As we discussed in the last day of class, Cost Structure pertains to both direct and indirect costs, and it is sometimes essential to show that you can differentiate between them. Often nonprofits receive funding “with strings attached” that dictate the strict purposes that the funds will serve. SCO’s need to know which components of the program are associated with the highest costs and determine if the cost structure is appropriate. (not all organizations are meant to be multi-million dollar entities.) To effectively manage your costs, be sure to quantify all the major components of your organization so you can better orchestrate the key components of your Cost Structure.
In assessing the sustainability of Cost Structures within the framework of the business model, we should reflect on the following questions & considerations:
People & Cost Structure
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- Does the cost structure provide sufficient return for the time staff (both salaried and volunteers).
- How does Earth Access place a value on the time and services of the staff and volunteers? Since nonprofits are inherently "nonprofit," consider alternative forms of expressions of gratitude to conserve funds.
- Determine the cost of one person participating in each activity at EarthAccess -- this will help will future evaluations of program profitability and success.
Planet & Cost Structure
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- Why is sustainable always likened with expensive?!?! Look at simplifying methods, and when appropriate refer to more old-world, traditional ways of doing things -- why by a fancy new tool when a good, old-fashioned stick will do the job?
- Always anticipate that there will be some area in which your organization is not 100% self-sustainable. Allocate funds to pay off your environmental debt through carbon offsets or philanthropic donations. (For example, incorporate a carbon offset "tax" into your employee package and clientele services).
- Be constantly researching innovative trends in green technology -- look for programs that offer discounts or donations to like-minded nonprofit organizations. Even if there is no direct exchange of goods & services, it may be beneficial to connect and establish potential future working relationships.
Profit & Cost Structure
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- Do we clearly understand which parts of our business model have the highest costs?
- Attract charitable contributions from those who share your cause; these may be receive in the form of in-kind contributions of volunteer time or contributed materials, thus reducing overhead costs.
- Consider a wider range of volunteers -- Did you know that baby boomers are retiring in the US at a rate of 10,000 per day. This means that the volunteer candidate pool is rapidly filling with skilled & experienced professionals! Nonprofits can gain a significant edge by taking advantage of the expedited rate of retirement among one of the country's most educated and accomplished generations. Engaging the skills of volunteers can significantly reduce overhead charges and redirect funding for activities that directly correspond with mission.
- Is our cost structure appropriate for our organization? Remember that not all org's are intended to be multi-million dollar entities -- remember that all nonprofits don't need to be poor, either. Find the appropriate budget for your organization.