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Financing Not Fundraising: Assess Your Nonprofit’s Financial Model

moneyI am amazed by the reaction of some nonprofit leaders when faced with a budget shortfall. Some simply shake their head in innocent confusion, some blame an “inexperienced” development director or a “checked-out” board, and others throw together a knee-jerk fundraising event in order to stem the tide.

But a much better approach, when you don’t have the money your nonprofit needs, is to step back and assess the viability of your nonprofit’s overall money function, which is the topic of today’s installment in the ongoing Financing Not Fundraising series.

If you want greater, more reliable funding for your nonprofit, you must get strategic. And the first step to any real strategy is analysis.

Instead of viewing the money that flows to your nonprofit as a side note, or worse, a completely uncontrollable force, you must view money as a very necessary and integrated function that is just as important as your nonprofit’s programmatic function. And in order to determine how well your money function operates and how to transform it, you must assess it.

A transformative financial model assessment uncovers how all aspects of the organization contribute to or detract from money flowing through the doors. It analyzes the financial impact of 7 areas of the organization, like this:

  1. Strategy
    Does your nonprofit have a long-term strategy that integrates money, programs and operations? Does your strategy help articulate the value your nonprofit provides the community in order to compel outsiders to invest? Does your strategy include measures for whether that value is actually being created?

  2. Mission and Vision
    Does your nonprofit have clear, compelling vision and mission statements? The two statements are not “nice to have” marketing language, rather they articulate the very essence of why your nonprofit exists. Does your vision paint a bold description of the social change you seek? Does your mission describe the day-to-day work towards that vision?

  3. Board and Staff Leadership
    Does your board have the skills, experience and networks necessary to execute on your strategic plan? Are they engaged and invested? Are they actively connecting the organization to people, resources, partnerships? Does your staff have the knowledge and experience necessary to make money flow? And are they structured and managed effectively?

  4. Program Delivery and Impact
    As a nonprofit you have two sets of “customers.” Those you serve (or your “clients”), and those who fund those services (or your “donors”). Without a compelling and effective delivery of services to clients, donors won’t fund those services. Is your nonprofit strategic about which programs to grow and which to cut? Do you measure the effect of your programs on clients? Are your programs financially viable, or are too many of your programs mission-rich, but cash-poor?

  5. Marketing and Communications
    Do you make a compelling case for your work and for support of it? Once you’ve made the case, are you using the right marketing channels (website, social media, events, email, etc.) to attract and engage your target funders, volunteers, advocates, board members and other supporters?

  6. External Partnerships
    In order to move the mission forward and in order to attract funders, volunteers, advocates you must be strategic about building alliances that make sense. Do you have the necessary external relationships to execute on your strategy? Are you constantly working to strengthen or grow the right partnerships in the right ways?

  7. Financial Model
    And only now do we look specifically at money. Because without all the previous elements (thoughtful strategy, compelling vision and mission, strong leadership) money simply will not follow. Does your funding mix fit well with your mission and core competencies? Are there other revenue streams that make sense to pursue? Are there fundraising activities that are actually costly rather than profitable?

When money isn’t working the way you want it to, don’t stick your head in the sand. Wrest the money sword from the beast of chance by taking a hard look at your nonprofit’s money function.

If you want to learn more about the Financial Model Assessment I provide clients, click here. And if you want to learn more about the Financing Not Fundraising approach, download the newest e-book in the Financing Not Fundraising series, Financing Not Fundraising volume 3.

Photo Credit: Pen Waggener

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Second Annual Giving Tuesday

As we head off for the Thanksgiving holiday and the start of the consumer-driven holiday season, it’s important also to give back. And there’s a movement to help you do just that.

Tuesday, December 3rd is the second annual Giving Tuesday, an exciting experiment that started last year to “create a national day of giving to kick off the giving season on the Tuesday following Thanksgiving, Black Friday and Cyber Monday.” Last year’s first Giving Tuesday saw some impressive results:

  • More than 2,500 recognized #GivingTuesday™ partners from all 50 states
  • Blackbaud processed over $10 million in online donations on 11/27/12 – a 53% increase when compared to the Tuesday after Thanksgiving the previous year.
  • DonorPerfect recorded a 46% increase in online donations and the average gift increased 25%.
  • More than 50 million people worldwide spread the word about GivingTuesday – resulting in milestone trending on Twitter.

The video below explains the movement and how to get involved. To learn more go to community.givingtuesday.org.

