How do nonprofit leaders evaluate opportunities? In the last blog post on The Adaptable Nonprofit part of the post dealt with the question of how to think about piloting new programs. Clearly, how much time and money you spend evaluating opportunities should be in the right relationship to their potential scope and impact. That impact runs two ways: “what is the potential scope of social outcomes” (external) and “what is the potential impact on your organization” (staffing, finances, strategic direction etc.). Below is a very brief synopsis of the range of inquiry from simplest to full business plans and then two easy to use resources (tables) for you. First is an opportunity matrix for nonprofits – it uses red flag, green flag, neutral columns and enables nonprofit leaders to quickly generate dialogue and get a temperature check on an opportunity. The second table incorporates classic venture capital questions and mistakes into the same easy to use table format.
What should you have before you experiment? Staff proposing new ideas and projects should at a minimum provide (these will be developed further in the upcoming post on learning from clients and funders):
· Core benefit/core value proposition
· A positioning statement (for whom the product/service is targeted, the value they’ll derive, and how it is distinct-better than other existing offerings)
· A perceptual map or customer persona describing whom is to be served – whose needs will be met?
· Fill out the Opportunity Matrix table, Venture Capital table, or both
At the other end of the spectrum and depending on the scale of the intended project there should be a business plan with full financials and comprehensive cost allocations. (www.businessplanpro.com, https://nonprofitsassistancefund.org/resources/item/business-plan-for-nonprofits-social-enterprises)
Use the tables below to quickly discover how promising or risky your new venture may be and whether you want to invest more staff and leadership time into further discovery. You’ll be well on your way to a thoughtful (and time efficient) approach to piloting new programs or strategic directions. This initial pass via the tables will suggest further exploration or a quick change of direction.
Opportunity Name: xxx Opportunity Description: xxx
Opportunity Evaluation:
Category | Criterion | Red Flag | Neutral | Green Flag |
Financial | Can be pursued with limited financial resources? | |||
High expected financial returns (earned revenue or gifts)? | ||||
Low level of financial risk? | ||||
Constituents
Clients |
Solves a strong constituent/client need? | |||
Large target market? Enough people need this problem solved? | ||||
Easy for people to switch to our service? | ||||
Can we generate reliable revenue (earned and gift)? | ||||
Can we deliver at the right quality level? | ||||
Can we reach people with this need (awareness, distribution)? | ||||
Organization | Fit with our organizational structure? | |||
Fit with our culture and mission? | ||||
Fit with our strategy? | ||||
Fit with our core capabilities and competencies? | ||||
Competitors | Little competition (current and future)? | |||
Can we deliver with excellence – better than competitors? | ||||
Collaborators | Do we have the right collaborators? | |||
Context | Fit with broader environment (economic, legal, political, cultural, technological)? | |||
Experience | Similar to past successful/unsuccessful attempts? |
An even leaner approach is the Venture Capital Opportunity Matrix – this matrix provides another valuable lens on evaluating opportunities.
Social Sector parallels in italics
Category
|
Criterion
|
Red Flag | Neutral | Green Flag |
Management & Talent | Does management have the passion, execution skills and experience? | |||
Length of the product development plan. Social sector – will it take so long to launch that funders lose interest or market need changes? | ||||
Market & Service
Competition |
Is the product/service sufficiently unique to mitigate competitive pressures? | |||
Is the addressable market sufficiently large to justify the investment? Is there enough demonstrated need for the new program? | ||||
Market not yet ready for the product/service. Do constituents feel they have a problem or is it only our great idea? | ||||
Not enough product/service differentiation | ||||
Economics & Funding | Can you raise enough capital? Social sector – can you raise growth or capacity capital to support infrastructure and operations for this opportunity? | |||
Do the economics of the business/program support an attractive return on capital? Social sector – is there a strong ‘social return’ and a sustainable financial model? | ||||
Length of the sales cycle (cash flow issues). Social sector does it tie up more cash than it generates – maybe in the form of restricted grants? | ||||
Strategy | Does the investment fit with the strategy and scale of the venture firm? Social sector – does the project fit with your mission and current strategic direction? | |||
Intensity of the competitive response |