Hugh Ballou: Greetings, this is Hugh Ballou. Welcome to the Nonprofit Exchange, where we explore leadership strategy and systems that help mission-driven organizations increase their impact. Today, we are looking at a question every growing nonprofit eventually faces. How do we scale the mission without losing the heart, identity, and culture and local trust that made the work matter in the first place? Our guest today is Ryan Dewey Smith, founding executive chairman and CEO of Inperium. Ryan has built a national model for mission-driven growth that challenges the traditional assumptions behind mergers and acquisitions. We’re going to frame this in the terms of collaborations and affiliations today, because we don’t know how to do that as nonprofits. So, you know, we can, instead of absorbing organizations and replacing their identity, Inperium uses an affiliation model that allows organizations to retain their mission, name, leadership, and local presence while gaining access to shared infrastructure, discipline, stewardship, capital, and a broader constellation of support. Ryan’s leadership journey began in direct community-based service. He started in 1993 as a program coordinator at supportive concepts for families and later served as director of programs, COO, and president and CEO. He just went up the ladder. During his tenure, the organization grew from approximately four and a half million revenue to more than 65 million and expanded the workforce and strengthened the service delivery. In 2016, Ryan founded Inperium to help mission-driven organizations grow sustainably. without sacrificing their purpose. His message for nonprofit leaders is timely and practical. Financial strength and mission strength belong together. Today we will explore what is possible in the peripheral. The innovation partnerships, back-office systems, workforce models, and entrepreneurial thinking that can help organizations serve with resilience. So Ryan, thank you for being with us today. Start out with what is the title? What’s possible in the peripheral mean to you and why is it important for today’s conversation?

Ryan Dewey Smith: Hugh, thank you for having me. I appreciate the opportunity and welcome listeners. I believe that the real work that’s done in nonprofit organizations isn’t the forward-looking work at the mission, but instead what’s happening around the mission that we have to pay attention to, Hugh.

Hugh Ballou: So you moved from program leadership into executive leadership. How did that path shape your understanding of the tension between service delivery and business discipline?

Ryan Dewey Smith: I believe it gave me a well-rounded insight into what it means to be at the local direct service level and how that correlates into the operational back-office management so that all entity aspects can be driving towards the common mission. Without knowledge in each of the areas individually and an understanding or grasp, there tends to be conflict between those individual verticals within an organization. My knowledge and expertise in each of them has helped me throughout my career.

Hugh Ballou: So talk a minute, you teach about mergers and acquisitions and help growing nonprofits, you know, get more out of what they’ve got, but it’s in a sort of a collaborative sense. So speak to collaboration. What do we not understand and why is it important to think about collaborations?

Ryan Dewey Smith: Nonprofits who can join together through partnerships and collaboration are stronger as one than they are as stand-alone entities. Using scale and leverage reach and capacity. While maintaining your individual identity, create missions that are sustainable and missions that are able to advance.

Hugh Ballou: Mm hmm. We’ll get down to some pieces of that puzzle. So we have some unrealistic fears and myths. So nonprofit leaders sometimes fear that scale will cost them culture. So how do we scale without losing the core of what we are?

Ryan Dewey Smith: I believe scaling outside of your comfort zone actually improves culture. because it grants the opportunity for others to transition into your organization and influence and drive change. And I believe change is the essence of positive and evolving culture.

Hugh Ballou: We should be always transforming how we do things, shouldn’t we?

Ryan Dewey Smith: We should. If we’re not moving, we’re standing still. That’s correct.

Hugh Ballou: Probably going backwards. There’s that too. So as we do the scaling, how do we retain the identity of leadership, community trust, and program identity while we build the strength in a larger entity?

Ryan Dewey Smith: I think it requires debriefing and feedback cycles and loops with that leadership and with other stakeholders in your business to be sure that you’re grounded in your mission and your culture and cultural alignment to that mission.

Hugh Ballou: We don’t think about culture, do we? It’s sort of on the back shelf.

Ryan Dewey Smith: It’s back-of-mind, but I believe it’s there. I don’t think it’s front-of-mind as often as it should be.

Hugh Ballou: And in specific, so before we enter into this growth phase and this affiliation phase, for lack of a better word, what should boards and executives define clearly before we start that conversation and that journey?