 

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The Long View on the Nonprofit Sector: An Interview with Bill Shore

Bill ShoreIn today’s Social Velocity interview, I’m talking with Bill Shore. Bill is the founder and chief executive officer of Share Our Strength, a national nonprofit working to end childhood hunger in America. He has served on the senatorial and presidential campaign staffs of former U.S. Senator Gary Hart and as chief of staff for former U.S. Senator Robert Kerrey. He is also the author of four books focused on social change, including, The Cathedral Within.

You can read past interviews in the Social Innovation Interview Series here.

Nell: You’ve been on a (writing) kick lately encouraging nonprofits to make bigger, bolder goals. Which do you think comes first: bold goals or a sustainable financial model? And how are the two related?

Bill: Just as every journey aims toward a destination, every social change effort should start with a goal, bold or otherwise. A sustainable financial model, while critical, is a means to an end, not an end in and of itself. We began Share Our Strength with a financial model based more on cause-related marketing and corporate partnerships than on traditional fundraising. By leveraging the assets we’d created and delivering measurable value back to our partners, we generated significant revenues in ways that felt more sustainable. We were a grant maker to other organizations, and proud of the good work they did, but ultimately it was unsatisfying not connected to a bold goal.

Nell: The stated bold goal of Share Our Strength is to eradicate childhood hunger in America by 2015. That’s 2 years away. Will you get there? And how has your experience working toward that bold goal affected your thinking about how realistic bold goals are?

Bill: It’s a great question because a bold goal is a double edged sword. If you achieve it the market will reward you. And if you don’t it may penalize you. That’s all as it should be. But the real reason to do it is not the market or fundraising or the media, but for oneself. When you devote a lot of your life tackling tough social problems, you deserve to know whether you are moving the needle. We’ve seen the market reward Share Our Strength for simply setting the goal of ending childhood hunger by 2015. Our revenues have more than doubled, and that has fueled increased impact. We will not get all of the way to our goal by 2015. We will need more time. But we believe we will have earned it. In the states and regions where we have concentrated our resources we will have proven that childhood hunger can be eradicated. We believe that such compelling proof of concept will give us the support necessary to scale the strategy everywhere.

Nell: You have argued that nonprofits are not resource-constrained, rather that they “suffer a crisis of confidence” in investing in their own capacity. Some might argue that that’s easy for the head of a $40+ million nonprofit to say. How do you think the average nonprofit can move beyond the starvation cycle of never having enough resources?

Bill: It’s not that nonprofits are not resource constrained, it’s because almost all of them are that it is even more important to invest in their own capacity, to take a long view and be willing to trade off impact in the short-term if that impact can be multiplied dramatically in the long term. Imagine a maternal and child health clinic that serves 50 women a day and makes the decision to serve only 25 a day for 6 months so that it can invest in capacity that will enable it to serve 500 a day when the six months are up. The compelling nature of urgent human need makes that a tough decision to make, but it’s the right one if you have the confidence that more capacity will equal more impact.

Nell: Moving to bold goals necessitates a way to measure whether those goals have been achieved. Yet outcomes measurement is a very nascent practice in the nonprofit sector. How do we (or can we) get to a place where we are effectively measuring the results of both individual nonprofits and larger solutions? And who will pay for that work?

Bill: As your question suggests, measuring outcomes, and communicating what you’ve measured, comes at a price. Indeed it can be expensive, and that might mean less money devoted to program in the short-term. With few exceptions there won’t be third parties lined up to pay for it. Organizations will have to decide whether it adds to their long-term competitive strengths to invest in measuring outcomes and if it does, they should be willing to make that investment. A key task of organizational leadership is to marshal the will for these investments that don’t pay off until the long-term. The challenge is exacerbated by the fact that measurement is a still nascent practice, there won’t be common measure that can be adopted in a one-size-fits-all manner, and so each organization must wrestle to the ground the metrics that are right for their work.

Nell: What about bold philanthropy and bold government? Is it possible for those two sectors to be more bold? What would that look like and how optimistic are you that those kinds of changes are possible?

Bill: I’m confident that bolder philanthropy can lead to bolder government. Our politics currently is so polarized and paralyzed that people need to see examples of programs that work. Philanthropy can do things that government can’t do: take risks, innovate, and be closer to the people we serve. And when that all adds up to a program or service that works, it creates an even greater moral obligation on the part of the public sector, i.e. government to take what works and help scale it. Resource constraints and failures of imagination have conditioned us to pursue incremental change. But big and complex problems demand transformational change to address those problems on the scale that they exist.

