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What is Sustainability and Why Does It Matter to Charities?

Vu Le, founder of the blog Nonprofit with Balls, writes funny, insightful, and intelligent posts about the nonprofit community including this great article, Can We All Just Admit There Is No Such Thing as Nonprofit Sustainability, and more recently, Standardized Answers to the Sustainability Question, both of which I highly recommend reading. (I do wish it was called Nonprofits with Balls to be more inclusive.)

Like most things in the nonprofit community, the definition of the word sustainable varies widely depending on who you ask. As Vu Le indicates, funders are often the first to ask about a charity’s sustainability.  It can sometimes feel like foundations are following a philosophy similar to a stereotypical bank loan officer's — only willing to give money if the charity can show that it really doesn’t need the money. My definition of a sustainable charity is pretty simple:

  1. You have a diversified revenue stream so you are not too dependent on any one source of revenue.
  2.  It’s reasonable to assume that your revenue stream will remain consistent even if you lose a donor here or sponsor there. You have the infrastructure to replace this revenue.
  3. If one source of revenue dried up you would have enough revenue from other sources, or in the bank, to remain financially stable while you found a new replacement funding source. No employees would get laid off or go unpaid.
  4. The amount of work required to maintain your operations and your revenue allows for your staff and volunteers to maintain a good quality of life. Employees are not expected to work 60-hour work weeks to keep the doors open.

Basically, in my view, a charity is sustainable if it has a likely chance of staying in business
and effectively accomplishing its mission without burning out its best employees and volunteers in the process. As I said, pretty simple. A charity can have a sustainable business model without yet being sustainable.  That would mean that the charity has a realistic business plan that will help it attain all the above requirements. Why sustainability is important depends on your perspective:

  • As indicated, as an employee, you may worry if a charity can generate enough revenue consistently over the long-term to give you a sense of financial security and/or a balanced life outside of work.
  • As a prospective funder, you may worry that the charity won’t stay in business long enough to effectively use your grant or donation. It might be wiser to give this money to a charity that has a better chance of sticking around. For example, if a foundation gives money to a charity to buy computers and one year later the charity is out of business, the grant could be considered wasteful.
  • Even more critically, if a charity is providing life-changing services and is unsustainable, it may be irresponsible to support that charity. Let’s say a new charity was established to provide transition housing for foster children who age out of the system at 18. The future residents also have substance abuse or mental health issues that will be treated at the home. If the charity only has enough funding for six-months, what will happen to the
    teenagers if no long-term funding comes through? Will they be displaced mid-way through treatment and feeling especially vulnerable? (In this case, my solution might be for a donor to offer a matching grant to the charity; if the charity can raise $x amount from other organizations, then the donor will match that amount. It will help the charity raise more funds and support long-term viability.)

Foundations may ask about sustainability in their grant applications to ensure that a charity has given some strategic thought to long-term plans. They are not always expecting revolutionary answers.

I managed a grant program that distributed grants in increments of $10,000 or less. We asked about sustainability in our Request for Proposal (RFP) and had to rule out quite a few potential grantees because they had absolutely no plan on how to continue to raise money.  Like the example above, we were giving them money to buy something tangible and if they were out of business in a year, our grant was useless.

Answering questions about sustainability is a bit like answering some of the common
questions at a job interview. Is anyone really going to say that their biggest weakness is that they have a bad temper and can't meet deadlines?  Well, if you haven't interviewed many people, you may be surprised to hear what people will foolishly admit in a job interview.

Similarly, you might be surprised at how readily some charities will admit that they really don't have any plans for how to remain in business.

Although questions about sustainability can seem as mundane to charities who are well-prepared as standard job interview questions are to a  well-prepared job candidates, the answers can be shockingly revealing and critical to the people and organizations asking the questions.

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