Ryan Dewey Smith: They have to be agreeable to change. They have to be accepting of rank-free debriefing, so honest reflection around your role and responsibilities in the partnership or arrangement. And you have to be able to fail fast and pivot quickly. Slow-to-change silos that take too long to change are problematic. in a shared environment where you’re dependent upon others for the sustainability of your business?

Hugh Ballou: So our audience is made up primarily of those leading local charities. We do have clergy that are leading religious organizations, churches, synagogues, community faith-based charities. And then I think sometimes, and I served small to mega churches for 40 years, sometimes we don’t want to change. how do we, how do we alter that mindset to realize that the world’s changing and we need to adapt to it just to be sustainable?

Ryan Dewey Smith: I believe that none of us want to change. Um, but we have to recognize and acknowledge when change is healthy and good. And we have to come to the realization ourself versus being told that change is necessary. And I think that, Evidence can be given. where change can produce positive results and those positive results can have greater impacts in your charity and I believe those that operate in charities and nonprofits are generally folks that work to have profound impacts to others that need assistance or services. So I think once you can convince a board or executive or a professional who may not want to change that in doing so you’ll have a greater impact to a broader scope of people, in my experience, they tend to change.

Hugh Ballou: Great answer. So what are some of the structural elements that we need to look at? So if we’re going to collaborate or do an affiliation with another entity, Do we need to look at what each entity brings, what each entity needs? What are some of the structural elements to consider in the conversations we need to have to make sure that it’s a good fit and that we’re going to plan for success?

Ryan Dewey Smith: The type of partnership that you want is really indicative of what you need to consider. If you want to be merged into a larger entity, then what you’re looking at is different than if you want to affiliate into a network of companies. So it’s really driven by your goal at the end of the partnership. And autonomy and independence is really important. Mission, values and vision that is independent of the partnership members is important. The ability to have say and standing within certain decisions in the network are important. And the return on what you’re going to sacrifice because every relationship comes with sacrifices, Hugh, as you know, any and all relationships. What those sacrifices will be, the returns must be higher. So is the loss of who your medical health care provider for health and welfare benefits to your employees at a 75 percent savings worth pivoting away from? a long time provider of that coverage. Is your IT cybersecurity tool set vendor worth the additional cost? Those become the pinch points in the decisions around a joint venture or partnership when you’re trying to use scale and leverage to create savings for mission sustainability.

Hugh Ballou: And those are so important to have a checklist of what we want to even talk about. So speak a minute. We teach that you’re running a tax-exempt business, and revenue is essential. And we don’t really bring this business mindset to this. So we’re mixing up topics here. This is a key element. We’re running a business, and so these are some business disciplines. And I think one of the fears that we see in the marketplace is where a big company buys a little acquisition, and then they change the standards because there was no conversation on these. So it’s a different model with what we’re talking about in local charities. So how do we change our mindset and learn to benefit, but also keep those rubrics that you’ve just defined? We’ve got to have a say.

Ryan Dewey Smith: We do. And asking for help or partnership is not a weakness. It is a innovation for me. And innovating is important to furtherance of mission and having access to reasonably sourced capital to run your business for cash flows and opportunities of advancement are essential. No money, no mission. No mission, no money. And nonprofit does not mean not for a profit. We have an expectation and a responsibility to our stakeholders to produce positive operating income results year-over-year so that we are sustainable and are able to serve the people that we’ve been put forth with responsibility of helping.

Hugh Ballou: We tend to underestimate that in the charity section because we think, oh, people are going to give us money. But in my 40 years of doing this, we’re always chasing the dollar. So how do we get over this capital hump? It does take money to actually accomplish our mission. So is it a mindset shift? Is it the right kind of conversations or collaborations? How do we address this capital issue?

Ryan Dewey Smith: We’re all after the same dollar as nonprofits, banging into each other, trying to achieve the same grant funding. It really comes down in my mind to efficiency with those dollars versus sourcing new. If any of the operators that are listening today could move their general and administrative costs down by half of what they cost today. that you could reinvest those dollars back in your mission. That would be as if you received a new grant today out of the blue for all those revenues that you spend on all of the back-office infrastructure that is scalable and pulled under a joint venture affiliation or other business type arrangement.

