If you've ever worked in retail, you're familiar with the drill of taking inventory: The store closes early, and the employees hunker down and count the merchandise.
Taking inventory is the process of counting and valuing what's in stock. Although time-consuming, it has many benefits:
- It flags issues before they become larger problems
- It provides an explanation for bottom-line results
- It creates a benchmark
- And it helps you decide whether or not to invest in additional stock before expending resources to buy more.
What do retail practices have to do with nonprofit leadership and revenue?
As nonprofit leaders and trustees, we should "take stock" of our organization's revenue on a regular basis. Doing so in a thoughtful, deliberate way allows us to avoid the risk of "buying more" - that is, pursuing new opportunities - before "selling" what we already have.
Several years ago, I developed a tool for doing just that. Imagine a tool that allows you to look at performance trends of all your revenue streams at once over a five-year period. The Revenue Inventory allows us to see and understand both missed opportunities and growth opportunities through the lens of past performance.
I promise, you will be astounded with what you find. No matter how rigorous an organization's reporting is, the Revenue Inventory never fails to produce real and previously unidentified revenue opportunities. Equally important, it has kept many an organization from marching down the "road to hell" - however well-intentioned - toward shiny, new revenue opportunities that don't deliver.
A powerful example
If you're not yet sold, let me share a powerful example from one recent nonprofit client that serves special-needs children and their families. Stakeholder feedback suggested a "public mandate" to serve families who could not afford to be served, but the organization lacked the resources to provide those services. They had some earned income experience (education programs sold to social workers and families) and wanted to launch more to build unrestricted revenue to help fund their mandate. After completing the Revenue Inventory, here's what we found:
- Net revenue from education programs was actually negative, and participation was waning.
- Annual fund, conference, and gala revenue had all grown substantially each year, for five years, and all were delivering significant net revenue.
- However, retention within every single one of the above areas was abysmal - the vast majority of participants/donors were participating only once despite high levels of satisfaction and program quality.
The Revenue Inventory "gem of a finding" was this: The nonprofit was leaving money on the table! By refocusing on one action, retention through relationship management, the organization had the opportunity to radically increase unrestricted revenue in areas where it had already demonstrated consistent, sustained success, without introducing a single new program!
The Revenue Inventory process provides ample opportunity to explore new opportunities as well. I am only suggesting that we consider "new" in the context of what's in the larder already.
NANCY OSGOOD is founder and president of The Osgood Group, a management consulting firm that helps nonprofit organizations and socially focused businesses improve performance, effectiveness, and sustainability. Her work across diverse industries and functions falls into two broad categories: revenue generation (earned and contributed) and large-scale planning and restructuring to support profitable growth.
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