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Financing Not Fundraising: 5 Lies to Stop Telling Donors

By Nell Edgington

In part 11 of our ongoing blog series, Financing Not Fundraising, I’m talking about being brutally honest with your donors. If nonprofits are going to truly break free from the vicious fundraising cycle, they must find the courage to tell funders how it really is. And since board members are a nonprofit’s closest supporters and (I hope) donors, you need to stop telling them these lies as well.

If you are new to the Financing Not Fundraising blog series, the series is about how nonprofits must break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities.  Instead, they must create a broader, more strategic approach to securing the overall FINANCING necessary to create social change. You can read the entire series here.

If you want to learn more about how to apply the concepts of Financing Not Fundraising to your nonprofit, check out the Financing Not Fundraising On Demand Webinar Series

If you want to break free of the exhausting cycle of fundraising, a key step is to start being brutally honest with funders. Here are the top 5 lies you have to stop telling donors:

  1. X% of your donation goes to the program
    The distinction between “program expenses” and “overhead” is, at best, meaningless and, at worst, destructive. You cannot have a program without staff, technology, space, systems, evaluation, research and development. It is magical thinking to say that you can separate money spent on programs from money spent on the support of programs. Donors need to understand, and you need to explain to them, that “overhead” is not a dirty word. A nonprofit exists to deliver programs. And everything the organization does helps to make those programs better, stronger, bigger, more effective.

  2. We can do the same program with less money
    No you can’t. You know you can’t. You are already scraping by. Don’t accept a check from a donor who wants all the bells and whistles you explained in your pitch, but at a lower cost. Explain the true costs, including administrative costs, of getting results. Politely, but firmly, explain to them that an inferior investment will yield an inferior result. If they simply can’t afford the price tag, then encourage them to find fellow funders to co-invest with.

  3. We can start a new program that doesn’t fit with our mission or strategy
    Yes that big, fat check a donor is holding in front of you looks very appealing. But if it takes your organization in a different direction than your strategy or your core competencies require, accepting it is a huge mistake. Nonprofits must constantly ensure that money and mission are aligned. Otherwise the organization will be scattered in countless directions with an exhausted staff and confused donor base. Don’t let a donor take you down that road.

  4. We can grow without additional staff or other resources
    Nonprofit staff truly excel at working endless hours with very few resources. They have perfected the concept of doing more and more with less and less. But someday that road must end. Nonprofit leaders have to be honest with donors when their staff and resources are at capacity. Because eventually program results will suffer and the donor will receive little in return for their investment.

  5. 100% of our board is committed to our organization
    If that’s true, then you are a true minority in the nonprofit sector. Every nonprofit board I know has some dead  wood. Members who ignore fundraising duties, don’t contribute to meetings, miss meetings, take the organization on tangents are always present. It’s a fact that funders want to see every board member contributing. But instead of perpetuating the myth that 100% is an achievable reality, be honest with funders. Tell them that you continually analyze each individual board member’s contributions (financial, intellectual, time) and have a clear plan for addressing deficiency, including: coaching, peer pressure, training, asking for resignations. Getting to 100% is probably never realistic, it is far better to demonstrate that you are tirelessly working toward 90%.

Stop the madness. We need to stop telling funders what they want to hear and then cursing them behind their backs when they set  unrealistic expectations. Funders must be made to understand the harsh realities of the nonprofit sector if they are ever to be expected to help bring change.

If you want to learn more about applying the concepts of Financing Not Fundraising to your nonprofit, check out the Financing Not Fundraising On Demand Webinar Series, or download the Financing Not Fundraising E-books.

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About the Author: Nell Edgington is President of Social Velocity (, a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.

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72 Comments to Financing Not Fundraising: 5 Lies to Stop Telling Donors

October 26, 2011

Great article! This information is very important for non-profits. Nothing hurts a non-profit more than lies being disclosed especially in the area of finances. A huge problem in Brazil where I work.