Hugh Ballou: So we teach there’s eight different streams of revenue, that includes in-kind, which isn’t really revenue, but it saves you money. And those are slam dunk money you don’t pay back. Do you mix in debt with this kind of revenue? I do not. So there’s no debt financing you’re talking about. It’s all nonprofit philanthropy money. That’s correct. Except marketing money would be a sponsorship parts. That’s still money. We don’t pay back. So being under capitalized. Is there a mindset we need to shift to realize that we need to have responsible financial planning and people with that skill in our, in our network?

Ryan Dewey Smith: We absolutely have a responsibility for management of a capital stack. and access to availability for reasonably priced capital so that in the event of a insurance hiccup, uninsured insurance event, creep related to certain cost drivers, loss of a grant, we need to have protections vis-a-vis capital access reasonably priced for in the event of those bumps that happen in the night during our operations.

Hugh Ballou: Like a line of credit or something?

Ryan Dewey Smith: A line of credit, yes sir, that would be one.

Hugh Ballou: What you call back-office, you and I talked before we went live here, when I was music director in a large church, I determined that 10% of my work was music. 90% was all of that infrastructure that made music possible. And so I call that the blue 10, 90 rule. So you say, we talked about, this is an essential part of understanding the back-office that makes everything work. So talk about why that’s important and what are pieces of the back-office that we need to think about?

Ryan Dewey Smith: Back-office, defined as finance and accounting, auditing and legal insurance to include your corporate insurances, general liability, property and casualty, inland marine, cybersecurity, as well as your employee health and welfare insurances, workers’ compensation, unemployment, medical, general, eye, dental, IT infrastructure to include cyber security and data management, data warehousing, and then finally fleet and facilities management. Those are the five key areas. In addition to capital stack and debt capacity that we manage in our model for 44 companies that we use the scale and leverage to create savings to savings in time for the executives to run their mission-based businesses as well as costs out of their grants and revenues for best-in-class systems. With a leveraged constellation of companies, you can buy the best general ledger platform, we use Oracle, the best payroll systems, we use UKG, the best electronic health records, we have 14 of them for our 44 companies, while creating savings to you as your executive and your management team in managing those systems by pulling all the resources of all these companies together.

Hugh Ballou: So let’s talk about the bulk of our most nonprofits revenue comes from donors. They’re those other seven channels. Grants are hard to get; they are competitive, and they’re usually for specific functions, specific activities, and are not ongoing, typically. So if we have the donors that support us, All this stuff you just talked about, I would say, is critical for our balance, our sustainability, and doing the work that we’re here to do. It’s important to have that infrastructure. Now, what do you say to donors? I don’t want to fund that part. I want to help people. I want to fund the mission of what you’re doing, the actual programs. So, how do we interpret that in a way that donors know that’s essential for us to be able to help people?

Ryan Dewey Smith: I believe we need to show that we’ve struck the right balance between philanthropic contributions directly impacting the people that need the help versus the infrastructure required to support it. So what we’ve seen in our network is when you’re able to produce to a donor that nine cents of your dollar are going to the back-office and 91 cents are touching the people in the community, there’s an increase in those donations. When your message is $0.20 of your dollar is supporting my legal fees, my accounting department, processing payroll, it’s harder to raise funds because it doesn’t feel as philanthropic to those donors. So having those lower general and administrative costs can truly help with raising those funds.

Hugh Ballou: And so one of the values of what you’re talking about of these affiliations is working together with other entities is those costs are lower, aren’t they?

Ryan Dewey Smith: they are much lower. As a group and a partnership, that’s correct.

Hugh Ballou: So what do we need to say about our leadership capacity and our culture? If we think we have a culture, you know, a lot of us are so busy doing our work, we think it’s extraneous to do the fluffy stuff like leadership and culture, but it’s actually essential to what we do. So how do we build that and maintain that and create a system that’s sustainable?

Ryan Dewey Smith: If we are able to reduce the amount of time that you are spending on those back-office elements, it frees your time to focus on mission sustainability, leadership, and leadership development. When you don’t have to be concerned with an insurance renewal or a gap audit at fiscal year-end, a SEFA federal awards audit report filing in March, your 990, being filed on ProPublica, and you can focus on culture, leadership, mission, and sustainability, I’ve seen greater success in nonprofit success for their advancement of the services that are important to them through their organizations.

