[00:00:00] Tommy Thomas: For the past six months or so I’ve been asking our guests the question “If there was a nonprofit version of Shark Tank and you were on the panel of potential early-stage investors, what questions would you need to have answered before you’d make an investment?” Well, again, it’s just a fun question to ask that has turned into some great information that I believe people who are thinking of starting a nonprofit would find useful. The first force you’ll hear is Kristen McClave from Episode 81 – Her Leadership Journey from Johnson and Johnson to Cardone Industries and Beyond.
[00:00:38] Christin McClave: Oh, that’s a fun question. I think first of all I would really want to understand the leader’s background. The team, the person, on Shark Tank, they usually have one other person standing with them. And the Sharks are very interested in where they came from, what their experiences are, how the two or the three of them got together, and the dynamic of them working together and what skills maybe one brings to the table, the other one, fills in the gaps. I’d like to really understand that and know, that there’s some experience in them building an organization. I think the other piece to that is really the passion, the drive. What is the problem or the issue the founder or the co-founders are trying to solve and what’s driving that?
And is that passion or is that issue really going to still be driving them in five years or 10 years? Or is it more of a short-term thing? The other piece, and I think this probably comes from my experience on nonprofit boards that are probably larger than this would be, really understanding the percentage of the budget that would actually be going to the work, the problem solving, the issue resolution, and what percentage of the budget would really be going to administration and or SG&A or overhead, however you want to say it.
That may not be important for everybody, all investors, but for me it’s the piece that I enjoy digging into from a financial perspective and from an accountability perspective with nonprofits that I either work with or talk to and just understanding, are they managing that equation or that ratio.
And also as they get larger, they will certainly have donors, investors, fundraising questions around that in particular. And I think the third thing is I’d like to know, who is mentoring them? How do they have support built around them?
Maybe they’re an early-stage company, they probably don’t have a board yet. But I think in the nonprofit context, it’s really important to know those things and to make sure there are people that they’ve built into their feedback process. Maybe it’s just a monthly advisor call that they have with maybe an advisor or a few advisors who meet with them on a regular basis. Because the challenge with a nonprofit, is really thinking through your revenue source.
If your revenue is not coming from a product or a service, it’s coming from the fundraising donation side of things. You’ve really got to build out some people in your network who can help you strategize about that and become really good at that.
And I’ll say just from personal experience, that’s part of why I haven’t taken on a leadership role in a nonprofit yet in my career because I feel like you have to feel called to the issue or the problem at hand. If you’re going to be in a senior role of a not-for-profit organization, you’ve really got to have a drive and a passion for that cause. And, number two, you’ve got to really understand the revenue source is very different in the nonprofit space. And you really have to think about, okay, we’re raising money for this cause rather than, hey, this product has this gross margin, it’s a whole different mindset shift.
And maybe someday I will, but for right now I’m in the for-profit space. But I love supporting and being a mentor and advisor in the nonprofit space and supporting them as much as I can.
[00:04:37] Tommy Thomas: Next up is Caryn Ryan from Episode 84 – Her Leadership Journey from BP Amoco to World Vision to Missionwell.
[00:04:49] Caryn Ryan: This is interesting, but really Tommy, I don’t think it’s any different for a for-profit than for a non-profit organization. So you’re always asking do you have a good vision? And a really big and important question is, do you have the resources? And that’s in terms of money but it’s also in terms of the network of people to support you making steps towards your vision and making things happen.
And then do you have the drive? Do you feel called for this? How do you demonstrate that? How do you demonstrate that you have the call and that you have the drive? Are you a persister? One thing that will happen for every new organization is just tons of obstacles and problems. They’re nonstop.
And so, you have to have that ability to persist and to say, look, I see this obstacle. Am I going to go over it, under it or around it? But for sure I’m going to go around it or get through this. And so, you need to have that kind of foundational trait characteristic. I think the difference really between a for-profit and non-profit is in where you get the money from.
The Shark Tank for the for-profit might be from investors or a bank. Whereas the Shark Tank for a nonprofit might be from stakeholders, donors, grantors. So You have to make sure that the business plan reflects that. But you still have to have the money and you still have to have the people.
And the sense of call might be different too. I think if you’re working in a for-profit, you may have a vision around some new product or service. In the nonprofit world, your call may be even more deeply embedded. Especially if it’s a religious calling. It may be something that’s very right tied or connected to your faith.
It doesn’t matter how deeply connected it is to your faith. If you don’t have the same things that a for-profit needs your chances of being successful fall. Now, God can always come in and intervene, if you’re going to do your part in it, you need the same things that a for-profit does.
[00:06:54] Tommy Thomas: Episode 100 was a milestone for the podcast. In the beginning I probably wondered if I would ever get that far. Here’s Rich Stearns, the President Emeritus of World Vision US – An Inauspicious Leadership Journey Part Two.
[00:07:11] Rich Stearns: The very first question that a Shark Tank guy would ask if you came with a new product is how is this product different from every other product that’s already out in the market? In other words, nobody needs another cola drink, Coca Cola, Pepsi Cola, RC Cola.
