Entries For: September 2007
2007-09-25
Minimize costs, maximize flexibility
A wise businessman recently reminded me of one of the cardinal rules of building a successful company: keep your fixed costs low and allow your variable costs to react to the needs of your clientele. In boom times, you can easily expand your business to meet all your customers’ needs. And in lean times, you can contract your costs to fit the volume of services you are performing. While your net profit will fluctuate with the economy, your profit margin won’t depend on high volume and thus will remain relatively steady.
I wonder why we don’t hear more about this principle in the non-profit world. In the non-profit world, we tend to treat “overhead costs” (fundraising costs and administrative costs) as relatively fixed costs. We tend live in a mindset that says “first we raise the money for our staff’s salaries, our office building, our technology costs, etc, then anything we raise above that fixed amount will go to our programs and services.” This mindset is exemplified by the fact that most small nonprofits have extremely high overhead costs (averaging above 40%), and average non-profit overhead proportions decrease with organizational size. Clearly, the “profit margin” (percentage of total budget going to programs) is dependent on the volume of “business” (services) they are performing.
Clearly, non-profits should get more creative about the way they structure their business – especially small non-profits who don’t have the luxury of depending on high-volume. Why do we organize ourselves in such a way that our overhead costs are treated as fixed costs? Why can’t we make overhead costs proportionately variable with the amount of services that the organization is offering at any point in time, and thus naturally expand in times when programs are expanding, and easily contract in times when programs are contracting?
Don’t get me wrong – it’s not a simple task. But with internet technology and the intellectual capacity that social entrepreneurs are bringing to the industry, I think we can make a lot of progress. At FORGE, we are working on a just such a new way of structuring our work. I can’t tell you too much now – give me a couple of weeks – but I’m happy to say that it's something that will not only make business school professors proud, but something that will also transform the quality and efficiency of our work and maximize our positive impact on the communities in which we work. Stay tuned…
2007-09-04
My Greatest Struggle
As social entreprenuers, is it possible to find balance while our heads are always under water?
I awoke with a start at 5:45am this morning, heart pounding. I was out of town for the long weekend on a trip to spread the ashes of a close family member who recently passed away. For three days, I had no internet access or cell phone access. For three days, I didn’t work at all.
Yesterday evening, I finally returned home after driving through the night. Exhausted from the travelling and the emotional weekend, I had only the energy to get organized and to star the dozens of emails that had piled up in my inbox in need of reply. This morning I’m feeling the pain of how far behind I’ve gotten.
I don’t remember the last time I went three full days without working at all. For my fiance Nick and I, there is no distinction between weekends and weekdays, daytime hours and evening hours – they are all working hours to us. Though this schedule can be personally draining, perhaps the hardest part about it is finding time for our loved ones, our families. Because of this, the two weeks of vacation that we’ve taken together in the past two years have been with our parents to make sure that we spend what available time we have with them. And still, our vacations have demanded that we can spend at least a few hours working per day to keep up with our responsibilities.
As you can imagine, this leaves little time to spend alone or as a couple. Considering it all, I think Nick and I have done remarkably well. We work side by side, day in and day out. Though we’ve come close, we have yet to strangle eachother. Very different in nature yet very similar in philosophy, we compliment eachother well and that reflects in the quality of our work.
Still, we both long for a time when we can enjoy each other and our lives for an evening (maybe more?), leaving the Blackberries at home. This is the struggle that entreprenuers and leaders round the world go through – finding balance and time for those you love. I’ve always found it ironic that we as social entreprenuers work so hard to allow the spirit of life to open in others, yet often find the demands of our work are slowly driving down that spirit in ourselves.
Balance is what we must seek. If we hope to be able to give, we must spare ourselves the time to cultivate and strengthen that life-enhancing spirit within ourselves.
After we get through our inboxes, that is…
- Kjerstin