Hugh Ballou: I work with a lot of entrepreneurs. They’re running businesses. They’re purpose focused, but they’re entrepreneurs. This is no different in this sector. We are social entrepreneurs. So speak to our leadership capacity in terms of having this entrepreneurial spirit. We’re doing things that companies aren’t doing. That’s why we exist. So talk about why we need to have this entrepreneurial persona.

Ryan Dewey Smith: That persona not only has to be in what we’re doing with our dollars for the community, but how we’re managing those dollars. I think sometimes we innovate and create as entrepreneurs in the areas that give us the greatest reward, which is the impacts to people through social enterprises. We necessarily don’t innovate, create and act entrepreneurially as it relates to back-office synergy and supports. And I think that’s a shortfall of some of our leaders. It was my shortfall when I was running my first nonprofit, I was so darn focused on impacts to people. I let my back-office creep reach 28% and it became unsustainable. And I needed a different option to continue to provide the services that had been created. And that’s why I founded Inperium as this opportunity to diversify and strengthen through being one of versus the one.

Hugh Ballou: We’re going to, where can people find your website? Give them the link and then I’m going to pull it up here for, and if people left listening on audio podcast, just give them the link and then describe what they’re going to see when they get there. Please.

Ryan Dewey Smith: www.inperium.org. You’re going to find our homepage. There are several dropdowns. There’s an about us that includes my background as well as my leaderships. It talks about the creation. of Inperium and why. There’s a tab that explains how we help. This goes over a calculator and a rubric that walks you through, as a nonprofit, certain metrics, the 10 key areas that, if you’re struggling with, a conversation with Inperium could be helpful. Talks about our structure and our services. The Constellation tab highlights all 44 of our companies, provides case studies for roughly 10 of them. These are the success stories behind what we’re talking about here today. Hugh, news and insights is all the new and upcoming information and articles that are being published and new staff hires that have come on board at Inperium. And then the contact us is where you can fill out a short form, send that off. And one of our leaders will be back in touch with you within the same day to have a phone conversation or teams call.

Hugh Ballou: And I bet you answer all of those inquiries that come in.

Ryan Dewey Smith: I do.

Hugh Ballou: All right. We have time for a few rapid fire questions. Are you game having fun here? Yes, sir. One word nonprofit leaders should stop fearing.

Ryan Dewey Smith: Partnership.

Hugh Ballou: One system every growing nonprofit needs sooner than it thinks.

Ryan Dewey Smith: Electronic data warehouse.

Hugh Ballou: What’s the hidden cost of staying small? 10%. What is the most underrated back-office function?

Ryan Dewey Smith: Underrated back-office function, employee health and wellness.

Hugh Ballou: Great. Is there one book is what is one book thinker or practice that has shaped your leadership?

Ryan Dewey Smith: Caesar Milan, his first book around PAC leadership. Say it again. Cesar Millan and his book around dog pack leadership.

Hugh Ballou: Dog pack leadership.

Ryan Dewey Smith: And of course. Dog packs. Cesar Millan. He’s a dog trainer. Talks about pack leadership in dogs.

Hugh Ballou: Dog pack. Got it. Sorry.

Ryan Dewey Smith: If you haven’t read it, you should read it and make the correlation to people in leadership, Hugh.

Hugh Ballou: Love it. Love it. So what gives you hope for the future of mission-driven organizations?

Ryan Dewey Smith: Fragmentation in nonprofits is starting to subside because leaders of nonprofits are starting to see that there is power in partnership.

Hugh Ballou: Ryan, thank you for sharing. We’ve had almost 700 episodes and we’ve never had this succinct presentation of these topics. So this is very helpful. I’ll remind people there’s a full transcript. You can get all these great sound bites. You can watch this again, TheNonprofitExchange.org. You can find this information at Inperium. So give us that link again, please.

Ryan Dewey Smith: Inperium.org.

Hugh Ballou: So Ryan, this has been so helpful today, remembering all these essential pieces that really are going to help us do our job better, impact more people’s lives, and not burn out as leaders. So the biggest reason for that I see in the marketplace is over-functioning, and you’ve referred to that in different ways. If we have a team, let the team do it, and then build the right team. Ryan, this has been so helpful today. Thank you for being our guest today on the Nonprofit Exchange.

Ryan Dewey Smith: Thank you, Hugh.