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Mike Burns

About Mike

Five Questions Boards May Ask to Consider New Programs or Ventures

Over time communities and their needs change. To “keep up” a nonprofit must find new approaches and offerings. Toward this end and because they are the keepers of the nonprofit’s mission and resources, nonprofit boards will be presented, through the annual or strategic planning processes, new programs or ventures. What foAs a post-scripllows are five simple questions board members can ask to ensure that what is proposed has been vetted to help ensure success. First, here are the questions followed by a more in-depth description of each question and a case study to illustrate how these questions might be answered. The Detroit United Community Housing Coalition’s “Project Buy-Back” will serve as the subject for the case study.

Q. 1: What are the expected results from the proposed project?

Q.2: Who is the target audience for this project?

Q.3: Have the 5 P’s of the offering been identified?

Q.4: Are the income and expenses for this project clear?

Q.5: What are the risks and plan to ensure success against these risks?

Question 1: What are the expected results from the proposed project? Have these results been clearly outlined? Are the proposed results measureable, e.g., can you count them? Are the proposed results consistent with the nonprofit’s mission? These are the questions the results-focused board must ask to fulfill its duty of obedience (to the mission) and provide a reference point for future evaluation. A board should send staff back to the drawing boards for a project that is not results focused. A project that is inconsistent with or does not bring the organization closer toward achieving its mission should also be sent back for reconsideration. Revenue generating ventures in particular should first be evaluated based on how either the project itself or the proposed revenue that might be generated will contribute to mission.

Take for example the United Community Housing Coalition in Detroit which is dedicated to improving, preserving and expanding affordable housing opportunities for low-income Detroiters. The national housing foreclosure crisis has hit Detroit residents particularly hard as a result of the failure of the auto industry, which subsequently made it difficult for homeowners to pay their mortgages as, simultaneously, the values of houses plummeted. The foreclosure crisis has the real potential of significantly limiting the Coalition’s ability to achieve its mission and solutions are critical. So, this past fall the Coalition came up with the idea of helping some residents get back their properties through the County Treasurer’s online tax auction. The purchase prices would be far lower than the amounts owed pre-auction. Keeping residents in their homes and saving neighborhoods from further losses – mission possible with clear, measureable outcomes!

Question 2: Who is the target audience for this project? To be mission-consistent and results-focused, an effective project has a well-defined target audience: service beneficiary, customer, or consumer. A description of the target audience should include a complete analysis of audience needs and wants; a description of factors that affect needs and wants; and, an assessment of options or choices in addition to typical demographics and socio-economic characteristics. This target assessment should be defendable not based on assumptions but facts from either internal records or external primary and secondary sources.

Back to the Detroit Housing Coalition, the target audience was handily identified through the County tax delinquency list. This list enabled the Coalition to alert selected homeowners about the auction and help them set up repayment plans where possible or take the “chance” they could win their homes back at auction. Of the 500 homeowners on the list, 180 chose the auction route. Note that if a bid was successful, that bid would wipe out any tax delinquency. In this case then, the target audience is clearly identified and conversations with each, be it on-line or by phone or mail, can easily discern the level of interest and need as well as the alternatives these folks have available.

Question 3: Have the 5 P’s of the offering been identified? The 5 P’s are the parts of a marketing strategy that help define the service or product being offered to the target audience. In classic “Father of Marketing,” Phil Kotler language, the 5 P’s are product, price, place, promotion and position. The product strategy describes the tangible and intangible elements of what is being offered. Price describes actual cost, reflecting that cost is derived from the cost to produce or deliver an offering; the perceived value of the offering in relationship to alternative offerings; and, when desired, the amount of revenue desired as profit or surplus. Promotion is the communications strategy for ensuring the target audience is aware of the offering. A promotion strategy can include all or any combination of direct selling, paid advertising, public relations (free advertising) and promotion which is the distribution of items that helps an audience either become or remain aware of an offering. Position or value proposition, the 5th strategy, reflects the nonprofit’s decision about how it wants its target audience to view its offering in relation to alternative offerings, including the option of not selecting any offering. The position strategy affects the design of the other four strategies and helps a target audience determine “what’s in it for them.”

The Coalition’s marketing strategy begins with how it describes the product (1st “P”) offering tangibly and in terms of benefits. The biggest benefit of course is that previous homeowners get their physical properties back. Next and tied into price (2nd “P”), their property is conceivably affordable or more affordable than pre-foreclosure. Part of this affordability is also that the Coalition itself is helping finance the re-acquisition. The access (place or 3rd “P”) is achieved by the Coalition which facilitates the bidding via computer; arranges the acquisition financing; and, supports the returned homeowner to avoid future foreclosures. The Coalition likely used a direct or one-to-one approach (promotion and 4th “P”) to reach its target audience beginning of course with the list provided by the County Treasurer. It is also likely that many of the prospective re-purchasers already had a relationship, or at least a familiarity, with the Coalition so the Coalition’s positive position (the 5th “P”) in the minds of the community and the limited options facing these prospective buyers expedited trust-building.

Question 4: Are the income and expenses for this project clear? It’s probably not rocket science to figure that one major focus of a board regarding any new project is the economics. The first question is usually, “Will we lose any money?” Or, conversely, “How long before we can make money from this venture?” The loss of money is an appropriate concern but one which should be balanced with the mission and need importance of the project.

While the answers to the previous three questions would likely satisfy many board members as a “slam dunk” – “Why would we not want to do this?” – it is likely that the financing of the project should certainly raise some questions in the minds of the prudent and diligent board. There are probably two sets of costs. One is the basic operational costs that relate to organizing and executing the project including the outreach and administrative tasks, the technology for bidding and handling all the legal matters. Bigger of course is the acquisition costs which are somewhat of an unknown. But the Coalition will need reserves in order to back its auction bidding. And, in addition to the cost-side of this effort, there needs to be a plan for paying for the budget either through philanthropy or borrowing (from itself or others). The good news for the board was that the money used to acquire homes would in turn be structured as loans to the re-purchasers. This would largely offset much of the cost of the project.

Question 5: What are the risks and plans to ensure success against these risks? The final questions for the board: “What could go wrong with this project? And,”What are your plans if something does go wrong?“ Many of the risks will be associated with shifting demands, shifting economics, or internal management and operational challenges.

For the Coalition, a principal risk is the failure to acquire the funds to be used to facilitate acquisitions. What is the plan if there are no readily available funds? Another question:”What if many of these loans are not repaid?” After all, the re-purchasers failed to pay their first mortgages and taxes. Again, what is the plan to address this situation? I am sure there could be additional risks but as a prudent board member considering what appears to me to be a sound plan solving a problem I want solved, I don’t believe I would be looking for nor seeing too many other risks.

As a post-script to this case, the Coalition succeeded in supporting 149 residents in buying back their homes at a cost of only $194,000. One house with a $5,500 delinquency was repurchased for $500.

In conclusion, a strong project proposal will ask and answer all five questions and provide the board with the confidence that this is a well-researched and constructed endeavor that deserves the board’s approval.

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