Countless nonprofit organizations are stuck on the treadmill of financial survival. Most of their energy is spent trying to make payroll at the end of each month—which means less time is spent maximizing their impact. Does that sound familiar to you? For five years Kathleen Janus traveled the country to find out how successful organizations like Teach for America, City Year, and Charity: Water broke through their barriers. She conducted studies and interviewed 200 social entrepreneurs. She documented their secrets to success and wrote down the five patterns that got them there. Soon, a playbook was created. In this episode, Kathleen talks about her new book, Social Startup Success: How the Best Nonprofits Launch, Scale Up and Make a Difference. She is a lawyer, lecturer at Stanford, and founder of Spark. Kathleen Janus Reading List The Happy, Healthy Nonprofit: Strategies for Impact without Burnout by Beth Kanter and Aliza Sherman Kathleen Janus Show Notes Kathleen Janus grew up in Napa, California and began volunteering at a very early age Her parents sat on many nonprofit Boards She noticed early on how nonprofits struggled to survive financially Kathleen in her twenties got together with her college friends and started SPARK to support gender equality They organized a fundraising event in San Francisco and raised $5,000 to help women in Rwanda $5,000 seemed like a lot of money at the time SPARK doubled its revenue every few months Kathleen was a practicing lawyer at the time They were able to hire an executive director when they hit a certain size The organization hit a wall When Kiva went on Oprah, they raised $11 million overnight Of the 300,000 nonprofits in the US, ⅔ of them raise less than $500,000 per year There is a desert of failed pilot nonprofits because they were unable to sustain themselves A nonprofit that raises $2 million per year has likely hit financial sustainability Organizations that scaled quickly first went into a quiet phase where they tested different strategies to get proof of concept “It’s about improving the model as you grow.” “Innovation becomes a part of your organization’s DNA.” Wishbone was started by a school teacher who asked her low-income students to write essays about their passions. She forwarded those essays to family and friends to raise a few thousand dollars to give these kids summer experiences. She updated the donors and decided to scale. Wishbone now allows students to raise money on their online platform “Impact measurement is absolutely critical.” Measuring impact allows an organization to collect data and figure out if a program is working “It’s not just about proving your program is working. It’s about improving the program. 75% of the nonprofits surveyed collected data. But only 6% of them felt they made “good use” of their data. An organization needs to figure out what indicators to measure, such as attendance rates of a scholarship recipient; feedback from students’ mentors, etc. Such data gave confidence to donors and can lead to seed capital Some randomized control trials can cost six figures Very few nonprofits carry out randomized control trials early on You can give incentives to survey participants (including control participants), like gift cards Many nonprofits test earned income programs. Hot Bread Kitchen provides job training for low-income women looking to enter the food industry. They created a cafe and also sold their produce to local markets Hot Bread Kitchen started to provide childcare to their participants by raising funds. They now operate on 65% earned income and 35% philanthropy capital “We tend to revere celebrity heroes. Steve Jobs. Mark Zuckerberg. Mohamad Yunus.” “It’s actually not about the leader at the top.” “Senior leadership was really critical for them.” Only 15%