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The Business Challenges of Running a Nonprofit

Posted March 24, 2008 7:45 AM by Ted Jackson

There was a great article in the Wall Street Journal on March 20, 2008 highlighting the challenges that food banks are running into during this recession in the US. In today's environment, these food banks have a real business challenge on their hands. Demand is up, but supply is down. This demand and supply situation would make a for profit very rich, but it is extraordinarily challenging for a nonprofit.

In a company, surging demand and dwindling supply is a great opportunity to make money. It provides pricing power and allows an organization to make lots of money. Imagine Exxon's $40 Billion in profit based on surging demand for oil.

Food banks either give their product away or charge below market rates to families in need, so surging prices cause real problems. In simple terms, a food bank provides free or discounted food to people in need. These nonprofits rely on donations of money to purchase food and run the organization as well as donations of food and government assistance through programs related to food subsidies and food policies.

In Kris Maher's WSJ article (, he sites that food banks have seen an increase in demand of over 20% in the last year as low income families have been pinched by rising gas and utility costs. He also sites how government food subsidies have dropped by 80%, forcing food banks to purchase food, which is increased in price as well. All of this creates quite the challenge for food banks.

I'm sure that food banks are just one of the nonprofits that are feeling the challenges of rising costs while demand for their services are increasing as well. From my volunteer work with SOME in Washington, DC last year, I know that their challenge of finding affordable housing in the Washington area has been extremely challenging given the recent surge in home prices. Prices will have do drop even more than the recent mortgage crisis to help create low-income housing.

Each of these situations highlights the need of nonprofit organizations to focus clearly on their strategy and determine the key areas where they can make a difference. The Balanced Scorecard framework can help a nonprofit navigate these challenging times. With scarce resources and surging demand, tough decisions will have to be made. The BSC can provide that framework to make difficult decisions and stay true to your mission. Let us show you how you can leverage the BSC framework to help your organization.