Photo Credit: Share Our Strength

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10 Great Social Innovation Reads: September 2013

10 Great Social Innovation ReadsThere were some really great articles and discussions in the social change space this past month. From new attempts to put philanthropy under the microscope, to analyses of Silicon Valley’s contributions to social change, to the difference between market innovations and social innovations, to Millennial giving, there was a lot to think about.

Below are my picks of the 10 best reads in the world of social innovation in September. But please add what I missed in the comments.

And if you want to see an expanded list of interesting reads, you can follow me on Twitter, Facebook, LinkedIn, or Google+.

The 10 Great Reads lists from past months are here.

  1. Silicon Valley has been getting into the social change game, but some aren’t impressed with their contributions so far. David Henderson takes Silicon Valley to task for focusing their technology “innovations” only on broken nonprofit fundraising models (Google’s announcement in September of a new fundraising app, One Today, is an example of what he’s talking about).  And Charles Kenny and Justin Sandefur seem equally unimpressed arguing that Silicon Valley’s view that technology can end global poverty is “wildly overoptimistic.”

  2. And speaking of social change and business, Daniel Goldberg makes a very interesting (and helpful) distinction between “market innovations” (“an opportunity for profit that also happens to help people…and [is] effective precisely because [it] so cleverly ride[s] the market wave”) and “social innovations” (which “produce value by filling gaps left by the market…a business opportunity in the classic sense, but a systematic market failure that required a social purpose to address”). Much of impact investing, he argues, falls into the first camp, whereas social impact bonds fall into the second.

  3. It is crazy (and terrifying) how the wealth of America is increasingly concentrated in a small group of people at the top. The rate at which it is happening is mind blowing. The 400 richest Americans are worth $2 trillion, which is a $300 billion increase from last year and double what it was a decade ago.  And in 2012 the top 10% of earners brought home more than 50% of the total U.S. income, which is the highest level ever recorded. Kind of depressing, isn’t it?

  4. But there is hope. Clara Miller, formerly head of the Nonprofit Finance Fund and now head of the F.B. Heron Foundation, is one of the leading visionaries in the social finance space. Her recent article is a must read and explains the dangers of nonprofit growth without adequate capital and what funders can do to prevent it.

  5. Paul T. Hogan, VP of the John R. Oishei Foundation, argues that funders should focus on building nonprofit organizations: “The development of the nonprofit organization provides plenty of factors to evaluate and many outcomes to strive for. It can also satisfy the funder’s obligation to effectively steward resources insofar as an organization is being helped to last for the long term and have a much greater chance of effectively achieving its, and therefore the funders’, goals.” Oh, if only more foundation leaders thought that way!

  6. Pablo Eisenberg writes a fairly vehement rant against philanthropy for being an increasingly closed loop. He argues that their insularity “keeps philanthropy from solving serious problems” and that we need “foundations and big donors to realize they don’t have all the answers. Nonprofits should have a greater role in driving the agenda.”

  7. September saw the annual Social Capital Markets Conference and one of the interesting things to come out of it was a new Community Capital Symposium that immediately preceded SoCap this year. CoCap brought non-accredited investors (with a net worth below $1 million) and social entrepreneurs together to talk about community-focused investing. It’s an interesting financial innovation to watch.

  8. Over the month of September, GrantCraft, a project of the Foundation Center, ran a 4-episode podcast series talking about and with Millennial philanthropists as a complement to the Johnson Center NextGen Donor Report about Millennial giving that came out earlier this year. Fascinating stuff.

  9. And then on the tactical side, HubSpot offers some great insight on What Millennials Really Want From Your Nonprofit’s Website.

  10. I always love urban food innovations, perhaps it’s because they are addressing several social problems at the same time (urban decay, obesity, economic decline, environmental degradation). And so I was interested to see that urban rooftop farming is a new trend.

Photo Credit: UWW ResNet

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The First (and Next) Question Every Nonprofit Should Ask

Nonprofit QuestionsAsking the right questions is absolutely essential to creating social change. I’ve written before (here and here) about the importance and kinds of questions nonprofits should be asking. I am a huge believer in smart, hard questions.

Which is why I loved Bill Shore’s recent post in the Chronicle of Philanthropy. He encourages nonprofits to ask one simple, yet profound question: “What Does Success Look Like?” Which is very similar to Mario Morino’s question, “To What End?“, encouraging nonprofits to determine the ultimate goal of their work.

