Insights and Recommendations for Collaboratives: Economic Viability

Economic Viability: A Collaborative’s financial health; sustainable efforts have a surplus or break even operating model that will carry the work forward in the long term.

Economic viability provides tangible evidence of a Collaborative’s likelihood to achieve sustainability over the long term. Economic viability is defined by a number of markers, including financial goal setting, revenue diversification, and revenue forecasting. When assessing Alliances, Community Wealth Partners identified a number of key areas where increased focus could maximize the probability of success as those Alliances transition beyond their financial relationship with AF4Q.

Collaboratives should make understanding their own financial data a top priority. Economic viability is not just about having more money with which to work. It’s about having the ability to gather, manage, and use financial data to make informed and strategic decisions about how to best manage and use resources. This sounds simple enough, but many Alliances had trouble extracting financial data specific to their efforts because of the way their finances were managed within host organizations. As a result, many Alliances struggled to understand the true costs of their services, faced challenges establishing financial goals, and were unable to use real-time data to predict and manage their revenue and expenses.

Collaboratives should diversify revenue streams. Revenue diversification is critical to ensuring that losing any one specific funding source does not pose a significant financial risk. At a macro level, Alliance revenue streams were fairly diverse. With the most recent fiscal year data collected from Alliances in 2013, philanthropic funding represented 52 percent of Alliance revenue, with 30 percent of that figure coming directly from AF4Q, 18 percent from outside grants, and 4 percent from contributions. The remainder of revenue came from earned income sources: 25 percent from membership dues and service fees, 21 percent from contracts, and 2 percent from registration fees and sponsorships. For the majority of the smaller Alliances, AF4Q funding made up more than half of their income. Given this reality, Alliances needed to evaluate their current revenue diversification and operational structure, identify potential areas of growth, and employ insights to focus on improving and monetizing their products and services.

Collaboratives should charge for services. Earned income creates a critical inflow of unrestricted dollars and indicates that stakeholders understand and value the services for which they are paying. While the smaller Alliances were dependent on philanthropic funding, large and medium-sized Alliances were able to grow their revenue through earned income strategies. Large Alliances did so primarily through contracts (approximately 50 percent of revenue), while medium Alliances focused on membership dues and service fees (approximately 30 percent of revenue). While the end products differed, these Alliances proved their ability to develop products and services tailored to their stakeholders’ needs. Pursuing and effectively delivering earned revenue required these Alliances to think creatively about the assets they have, embrace a sales and service culture, and take calculated risks. Their efforts resulted in unrestricted revenue and greater control over their financial future.