that are going to be more effective, more cost efficient. Um, and again, do not go out there saying that Stephanie says we can’t spend money or Stephanie saying we have to, we have to cut expenses because that’s not what I’m saying.

I’m saying we need to be more, much more strategic. with what we are spending money on. All right, y’all go forth. Stop wasting money. As always, you know where to find me. Thank you so much for listening and we’ll see you next time. Before you go, I just want to thank you for being here. To access our show notes and bonus content, visit 100degreespodcast.

com. That’s 100degreespodcast. com and I’ll see you next [00:19:00] time.