We are increasingly (I hope) asking nonprofits to get more strategic about their work, so that instead of spinning wheels, we are actually solving social problems. So Bill’s is an incredibly critical question.

But it is only the starting point.

Once a nonprofit knows what they are ultimately trying to accomplish, there are three critical questions they must next ask. And these are:

What is our strategy for getting there?
Unfortunately it’s not as simple as Bill makes it seem (and he would probably agree). You can’t simply set an end goal, and yell “Go!” You need a strategy for getting there, because there are many ways to get from point A to point B. The trick is figuring out what the right strategy is given your core competencies and the external environment in which you work. Because you cannot get to point B by doing something you are no good at, or something someone else does better, or something that won’t solve the problem.

What is the most effective and sustainable model to get there?
This is a piece that is sorely lacking in most of the nonprofit sector. Once you have figured out what you want to accomplish, you must figure out how you can structure your resources (money, staff, volunteers, board, advocates, assets) in a way that puts them to their highest and best use and actually ends up accomplishing your end goal. That’s a business model, and it includes staffing, financing, marketing and so on. And few nonprofits have a smart, strategic, sustainable business model behind their work.

What people and networks do we need with us?
Nonprofits have to stop trying to convince anyone and everyone to join their cause. You must be strategic about analyzing your end goal and your strategy for getting there and then determining what people, organizations, networks you need in order to execute effectively. So instead of assembling a board of warm bodies, you want to think about exactly what kinds of people, what kinds of networks, what kinds of expertise you need to move forward. And beyond assembling the right board, you need to assemble the right advisors, partners, alliances, advocates, decision makers, followers. In order to reach your end goal, you must marshal a whole army of people with specific, key assets. But you won’t build that army without first figuring out what the army should look like.

These are not easy questions. And finding the right answers is hard, hard work. Often it is challenging enough to get a diverse group of people (board, staff, funders) to agree on a common end goal, let alone to agree on all the steps and structures necessary to get there. But the alternative is to simply continue to spin your wheels while our challenges grow.

So start asking some hard questions.

Photo credit: Oberazzi

Here Come the Millennials

mcon blog_smLast Thursday was the 4th annual Millennial Impact Conference (MCON#13) hosted by the Case Foundation and Achieve, a fundraising agency specializing in Millennial donor engagement. The conference is an opportunity to analyze the Millennial generation (ages 20-33) and how they think about and engage in social change.

Because the Millennial generation is so large and they are coming of age in a time when technology and how we communicate are changing so rapidly, they will have a big effect on the sector.

As part of MCON, Achieve annually releases a study on the philanthropic interests of the Millennial generation. Their online survey of over 2,500 Millennials (and in-person user videos of 100 Millennials) found some interesting things about how this generation connects, gets involved and gives. And their findings seem to echo earlier studies about Millennial donors and their interest in impact.

Achieve’s study found that “Millennials aren’t interested in structures, institutions, and organizations, but rather in the people they help and the issues they support.”

Here are some more interesting findings about Millennials and their engagement with social change:

  • Behind email, Facebook is the next preferred method by Millennials to stay current on organization issues.
  • 83% of Millennials use smartphones.
  • Mobile friendly websites are the most important feature on the smartphone device that Millennials want from organizations.
  • The number 1 action on websites and social networks taken by Millennials is sharing content.
  • Advance online training and knowing how the volunteer experience will affect the people served is a key interest to Millennials.
  • Run/Race/Walk events are the highest peer fundraising approaches used by Millennials.
  • Asking for a donation to an organization instead of receiving personal gifts is a growing favorite among Millennials.
  • Online websites are still primarily used and preferred when Millennials donate.
  • Millennials are more likely to donate when the organization explains how the gift will impact an individual.

The full report along with Millennial user testing videos (which are fascinating looks into how Millennials react to and engage with nonprofit websites) are available here.

The implications for the nonprofit sector are important. And they underline the fact that nonprofits cannot ignore social media and the Millennial generation. Nonprofits must embrace the fact that the world is very different now than it was even 5 years ago. They must embrace and find ways to engage this younger generation. It’s about empowering Millennials to tap into their networks to find advocates, volunteers, supporters for the cause.

So get out there and start experimenting.

Photo Credit: The Millennial Impact
 

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Could Your Nonprofit Raise More Money?

Can Your Nonprofit Raise More Money?It is the ultimate question isn’t it? But often one that a nonprofit leader can’t answer on her own.

