My friend Mike and I sat down for lunch. He is raising money for his non-profit. Mike may be in ministry, but he is an entrepreneur through and through. He is innovative, resourceful, a visionary and a leader who attracts great talent. But there has always been an issue.
He was just about to begin telling me his new idea and vision when I asked, “Will you ever achieve sustainability?”
I asked, “Why did you respond that way?”
He said, “I knew you were going to ask that question, and I don’t have an answer.”
I said, “Over the years I have supported you because I like you and the work you do. But I see a troubling trend. You want to help people but not charge them for it.
“Yet the people you serve have money and rave about what you do for them. If you are providing a valuable service then they should pay, and you and your staff should make enough money doing this to provide for your families. This is sustainability.”
I continued, “If the people you serve don’t pay or don’t pay enough, you will never know the value of your service. Free services followed by contributions on the back end does not create sustainability. You must achieve sustainability or fundraise forever.”
He said, “But they don’t know my ministry or how impactful the program is that I offer until they attend.”
“This is a marketing problem every entrepreneur must conquer to succeed.” I said. “You cannot continue to raise money on a service resulting in satisfied clients and continue losses.
“If this is the model, you will eventually exhaust the donors who support you today and always be in search of new donors. Perpetual fundraising is not a plan to create sustainability. I recommend you plan your ministry differently starting now.”
Then he said, “I am a ministry guy. I don’t know how to make money. I just don’t think that way.”
I finished by saying, “You can’t say that. You are not living on the street. That means you figured out how to make enough money to cover your expenses at home. Why not apply the same principles at work?”
A business is any activity or enterprise entered into for profit.
Rick Page, a legendary sales trainer, wrote a book to salesmen called Hope Is Not a Strategy. I am sure an investor in early-stage ventures will someday write a similar book, Perpetual Fundraising Does Not Create Sustainability.
You must generate enough sales to become sustainable. If you never cross this divide, you are in perpetual fundraising mode, and this is not sustainable. Here is what sustainability looks like. You generate enough sales to satisfy these three expense categories.
1. You cover your fixed expenses.
2. You pay your employees a livable wage.
3. You pay yourself a livable wage.
Use these constraints to plan your business. If you do this, you will create a sustainable business. A business which can continue into perpetuity, assuming you never leave these constraints behind in the planning process.
Once your business is supporting itself, you are challenged with how to grow it profitably. This is a higher challenge than how to stay in business.
As we finished our lunch, Mike said, “I would like you to meet with me and my board chairman to discuss sustainability, what it means, and how we might get there.”
We are meeting on October 12th. I’ll tell you how it goes.