When it comes to non-dues sources of revenue, not all are worth the time, energy and effort. Organization leaders need to understand the total value of the revenue source, which means more than the return on investment; it also means looking at how much mission impact is perceived to be achieved by board members, staff, and members.
So, how can you measure the revenue source’s total value?
MEASURING IMPACT ON MISSION
When I first started at Michigan Society of Association Executives (MSAE), we took some time to put together a matrix to break down our programs and services into four quadrants. Looking at each program through the matrix lens allows organization leaders to get a sense of how much revenue is generated, the amount of risk undertaken by the organization and the degree of mission impact for each program and service.
There are many books that discuss the same principle. However, I used “Nonprofit Sustainability: Making Strategic Decisions for Financial Viability,” which walks through the steps and information necessary to create the matrix.
In order to construct the matrix, you need expense and revenue information. It is best to include staff time in the expenses for each program to get a true sense of the total cost. It is also necessary to have a mission impact measurement for each program. At MSAE, the impact on mission data was gathered through a survey that used Likert scales to assess each member’s perception. There was also an option to not rate the program or service if they had no experience with it. This allowed us to keep the ranking clean so a program’s weight was not lowered from people who had not attended or experienced it answering the survey.
MEASURING THE VALUE OF EACH NON-DUES SOURCE OF REVENUE
How to Read the Matrix
The Matrix Map is a model that visually shows how each business line contributes to the business model of the association.
The X-axis represents net profit or loss for each program while the Y-axis plots the mission impact* rating of each program.
The size of the circle represents the relative financial expense for the association and includes staff time expenses but does not include indirect costs such as mortgage, electricity, etc.
As more responses are gathered, some programs may shift on the matrix map.
*The mission impact rating was derived by using the Survey Monkey tool to gather the impact rating from 107 randomly selected members across each membership category and 6 CEO Circle members between November 19, 2018 and November 26, 2018. To date, 17 members have responded to the survey. Efforts will continue to gather more input from a larger percentage of members.
The matrix itself consists of four quadrants. Programs that fell into the lower left quadrant had low or no profit to the organization and a low impact on mission. Therefore, these programs don’t carry a lot of weight with members, and the organization money by providing them. The organization should discontinue or divest from these programs and services because they drain resources without providing mission value.
The lower right quadrant, on the other hand, shows the highly profitable but low impact programs. The lower right quadrant is referred to as the money quadrant and shows programs or services that don’t have a high mission impact but bring in a lot of revenue. This includes, for example, programs like a directory, which provide advertising revenue. This quadrant is also where sponsorships fall because there isn’t a high impact directly on the mission despite the high financial source for the organization. These in the lower right quadrant programs are important because the revenue can add to mission impact by subsidizing other programs.
The upper left quadrant is known as the heart quadrant, and it shows programs and services with a high mission impact but which barely break even or lose money for the organization. Programs here are those that members really love but are either hard to monetize or too expensive to get a good return on investment. Examples include community service projects that directly impact the organization’s mission.
Lastly, the upper right quadrant has high mission value coupled with high income. Programs that appear here are usually items such as educational courses or annual meetings in which members get really excited about attending and are willing and able to pay for them.
At any point in time, when we look at non-dues revenue, it’s effective to put programs and services into this kind of matrix because some non-dues revenues don’t bring in enough money to cover the expense, but the program or service helps the organization achieve its mission.
Some programs and services may seem like they bring in a little bit of money, but after analysis, in reality, the program is taking valuable staff time away from the focus of the mission. Organization leaders can use the matrix model to determine which programs and services move the organization forward.