I see it all the time. A nonprofit leader wants to expand services to meet growing demand, or she is frustrated with a stalled fundraising effort, or concerned that a key revenue source is drying up, or lacks the staff or expertise to analyze where to diversify their fundraising efforts. She wants to raise more money, but she doesn’t know how to prioritize resources to do so.

But a Financial Model Assessment can turn the tide.

A Financial Model Assessment can be eye-opening and, ultimately, game changing. It can give your nonprofit a deep understanding of where you need to focus your efforts and a clear road map for growing the financial viability of your organization.

A Financial Model Assessment is for nonprofits that want (or need) to raise more money, but don’t know how to get there.

Here are the steps I go through in a Financial Model Assessment:

Interview Board, Staff, Funders
I conduct in-depth, one-on-one interviews with the executive director, revenue-generating staff, key board members, and some funders and others outside the nonprofit to understand what is working and what isn’t.

Analyze the Current Organization
I analyze all organization documents, policies, procedures, financials, systems, and materials to understand the internal and external processes for raising money. But because a nonprofit’s ability to raise money depends on much more than their fundraising efforts, I look at six areas of the organizational structure to determine how well they contribute to fundraising effectiveness, these areas are:

  • Mission and Vision
  • Overall Strategy
  • Board and Staff
  • Program Delivery and Impact
  • Marketing and Communications
  • Infrastructure and Systems

Uncover Opportunities for Current and Potential Funding
I look at all current and potential funding streams to uncover opportunities for increases. I also review all aspects of the organization’s back-end functionality for raising money (such as donor database, materials, systems, technology) in order to uncover areas for increased efficiencies.

Provide a Road Map to Grow Revenue
I create  a 20-30 page detailed analysis with recommended actions for increasing funding streams. I present the assessment and recommendations in-person to staff and board for an engaging session of questions and discussion.The nonprofits that receive the completed Financial Model Assessment hold in their hands an in-depth analysis of where they need to focus time and resources in order to increase the funding flowing to their organization. Often the Financial Model Assessment is the catalyst for big insights among board and staff and sets the organization on a path toward fundamental changes to how they bring money in the door.

It doesn’t have to be so hard. With a clear road map, your nonprofit can move from financial insecurity to financial sustainability.

To learn more, check out the Financial Model Assessment consulting page, or email me at nell@socialvelocity.net to discuss whether a Financial Model Assessment is right for your nonprofit.

Photo Credit: Images_of_Money

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What Change Does Your Nonprofit Seek?

Theory of ChangeWhat I love best about my job is opening nonprofit leaders to new and bigger possibilities. Last week was a busy one. I was in Phoenix for part of the week speaking at the Planned Giving Roundtable Conference and then I flew to New York to lead a board retreat at the National Guild for Community Arts Education.

When I am speaking to or leading a group, I love the moment when they move from discouraged, exhausted or burned-out, to energized by new ways of thinking.

At the Planned Giving Roundtable I delivered a keynote address about the power of a theory of change. A theory of change is such an incredible tool for helping a nonprofit articulate what value they provide the community. And once you have articulated that value, a theory of change is a jumping off point to:

  • Chart a strategic direction, which guides the action of the organization and focuses limited resources
  • Prove the results the organization is achieving, which allows the nonprofit to,
  • Attract more support, leading to the holy grail in the nonprofit sector,
  • Sustainable Community Change

So the theory of change serves as the fundamental building block in making that process happen, like this:

TOC image

 

 

 

 

 

 

 

Because the theory of change is so instrumental, I believe that every nonprofit organization that is working toward social change should have one. Without a theory of change, you don’t know what you are trying to accomplish, how you will get there, or whether you have accomplished it, and you certainly won’t attract the funding necessary to get there.

So once I (hopefully) convinced the group in Phoenix about the importance of a theory of change, I flew to New York City to help the board and staff of the National Guild for Community Arts Education actually develop their own theory of change.

It was so exciting to see the group work together to articulate how their organization puts community resources to work towards community change. It’s not easy to come to agreement about exactly what change an organization is working towards, which is why I think it is important to have an outsider leading that process.

At the end of the day, board and staff were energized and excited about their evolving theory of change and how it could help them chart a new strategic direction, focus resources, and attract more support and momentum.

That is the moment I love. When people who are so passionate and working so hard for community change, can take a step back and articulate how and why they do the work that they do. Because it is in taking that big step back that you can begin to develop a strategy for bringing hoped for change to fruition.

If you’d like to have me come speak to your board, staff, conference or event about a Theory of Change, check out my Speaking page, or email info@socialvelocity.net.

Photo Credit: Dean Morley

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