William Schmidt
Will Schmidt
6 min
lean startup methodology

How to Build a Lean Nonprofit During Any Stage of Its Lifecycle

Spend some time in the startup world and you’ll probably hear the mantra, “move fast and break things,” as made famous by Facebook. Essentially, it means that startups releasing tools, features, and updates should prioritize creation speed, even if the final product isn’t perfect. Any missteps along the way will be corrected.

This mentality allows for-profit companies to grow and scale with minimal staff and funding. Similarly, the same processes is applicable to nonprofits. However, some suggest the “move fast and break things” mantra be augmented for nonprofits to read: “move fast and help things.”

There are a lot of intersecting points between the startup and nonprofit worlds. To help your organization understand precisely what it shares in common with startups, and what key takeaways it can use from the space, this post explores the common ground and some lessons you might apply.

What Startups and Nonprofits Share in Common

Nonprofits and startup companies have a great deal in common. For example, they both adhere to a mission, raise funds, and factor in supply and demand.

As such, nonprofits and startups stand to gain a lot from applying key learnings across their industries. Before we dig into how to apply lessons learned from the startup world, it’s helpful to first understand the commonalities between the two. Brian Nansel of Auto-Rain Supply identifies three areas where this cross-pollination is most prominent.

Mission Driven Action

When startups run into difficult times, it’s their passion for their mission that propels them through to greener pastures. A natural side effect of their youth is the closeness to the company’s founding story—which often starts from a personal experience, frustration, want, or need.

Like startups, nonprofits turn to their mission for inspiration. Because their organization is tied to social impact, employees are often connected to their work on an emotional level. This emotional connection can strengthen their commitment to the organization’s mission.

Funding Equals Survival

Startups need funding to survive and reach a point where they become profitable. It’s common practice in the startup world to go through rounds of funding, from seed stage all the way to Series C and beyond.

Nonprofits also require funding from outside sources to keep their operations running. Instead of funding rounds though, nonprofits rely on fundraising campaigns throughout the year. The individual donor is as important to a nonprofit as an angel investor is to a startup. In fact, individual donors collectively make up 71 percent of total giving.

Supply and Demand

Ride-sharing startups, like Lyft and Uber, connect people who need a ride—and are willing to pay for it—with drivers who can provide it. There’s a demand for the ride, and the apps serve as middlemen that connect customers with the supply.

Similarly, nonprofits supply donors with their demands for societal change. By specializing in a specific cause, they reduce transaction costs for donors, granting anyone with time or a wallet the ability to involve themselves in social impact.

The Lean Startup Methodology

While it’s clear nonprofits and startups are alike in overall concept, the similarities also carry over into daily operations. As such, philosophies that work well for startups can be employed by your organization.

To understand what specific strategies nonprofits might take inspiration from and employ, we looked to the Lean Startup Methodology (LSM). Created by Eric Ries, this process identifies ways for entrepreneurs to start a company quickly and efficiently. Nonprofits looking to get started, scale, or iterate on ideas can reap the rewards of this methodology right alongside startups. Here’s how:

Eliminate Uncertainty

Startup companies typically haven’t nailed down a tailored management processes yet. To provide some sense or order, the LSM encourages entrepreneurs to continuously test their ideas, products, and visions. This provide some semblance of a foothold that can indicate if they’re heading in the right or wrong direction.

Key Takeaway for Your Nonprofit

Nonprofits don’t necessarily have a “product” like startup companies do. However, you can view your fundraising campaigns, content creation strategies, or social media promotions as products.

Under this lens, nonprofits, too, create under condition of uncertainty. It could be beneficial to test new iterations of campaigns with A/B testing, soft launches, and focus groups. That way, even when dealing with uncertain situations, you can have a foothold on how your “products” resonate with your support base.

Work Smarter, Not Harder

The LSM views a startup as an experiment looking for an answer to a question. The question isn’t if the product can be built or not. Rather, the question is how to build a sustainable business around the product.

The answer to the question is viewed as a first iteration of the product. If the first iteration is successful, it opens the door to build the product out further.

Key Takeaway for Your Nonprofit

Your nonprofit itself isn’t necessarily the experiment in this scenario. Instead, the experiment could be something more specific, like a new fundraising campaign. The question would be how it will sustain your nonprofit.

