* * *
Creating Value -- and Selling It
The active fund-raising push, Hilliard hopes, will help generate surplus. But he doesn't kid himself that donations alone will pave the path to permanent self-sufficiency. He and his staff are getting smarter about pricing and controlling costs, and Wyman's new chief financial officer, Brad Sharpe, aims for Wyman to generate "more income with margin by leveraging ourselves not only as providers but also as sellers or franchisers."
The Wyman team, now consisting of 23 full-time employees, continues to expand upon Fran Werner's lessons -- find value in what you do and unbundle your pro-ducts and services. Hilliard is discussing producing videotapes on Wyman's approach to conflict resolution. He plans to telemarket the videos to high school principals. There's talk of franchising Camp Caravan and of selling Wyman's program expertise to other camps. Hilliard carries a teams course in the trunk of his car so he's always prepared for impromptu test marketing. And Wyneken is looking into the possibility of a for-profit training and personnel-development division to serve corporations. Yet another group of community leaders, Wyman's Council for the 21st Century, has assembled, as Jim Miller says, to "put the acid test to our plans." The council -- 10 highly esteemed members of the St. Louis community -- will help Hilliard develop and fund those margin-driven projects, all of which share at least one important element: Wyman will be selling directly to the end user rather than to an intermediate party such as a social-service agency or a school district that relies on public funds.
It's a risky undertaking, but Hilliard is confident the past four years have prepared him to take Wyman into a more competitive environment. Earned revenues for 1994 grew to 60% of total revenues -- an enviable accomplishment among Wyman's peers. Hilliard and the board intend to increase that to 80% by 1997 while generating a 9% surplus, but first Wyman has to "slow or stop growth so we can do some limb trimming." After three years of double-digit revenue gains, Hilliard has set 1995 to be a "no growth" year. Sharpe is imposing efficiency throughout Wyman: he has negotiated longer no-interest terms with vendors as a way to conserve the camp's line of credit; by phoning delinquent customers after 30 days, he has dramatically cut aged accounts receivable; he actively manages cash reserves; and he's looking to integrate volunteers and contractors into operations.
Hilliard and his staff will apply the cardinal rule of competition: pick your fights. Wyman shouldn't compete with the Ramada Inn in the hospitality field, and it shouldn't compete with high-amenity summer camps for customers who want simple recreation and are able to pay for it. Wyman excels at prevention and education, and its competitive edge is its reputation as an industry leader in those fields. That, ultimately, is what Hilliard will take to market and what he believes will make Wyman self-sustaining. It's not standard operating procedure for your average nonprofit, but Hilliard is unapologetic. "We can manage ourselves with all the rigorous intensity of a business," he says. "It doesn't take a thing away from our mission."
VIVE LA DIFFÉRENCE
A nonprofit can run itself in a businesslike way, but there remain several critical distinctions between the for-profit and nonprofit worlds:
A nonprofit has no owner. "The assets of the organization are dedicated in perpetuity to charitable purposes," says Laura Kalick, director of nonprofit tax services for Coopers & Lybrand. There are no private shareholders, and the organization is governed by a board of directors or trustees who may not receive any individual benefit -- direct or indirect -- from the organization.
A nonprofit like the Wyman Center is set up for charitable purposes, and its IRS classification confers special tax-exempt status. Nonprofits are chartered by the states, which may also grant exemption from property, sales, use, and income taxes.
Nonprofits may generate profits (or "surplus"), but they may not distribute them. All the assets of a nonprofit must be dedicated to its exempt purposes. Kalick says, "You may give incentive compensation based on productivity, but you may not give compensation based on the profitability of the organization."
All nonprofits have mission statements, and the IRS forbids such organizations to engage in businesses unrelated to their charitable mission.
BY THE NUMBERS:
Wyman Center Operations ($ in thousands)
Sources of
Revenues '91 '92 '93 '94 '95*
Contributions $270 $302 $291 $344 $367
The United Way $280 $305 $308 $371 $381
Earned revenues $472 $638 $782 $1,111 $1,163
Total Revenues $1,022 $1,245 $1,381 $1,826 $1,911
Payroll $546 $619 $712 $942 $956
Surplus (Deficit) $14 $5 ($21) ($17) $0
Employees
Full-time 19 20 20 21 23
Part-time** 25 30 26 24 20
Clients 13,000 13,500 15,000 18,000 18,000
*Budget **Full-time equivalent
WHAT'S NEXT?
Slash and Burn?
Dave Hilliard must have had a premonition about the survival scramble that is likely to erupt in the nonprofit world should Congress have its way, and that foresight has given Wyman a head start. "We're going to see federal-government cutbacks to a lot of programs," says Virginia Hodgkinson, vice-president of research at Independent Sector, based in Washington, D.C., a nonprofit umbrella group supporting philanthropy and voluntary action. "It's particularly important for nonprofits not only to become more self-sustaining but also to diversify their sources of income. From the perspective of financial and strategic planning, they're going to have to be much more sophisticated, and contributors will be looking even more carefully to make sure services are effectively managed."
