How We Serve Our Clients: Financial Strategy
Hello Tangelo Tree Community!
We hope you all are finding resiliency in your communities in these uncertain times. We hope that these newsletters will help you find tools that help you navigate these turbulent waters.
Use financial forecasting to act (and adapt) strategically
Welcome back to the final installment in our three-part series on connecting Organizational Strategy, Financial Strategy, and Multi-Year Financial Projections.
Organizational Strategy
Mission and Vision
Values
Differentiating Strengths
Strategic Priorities
Financial Strategy
What is our optimal income mix?
What is our most effective use of resources?
Multi-Year Financial Projections
Identify income and expense drivers
Connect with different strategic pathways
After reviewing the four questions from our last post, you may have a clearer idea of your nonprofit’s financial strategy when it comes to revenue streams. This is important to your organization’s success and sustainability, but you’re still going to have to ride the waves and adapt. We understand that in the context of 2025, you may feel that you are not finding any respite from the ups and downs of your organization’s finances.
This is where multi-year financial projections come in. Just as an implementation plan brings your organization’s strategic framework to life, multi-year financial projections enhance your financial strategy by enabling informed choices in real time. This will also allow you an opportunity to do a risk assessment for your organization while planning your multi-year financial projections. We use this risk assessment tool for many of our clients!
Multi-Year Financial Projections
Our team at Tangelo Tree Consulting has helped dozens of organizations build multi-year financial projections using custom-built tools to support strategic financial thinking and decision making.
Three Approaches to Financial Forecasting
All financial forecasting is built on a set of reasonable assumptions, but the approach can vary. We have observed and utilized three common approaches:
Incremental: Using assumptions about what low, medium, and high performance could look like, this approach offers an accessible way to explore the limits of possibility (e.g., “what if in-person events revenue grows 5% each year over the next three years?”)
Scenario-based: Building in more detail about more than one distinct strategic option, this approach tests very different possibilities (e.g., “what if we discontinue in-person events entirely?” or more relevantly in 2025, “What if we lose federal funding?”)
Layered: Defining a cascading set of assumptions and overlaying them relative to one another, this approach forecasts the impact of interrelated activities over time (e.g., playing out what strategy your organization may take if you lose Federal funding, but in-person events revenue grow 5% each year over the next three years).
The takeaway is that there are several different ways to design for financial forecasting. It’s not just a technical exercise but rather depends on building a logical set of assumptions that will be relevant to your organizational and financial strategies.
Our goal for our customized multi-year financial projections tool is that it ultimately becomes YOUR tool, and that in working together we’ve helped you build the capacity to adapt it for use over the long-term. We know we’ve been successful when we hear that a client used the tool in a meeting to answer staff or board members’ “what if” questions in real time.
Before disembarking from this three-part cruise through financial strategy, there’s just one thing we’d like to reiterate from our first post: always start with organizational strategy. Take care not to rush into building financial models or projections without defining your organization’s strategic direction. When you are faced with emergent financial issues, it’s tempting to jump right into modeling. But the questions you ask about critical drivers of cost and revenue, as well as how you ask them, will vary a great deal depending on your strategy foundations. Organizational strategy, financial strategy, and multi-year financial projections can be mutually informative, and strategy should always lead the way.
In Community,
Tangelo Tree Consulting