Nell Edgington
October 26, 2011

Jim, I think the problem in the nonprofit sector is not one of a lack of cost-consciousness. In fact I would argue that the vast majority of nonprofit leaders are overly cost conscious, spending an inordinate amount of time trying to squeeze every last resource dry, often at the expense of being able to do more social good. In order to stop that madness, we need to move away from a preoccupation with distinguishing, to use your terms, “positive” costs from “negative” ones. Rather, let’s start to evaluate nonprofits on whether or not they are achieving the social benefit they set out to achieve. If they are in fact achieving that impact, and we can compare how cost-effectively they achieve that impact vs. how cost-effectively other nonprofits achieve impact isn’t that the end goal? Percent of overhead is a meaningless concept because it is only half of the equation. What we are ultimately interested in is how cost effectively they can achieve impact. And I think you and I can both agree on that.

Jim Norvell
October 26, 2011

Social consciousness is not good at any price. Do-gooders who are making some difference but at a tremendous price taint those who are using resources far more effectively. They make donors wary.
I think we will just have to agree on your last four points and somewhat disagree on the first.
Thank you, though, for the stimulating conversation.
Keep up the good work.

Nell Edgington
October 26, 2011

Jim, thank you as well for your thoughtful comments and interest in having a debate about this issue. It is open, honest conversations like this that are going to help create a stronger, healthier, more effective nonprofit sector.

October 26, 2011

Nell, I am a reform advocate in the animal shelter industry. Historically, private shelters have gone to great lengths to hide their performance. Most have relied on “corporate spin” either through marketing statements or the president’s typical song and dance routine on annual reports.

The focus on transparency in the the non-profit sector has made it almost mandatory that any reputable facility post their 990 form on CharityNavigator or Guidestar (or both).

The problem I see – and that aligns with your philosophy – is that tends to give outsiders a false sense of security. For example, most typical private shelters have a fully-burdened labor cost that runs between 70-80% of revenue. Yet almost every one of the organizations report “administrative expenses” at around 6%. That means 94% of revenue goes to programming. That’s ludicrous to anyone who thinks about the meaning of those numbers.

The problem I see in this is that in this industry, at least, we are now just getting to a point where NPOs feel any obligation at all to post these tax forms in the public domain. We are a long way from showing what each org is doing in reality as these forms are only accounting forms and easily hide the real operational truth.

The shelter industry is atypical in some aspects because it comes from a time when they were all governmemnt run “pounds.” They were much maligned as the garbage can for failed employees, the last stop on the way out of town for failed careers. In response the private side of the shelter industry has spent decades puffing up itself to overcome this stigma and now has gone to the “dark side!” Stodgy, bloated organizations with overpaid management teams make it almost impossible for them to change directions. They’ve become ponderous in size and cost with dismal effectiveness. Train engines (like shelters) don’t come with steering wheels for a reason!

The challenge to implement your philosophy in this industry is daunting. I look forward to learning more and trying my hand at starting the ball rolling…

Nell Edgington
October 26, 2011

Thomas, I agree, change like the kind we are talking about is enormous. There is a tremendous amount of baggage in the nonprofit and philanthropy sectors, as there is in the government sector. But we have to start somewhere. To your point about rating agencies, Charity Navigator has made somewhat of a step forward recently by starting to include some impact and transparency measures in their ratings of nonprofits, as opposed to just financial measures. That’s a start. But we also need to start at the ground up and on an individual basis. The more we talk about what needs to change and start making a few steps in that direction, every one of us, the sooner we can get to a nonprofit sector that is stronger, more transparent and better able to achieve change.

October 27, 2011

Thanks for the sound and ethical advice!

Kevin Gray
November 2, 2011

GREAT ARTICLE!!!!!It seems unrealistic to donors today that a real non-profit has to, in some shape form or fashion, have little to no administrative cost to run the foundation properly. I was over joyed to read the comments. As was mentioned, it so hard to keep up with all the excellent reading material thats out there today, but keep it coming. Now let’s all stick together and really make a difference.

November 3, 2011

Some of us in the aid sector are writing about this, too…

Nell Edgington
November 3, 2011

J, that was a really powerful post. Thanks so much for sharing. We all need to be much more open and honest about the realities we are dealing with.

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