A first iteration of a fundraising campaign might begin with a small, internal soft launch to get feedback. Like the LSM, if this first iteration is successful you can begin expanding the scope of your next iteration—maybe you release it to 25 of your top supporters.

The goal could be to quickly build out a fundraising campaign that, eventually, you’re comfortable releasing to all your supporters. Throughout the process, you’ll get:

  • Early adoption from top supporters
  • Employee buy-in to the campaign
  • Confidence that your campaign has the potential to meet its goal

Develop an MVP

Central to the LSM is what Ries calls the “build-measure-learn feedback loop.” It complements the “Work Smarter, Not Harder” step of the process as your iterations build towards what entrepreneurs call a minimum viable product (MVP).

The feedback loop eventually leads to a point where the startup is confident enough in the base functionality of the product: the MVP. Once established, startups release this MVP to a wider audience that gives them feedback. This allows the startup to study the MVP and start solving problems around it as they continue to move forward towards a more finished product.

Key Takeaway for Your Nonprofit

Once you’re comfortable with the status of your fundraising campaign, consider your MVP ready. While it’s not time yet to release it to your entire network of supporters, you can feel confident sending it to a larger network of donors at this point.

Study and solve for any problems that come up with the campaign. For example, does your page design distract a lot of donors from learning about your fundraising cause? Ask for feedback and qualitative information to support any data you collect.

If done correctly, this part of the process will indicate if you’re moving in the right direction. Negative results will let you know if you need to pivot, make structural changes, or test new promotional strategies.

Validate Key Learnings

The LSM stresses validated learning as a metric of progress. It’s how you know you’re headed in the right direction when building something you don’t know will succeed or fail.

It’s easy to focus on the wrong metrics of success here, which might give you a false sense of progress. For example, “likes” on a Facebook post would typically be considered vanity metrics. While they indicate interest, which is great, they don’t always translate into monetary conversions.

Key Takeaway for Your Nonprofit

As you collect feedback, focus on data that proves you’re making progress. You may have 500 likes on a social media post, but how many conversions did it generate? By focusing on data points that are success indicators, you can take the right steps to optimize your campaign.

In the case of a Facebook post, you can dig deeper to examine click through rates from the post to your campaign page. You might also consider how many new followers a post nets you. All of this, and a whole lot more, can be tracked with social media tools like Buffer.

 

Whether it’s a social media promotion, a fundraising campaign, or new blog content, the LSM encourages you to get feedback before you release your final product. This results in more effective efforts that resonate with your intended audience, and ultimately raise more money for your cause. Keep in mind that your nonprofit can apply this advice at any stage in its lifecycle. You don’t have to be just starting out to be lean and efficient.

Image Credit: Jan Kraus


  • Brion Hurley

    I am applying the Lean Startup methodology to Recycling Advocates’s latest campaign, reducing disposable coffee cup usage. We only printed a small batch of materials for the coffee shops (our minimum viable product), to test out the message, look/feel, and quality of the product. We learned that some shops will want to make their own signs with their own branding (not use our materials), the window clings did not turn out the way we hoped (so we need to make revisions), and some materials they said were too large to fit on the table tops (not interested in them).

    We paid more per item for this small batch order, but the overall cost wasn’t as much, which was good for cash flow. If we had gone with a bulk discount and paid less per item, our overall cost would have been higher, and we would have had a lot of unused materials (which is an environmental waste), and we would have still needed to spend more to get exactly what we want. The feedback from the customer is the purpose of the MVP, and that has been valuable. We all have good ideas, but this approach helps nonprofits decide which ideas are the best.

    I would recommend the book “Lean Startups for Social Change: The Revolutionary Path to Big Impact” by Michel Gelobter, which expands on the Lean Startup book, but is focused on applying these ideas to nonprofits and mission driven organizations.

    Attached is a picture of our materials, one sign on the wall, and one table tent on the counter (that is too big for the tables)
    https://uploads.disquscdn.com/images/fcbe883caba6c4f40961399430acbdcae70443f8f8839c214087bca7070aa655.jpg

    • Will Schmidt

      That’s a great real world example of the LSM in action! Thanks for sharing, Brion. I’ve never read Gelobter’s book, but I’ll be sure to check it out.

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