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Next Year’s Fees

It is time to think about next year’s fees. For most nonprofits, the budget cycle is starting. How much will your fee structure change?

Setting the price of anything is risky. Setting the fee for a nonprofit is especially tough.

When the fee is too low, problems arise:

This time next year, there may be insufficient funds to pay the bills and make the changes necessary to keep the services in line with our evolving society

You will attract clients who chose your services because of the low price but expect premium services, which will result in providing unbudgeted services or dealing with complaints that lower your reputation in the community

Sustainability declines because it is impossible to build the necessary reserves to help your nonprofit weather the next economic storm

Offering too much in fee assistance through donor support (in the for-profit world these are coupons and discounts):

Invites the same problems as setting the fee too low

Creates a client base that depends on subsidies that may be unsustainable over the life of the relationship

Appreciation is based upon what you pay for services so when the price is low the appreciation is equally low which results in insufficient word of mouth from highly satisfied clients

When fees are too high:

Clients who value and appreciate the services are lost because they are unable to afford the services

High fees create unachievably high service expectations and displeased clients whose word of mouth hurts the nonprofit’s reputation

Other agencies benefit and become stronger from your loss of clients and lower reputation

If you roll back fees next year, it raises questions about the board’s and staff’s judgment, makes the loyal clients feel abused, and rarely results in the return of lost clients

High fees rarely produce sufficient income to cover the lost income from the departing clients

When the price is right, all of the preceding negatives become positives. This includes increased sustainability, financial stability, growing reputation, and highly satisfied clients. In addition, it is the first step toward reaching service capacity. This is true even in a service-saturated market.

Luckily, setting the right fee is possible.

Next Step:

Determine who is your target market

Talk to a cross section of those in your target market (current, past, and prospective clients) about what they want and how much they are willing to pay

Talk with a cross section of your donors and determine how much they are willing to subsidize your fees

Determine how to restructure your programming and operations to provide what your clients want at a price that creates a sustainable service model

Look around at the for-profits and nonprofits in your area. The ones who charge the right price have the most clients and the highest level of sustainability.

Yes, the agency down the street has the highest fees in the area, a waiting list, and all of the rich clients go there. That agency is priced right for their clientele. They know who their clients are, what the clients value, and how much the clients are willing to pay. As your understanding increases, your enrollment and financial stability will increase.

The place to start the discussion about fees is “What is the profile of the client we want to serve?”

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