INSIDER IQ: New Revenue Done Right

Avoiding the "Fire, Ready, Aim" Approach to New Revenue
The economy is showing signs of recovery and many nonprofits are priming the pumps to expand into new, untapped revenue streams. But how do you do this smartly and strategically? Do you have the proper resources in place to launch a full-fledged pursuit? And once you win the prize, can you sustain it?

Before you flip the switch on new revenue pursuit, ask yourself these key questions:

1. Is this revenue stream truly worth pursuing?
A realistic forecast of revenue potential versus required expenses is essential. Double check the numbers and challenge whether the timeline to reach revenue goals is realistic and that the revenue numbers are attainable.

2. Is your organization “ready” to pursue a new revenue opportunity, program or product?
Proper planning and allocation of adequate resources must be in place to ensure the program launches and succeeds. Treat the project like a startup business to ensure it will reach its full potential.

3. Is there an “internal champion” in place to lead the charge from the idea stage through the execution stage?
Without follow through from a dedicated team or individual, a new revenue pursuit can devolve into an overly expensive “time suck”… or simply die on the vine.

4. Have you mapped out a comprehensive project timeline?
A well-thought out plan with key milestones mapping out how to move from concept to launch will keep the project on track.

5. Does your team have the right skills to help the organization scale to the next level and launch new programs?
Maintaining an organization requires different skills than scaling an organization – hiring or outsourcing these resources may be in order.

LISTEN UP: Straight Talk from Nonprofit Trendsetters

We asked Warren Tranquada, Vice President & CFO of New Jersey Performing Arts Center, to share his thoughts on the new revenue pursuit.

What are the key things to consider when deciding to launch a new revenue project?
The most important thing an organization should do upfront is to establish the criteria for success —especially with respect to mission. If an organization is not explicit upfront about the trade-offs it is willing to make, it cannot be successful.

The other key things to understand upfront are: the investment the organization is willing to make (not just capital, also human); and the tolerance that the organization has for risk. Realistic and clear expectations and limits are crucial foundations for any feasibility assessment or business plan.

How does your organization change when you shift into new revenue mode?
Organizational culture can be impacted by a significant new revenue source. This can be positive or negative, which again speaks to the need to set expectations. One of the more positive changes I have seen is when the introduction of modest earned income initiatives can transform constituents into customers. Customers feel ownership, and that is always a good thing.

Once the chase is on, what are the pitfalls and how do you avoid them?
One pitfall is underinvestment. New revenue sources take time to develop, and you need to be prepared for some short-term pain. Too many organizations budget no money for this ramp up, and then dump the business when it does not initially perform spectacularly. You need to give it a chance. At the same time, you need to know the early warning signs that the business is a true turkey. This comes from good business planning. Know what milestones have to be met, and monitor these closely.

Okay, say you win the revenue … what are your next steps?
Growth and replication.

Any other words of wisdom for those considering a new revenue pursuit?
Know what you are getting yourself into. While you can never predict exactly what will happen, you can prepare for the possible outcomes. Know how you will handle bad outcomes before you are in crisis mode.

Before joining NJPAC as Vice President and Chief Financial Officer, Warren Tranquada served as a partner at Aperio, a consulting firm that works with social sector organizations. He holds an MBA from Harvard Business School and is the co-author of “Social Sector Entrepreneurship and Innovation.”