Simulation Case: Nonprofit Donation Center

Why a Pay Raise Beat a $6.5 Million Expansion

Twin Rivers Charities planned to spend $6.5 million on opening new stores. We built a systems dynamics model of the charity’s strategic plan to test the potential outcomes. The model showed the new stores would use up the charity's savings in under two years and bring in less money, not more, while uncovering that the highest leverage point was to pay employees more.

Background Information

Twin Rivers collects donated goods at one sorting center and sells them in three large thrift stores. The money it makes pays for job training. Five years ago, the board closed nine of its twelve stores, and sales more than doubled. Now a large new industrial site is bringing thousands of jobs and new families to the nearby city. A market study said that area could support two new stores and four donation drop-off sites. The CEO wanted help carrying out the $6.5 million plan, and the board supported the decision.

But the charity's own records told a different story. For 14 years in a row, it had brought in more than it spent. Yet its savings had dropped from nine months of expenses to less than four, because almost every extra dollar went into building and infrastructure updates. The pile of donations waiting to be sorted had tripled in 18 months. Donation intake positions remained unfilled for five months, while employees at the new locations would be paid $4 to $5 more an hour. And while the market study asked whether people in the new area would shop, it did not address whether they would donate.

The green line shows what the charity reported earning each year. The purple line shows how its savings actually changed, 2019 to 2024, in months of expenses. The shaded gap is money spent on buildings, which regular reports don't show.

The Simulation

Strategic decisions are often made without fully understanding how they will impact the organization systemically. Before executives commit, we:

• Understand how all parts of the organization function currently, and identify which numbers explain its results and which only describe them.

• Work with professionals from across the organization to map how the parts affect each other, and find which cycle is driving results right now.

• Turn that map into a fully functioning systems dynamics simulation to test all viable options, including the current strategic plan and initiatives.

A screenshot of the simulation dashboard

Results from 2011 to 2024, then the two plans tested from January 2025. Under the board's plan (dashed line), savings run out within 20 months and monthly sales fall to about $1.14 million. Under the pay fix (solid line), sales hold at $1.48 million a month and savings stay above one month of expenses through 2030.

Case Summary

Twin Rivers was ready to spend $6.5 million fixing the wrong problem. Through the simulation case, we are able to identify potential outcomes and help organizations avoid unintended outcomes, saving them thousands of dollars in investments, time and resources.

Interested in bringing this to your organization? Email us to set up a complimentary meeting today. [Link to info@wellledstrategies.com]

Disclaimer: Twin Rivers Charities is not a real organization. We built it from public nonprofit records and made-up details. The numbers above come from our model and show the kind of work we do.