To be innovative, you need to constantly “get on the balcony” to spot ongoing problems and pain points.
Seventeen years ago, I responded to an ad in the newspaper (!) and became the second employee at what was then Nonprofits Assistance Fund. Kate Barr was the other employee. We had $4 million in our loan pool, a couple chairs and early 2000 computers, and an amazing amount of energy and ideas about how to work with nonprofits to make them more effective.
This month, what is now Propel Nonprofits has deployed $200 million in loans to mission-driven organizations. Kate and I are still here, joined by nearly 30 coworkers. Today, Propel Nonprofits offers an entire range of support services for nonprofits. This did not happen by chance. There were many late nights and hard decisions, phenomenal client successes that put wind under our sails, and a diverse range of partners. We learned a lot from leaning on our support networks. Underlying all of this was a critical component: innovation.
The definition of innovation that seems most true to me comes from Nick Skillicorn at Idea to Value: “executing an idea which addresses a specific challenge and achieves value for both company and customer.” To be innovative, you need to constantly “get on the balcony” to spot ongoing problems and pain points. You need to understand your own mission and capacity well enough to find a creative response.
There have been a number of innovations along the way. Here are three that stand out, along with a key learning we took away from each:
Innovation: Created a training program
Why? We wanted to be sure we were getting loan dollars back so we could lend them back out to other nonprofits while also setting our existing clients up for success.
What made it innovative? Few people are going to come over to your office for hours to do a deep dive on cash flow and budgeting. We were naturally doing that as mission-driven lenders, but we needed to formalize the program to quantify that value and help fund that unique program offering. Creating a separate program also set that stage for that program to grow and evolve.
Lesson: When adding a new program, ask how it will make your nonprofit flywheel stronger. How will you be better able to carry out your mission as a result?
Innovation: Started offering back-end accounting services
Why? While we want our clients to know and own their finances, we always want them to have time to focus on what they do best: carrying out their mission. We found it didn’t make sense for all small nonprofits to have their own internal accountant, nor is that always feasible.
What made it innovative? No one else, to our knowledge, was doing this. We had clearly observed the need for nonprofit-specific accounting, but we needed to build our in-house expertise to respond. It was a win-win: clients could outsource accounting with a trusted partner, and we could diversify our own nonprofit business revenue and know that they were getting sound accounting advice with someone who was experienced with nonprofit accounting practices.
Lesson: Pay attention to common pain points and if no other solution exists, create one.
Innovation: Equity Builder Loan Program
Why? After years of making loans to arts organizations, especially those working in communities of color or in Greater Minnesota, we saw a familiar pattern (see previous lesson): artistic leaders were not able to be bold, visionary thinkers because they were trapped in short-term funding cycles.
What made it innovative? Operating grants are hard to come by, but always needed. The Equity Builder program uses program-related investments (PRIs) from some trusted funding partners to make loans, 20-40% of which are forgiven over their loan cycle if the organizations are also putting money into savings. Between the savings and forgivable loan, in 3 years, they’ll have operating reserves and most importantly, the beginnings of financial freedom to think bigger and take risks.
Lesson: Innovation is often built on relationships of trust and requires deep knowledge – technical, systemic, and personal. Do your homework, talk to your clients, and listen!
These were three points along our journey where we took a risk and said “yes.” However, sometimes innovation also means saying no – turning down opportunities that will pull you off course, deplete your resources, or jeopardize key partnerships.
There’s more to this story, and much to be learned from others. There’s still time to register to be part of this conversation at our 2018 Nonprofit Finance & Sustainability Conference on April 19. Register now and join us there – prices go up after April 12!