There’s plenty of cola drinks out there. So, if your big idea is I’m going to do my own cola drink, the first question is why? So with a nonprofit, for example, I’ve seen young people that want to start up a new World Vision. I want to help the poor in Africa. And so, I’m going to start my own non-profit organization to help them. And my question is why would you do that? Because World Vision is a 3.2 billion organization helping the poor around the world. Compassion is one and a half billion dollars helping the poor around the world. Samaritan’s Purse is a billion-dollar organization.
So what are you doing that they’re not doing? Why would I give my money to you instead of an established, successful nonprofit that’s doing that work? And, a good example of a positive answer to that would be the International Justice Mission. My friend, Gary Haugen, who started it about 27 years ago now, I think, but he looked around and he said, look, there’s a lot of organizations that are feeding the hungry and bringing clean water to the poor and doing microfinance. I don’t see any organizations that are helping the poor with their legal problems, protecting them from corrupt police departments and representing them in court when they’re falsely accused of something or getting them out of bonded labor in India by using the court system.
So Gary started International Justice Mission to focus on justice and legal issues. He could have called it “lawyers without borders” if he wanted to, because essentially, he hires a lot of attorneys that go around the world and they work through the legal systems to help people who are being oppressed in various ways.
So, the first question to ask is, why would I give to your charity? What is unique about it? And why wouldn’t you just partner up with somebody that’s already doing this work? If there are nonprofits that are doing it, the next thing you look at is the leader’s vision and motivation, right?
If there’s a powerful leader with a powerful vision and capabilities do you believe that they, just like you’d look at a startup CEO, do they have the right vision? That’s the other thing. Because it takes a lot of elbow grease to start up a nonprofit.
[00:09:39] Tommy Thomas: From Episode 115 Terri Esau – His Journey from Being Known As The Jingle King Of Minneapolis to Philanthropeneur.
[00:09:55] Terry Esau: First of all, whatever you’re pitching, it has to solve a problem and there has to be a resource to help solve that problem. Like for us, it was like, here’s the problem. Kids in America are unhealthy, they’re obese, there’s poverty, so they can’t afford a bicycle. Can help solve some of their health issues, not just physical health issues, but mental health issues, right?
I call my bike my carbon fiber therapist because, you’re a cyclist. It’s like I get on my bike, and I go for a ride. I could be having a bad day, but by the time I get done with my ride, all that stress has just been washed away.
So I’m Shark Tank. I think you’d have to go, what’s the problem? What’s the solution? And then on top of that you have to go, what’s your strategy to bring the solution to the problem? What are the logistics? What are the resources that you need? People who give money to causes, you really have to sell them on the fact that you are going to change the world in some small way. At least in the nonprofit world.
In the for profit world, then you have to prove to them that you can make your money back on this investment. For us, we say, yeah, you’re not making money back on us, but you should feel really good about what you’re doing to change the lives of children.
[00:11:38] Tommy Thomas: From Episode 88 – Lisa Trevino Cummins, Her Leadership Journey from Bank of America to Urban Strategies Part Two.
[00:11:49] Lisa Cummins: I think the question I would ask is what is your employee turnover? And because I have found nonprofits come and go and employee turnover helps me understand what your commitment is, what your ability is to lead, what your consistency is with your values.
Because if you’re not consistent, employees won’t stay long. Maybe you can explain them once or twice, but if you have an ongoing record of employees that are leaving, then there’s a problem there. The other thing I would ask is a lot of nonprofits talk about partners.
Let’s say, describe the continuum of partnership with these organizations. When you say your partner is this because you dropped off a leaflet at their door. Sometimes that’s okay. Depends on what the goal is or is this talking about someone who you know their name, right?
You know their name and you know their story and so you’re trying to get at it in a deeper way. Those kinds of things. Yeah, I think those are a couple of questions I would ask. I would also ask how well, and this is important, some people will say this is a political thing and it’s not.
How well does your organization reflect the communities you’re serving? Because if it doesn’t, that means there’s probably a sense of a pejorative type of approach that is not going to be that is less what could be, and it’ll result in less than results than what could be.
Does that make sense?
[00:13:33] Tommy Thomas: And last, but certainly not least, from Episode 109 John Somerville – His Leadership Journey from Marketing Executive with General Mills to Chief Financial Officer At The University Of Northwestern St. Paul.
[00:13:49] John Sommerville: I think the first question is, what need do you believe exists that your ministry or organization will serve? And how is what you’re doing, how will that serve that need? Because if there’s a true need I think many things follow from that. And if you have something unique that will really help meet that need, then the organization needs to exist.
So I think those are big questions. And the other thing that I often ask is, who else is doing this? What I find is that there are people who are pioneers who do something for the very first time, and we write books about those people, but often what we need is I found more often that the people that are innovators they’re just being novel without actually being effective and so it’s important to understand the need, be able to meet the need, and then also give examples of how that works.
You may have a unique spin on it, but the core of it needs to be channeled into an area that others have been successful in the past.
[00:14:51] Tommy Thomas: Next week is Christmas. And in keeping with the tradition, I followed for the past two years, I’ve interviewed someone from the music industry. This year, our guest is David Tolley. David is an amazing music, composer and arranger, and a tenured professor at Delaware State University. Part of David’s story is that a big part of his career was launched from an inauspicious and some might say accidental appearance on the Johnny Carson Show. Join us next week to hear the rest of David’s story.
Links and Resources
The Perfect Search – What every board needs to know about hiring their next CEO
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