EMH Insights

Four Ways Non-profits Can Increase Their Competitive Advantage

When most people think of competition, they think of the private sector. Family businesses, large corporations, and nascent start-ups all have to compete for a limited customer base. In the not-for-profit space, competition is not typically considered as much. One organization tackling a complex social issue does not (seemingly) limit the ability of other non-profits to do the same. Yet just as companies must constantly innovate to maintain their competitive edge, non-profits competing for a limited amount of financial support from philanthropic donors must also maintain a distinct competitive advantage. Any non-profit should specifically focus on the following four areas to define its purpose and enhance its competitive advantage.

1.Articulate the Need: Donors want to invest in non-profits that meet serious needs. To give donors a clear understanding of why it is deserving of a grant, any non-profit should clearly communicate what issues it is trying to solve, why those issues are pertinent, and how it intends to solve them. If you manage a non-profit, ask your staff, board of directors, and members of the community what they perceive your purpose to be. If your answers are not generally congruent with one another, then you are not effectively articulating the issues you exist to solve.

2.Avoid Mission Creep: Once you have defined the specific problem you exist to solve, let it be the motivating force behind everything your organization does. Serious social issues, especially those that vaguely align with a non-profit’s mission, can tempt a non-profit to bite off more than it can chew. Too much ambition can cloud an organization’s focus, spread its resources too thin, and ultimately reduce its effectiveness. It is critical for any non-profit to first understand why it exists, and what needs it is best suited to address. Any path that an organization then pursues should be focused, mission-driven, and benefit the target audience. In order to remain disciplined, seek out grants that are focused on mitigating issues that are clearly aligned with your mission. Reaching for grant money (for an issue that your organization may not be best suited to solve) can distract your organization from staying true to its purpose.

3.Measure Impact: Private-sector investors want to see a return on their investment. Similarly, donors ultimately want to see a social return on their philanthropic investments. Organizations that measure the social impact of their programs and operations will naturally serve as the most attractive options for philanthropic agents looking to steer their dollars towards the highest social return on investment. Put in place comprehensive metrics so that donors, the community, and staff can measure the organization’s efficacy in fulfilling its purpose.

4.Focus on Financial Sustainability: Virtually every non-profit is, in one form or another, heavily dependent on grants for survival. In order to keep the financial pipeline flowing, a non-profit should diversify its revenue streams by creating a commercial source of revenue. Many non-profits, such as Reconcile New Orleans with Café Reconcile, have operations that both increase revenue and add as an additional programming outlet for the target market. Such additional branches increase an organization’s impact on the community and help ensure financial sustainability.

Non-profits tackle some of society’s most pressing issues that otherwise might be left unaddressed. They are indispensable to our communities, and it is crucial that society continues to support them. Organizations looking to position themselves for grants and other philanthropic donations can follow these four steps to stand out from the competition, increase operational effectiveness, and ensure long-term sustainability.