Help! I Leased Too Much

My Aunt Ina lived in an ancient Victorian home with expansive rooms and five kinds of wood used for the staircase. There was a great kitchen at the back of the house, large formal dining room with built in cabinetry, a family room, a grand foyer with formal staircase and formal living room. She was poor, but in a large home she did not need and could not maintain. In our terms, Aunt Ina had excess capacity!

The elegant house slowly destroyed itself with watermarks on the wallpaper from rain and termites in the foundation. She was at the end of her life and only used the back door, kitchen and family room. She did not heat the other rooms. Think of a formal house with all of the appropriate furniture and china – sitting unused

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Is your nonprofit like Aunt Ina? Are you leasing incredible space that you don’t begin to use?

Do you have capacity that you don’t even think about because your nonprofit is doing well? Coaching takes you from doing well to doing great.

Carbondale Counseling leased three offices and two meeting rooms. The suite was wonderful for both individual appointments and small group sessions. The two full-time therapists each had an office and could also schedule group sessions. The hours were 9-12 and 1-5pm. Insurance and government reimbursement covered all apparent costs and left a small surplus. The budget assumed that ninety percent of therapist time was covered since some excess capacity gave them freedom to add an extra patient in unusual circumstances.

Sheila Quinta as the new Executive Director decided to do an imputed cost review. Imputed costs look at fixed capacity and build a budget that’s a blend of a theoretical use of all capacity with a practical use of what is more probable. It’s not a normal approach. All traditional budgets are explicit budgets that assume 100% of capacity and capacity training for nonprofits is about fixing weaknesses to take more advantage of the capacity assumed in the budget. Imputed costs build the budget around costs that are incurred that could have an alternate use.

Sheila noticed that the leased space was frequently empty. Since the lease was for total occupancy, there were imputed costs during hours that the clinic was not open. She asked staff about sessions from 5pm-9pm, morning group sessions, sessions during the day for groups while individual appointments were being held and sessions on Saturday and Sunday. The initial conversation did not go well. Staff were opposed for many different reasons. Hiring part-time therapists might have more turnover, extra cleaning would be essential, sharing space is never satisfactory, hiring receptionists on weekends and evenings will cost money, the clinic already has a surplus, the larger size agency will be impersonal, and talking about this feels too much like a business.

A coaching maxim is that any change in Execution will bring complaints from staff.

Sheila patiently accepted the comments and persevered. She decided that theoretically, there could be thirty more group sessions weekly and thirty more individual sessions. The old budget was for sixty-three sessions so sixty new sessions would double the impact of the agency in the neighborhood.

The new budget had some good news for staff. The clinic would have cash to pay towards the higher end of salaries and add more conferences for professional development. The increased impact would also add to the clinic’s brand which would have a nice effect on resumes.

The initial reactive responses of staff gave way to a healthy exchange on various factors to consider. Sheila’s theoretical imputed costs budget had some capacity that was truly not practical to consider. Who wants counseling at 6am?

Various budget scenarios were created in staff discussions and a sweet spot arose for a true Imputed Costs Budget. It looked at marketing costs for various times, community need, and costs with extra staff. The comfortable old budget was replaced with a new Imputed Costs budget. It would draw on their cash reserves until the marketing recruited clients for all the new openings. Since the rooms were already set up, they could hire one more part time therapist immediately and start marketing

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They named the new strategy ‘More Mental Health’. For attention, they made a large tree picture in the office with leaves to add for each new client. There was also a wheelbarrow in the chart with the total Accounts Receivable for the missing clients. Everyone worked together bring the A/R over to nurture the base of the tree as they added a leaf and registered a client.

Adding new services or programs is practical for many agencies but there are other ways also. Partnerships can be a great way to find a use for fixed assets. Churches partner and rent to homeless centers in the evening to help people stay off the streets. Schools rent to all sorts of groups to become community centers. ?Colleges search for adjunct faculty who are willing to teach until late evening. Tutoring centers add technology to rooms and offer tutoring virtually in other time zones. ?

Let’s assume the opposite and you don’t have any lease or property, but you have a program. Why not make a partnership with someone who has imputed costs that they may not have considered? You will be helping them at the same time, and you may get a great deal on the space!

If you lease or own property, an imputed costs budget will 10x your surplus. Why? Because your fixed costs for insurance, lease, utilities, and equipment are already paid for in the traditional budget. The sixty new sessions that Sheila proposed have direct costs for part-time therapists and marketing, but it would not be surprising to see Carbondale Counseling plan for a surplus or profit of fifty percent on the additional programming. With agencies that lease or own property, the profit is all in the last clients recruited.

If this has given you possibilities, you can contact me for team or individual coaching. [email protected]