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capital campaign

Wielding the Money Sword

5487718171_f1f7bf31e9_zA new blog at the Chronicle of Philanthropy site launched this week that I’m pretty excited about. Written by Clara Miller and others at the Nonprofit Finance Fund, the Money and Mission blog will help nonprofits “understand and skillfully wield money as a tool.”  What a revolutionary idea.

As Clara writes in the inaugural post:

Great ideas, deep caring for those in need, creativity, resourcefulness, a service ethic, and an expansive vision for the future are abundant in the nonprofit world. But we lack the financial capacity to meet these ideals, and our financial habits undermine efforts to build it. We need to think of finance as more than a muddle of fund raising, budget monitoring, and compliance with overhead rules. The current, tough economic environment is spurring needed change. Now, understanding money concepts like risk, leverage, and accounting, seems to be a moral imperative.

Indeed, the nonprofit sector has for too long been burdened by a lack of financial literacy and thus an inability to use money effectively. Sure there isn’t enough money in the sector, but if nonprofit leaders better understood the financial tools available to them and how to use them to their advantage, the results could be revolutionary. This is the argument in our Financing not Fundraising series.

Capital campaigns provide a great example of this. Nonprofits have used capital campaigns for years to raise money for a new building or, less often, an endowment. Capital campaign money is raised and used in a very different way from how general operating money is raised and used. A capital campaigns USES money raised to buy a building. An annual fundraising campaign USES money raised to buy additional services that the nonprofit provides (food for a food bank, mentors for kids). An annual fundraising campaign often RAISES money by cobbling together various activities (events, grant writing, some direct mail appeals) hoping that the sum will equal the expenses needed for the year. A capital campaign, however, RAISES money by conducting a feasibility study to determine how much they can likely raise, then creates a plan, budget, and case for support. Then potential donors are cultivated and solicited in a systematic way. This is a deliberate, strategic way to bring capital campaign investors in the door.

However, capital campaigns are often misguided attempts to grow the impact of an organization. A nonprofit thinks that in order to be taken seriously in the community and attract larger donors they need to build a new building. Enormous amounts of time, energy and money are spent to create a building they don’t need, burn out their development staff, and eventually shoulder new building maintenance fees for years to come.

What if nonprofits could pour those same desires–to do more, to make a bigger impact, to attract more resources, to build deeper networks–and that same time, effort and resources into a campaign that will actually help them build a more effective, more sustainable organization that delivers more impact? What if the methods of a capital campaign were instead employed to raise growth or capacity capital that allows the organization to provide more, better services to the community? That would be huge. Enormous.

The Nonprofit Finance Fund turned capital campaigns on their head with their SEGUE (Sustainable Enhancement Grant) program. It is essentially a capital campaign, but instead of buying a building, the nonprofit raises growth capital to scale the organization for greater social impact. NFF takes a concept nonprofits understand and are comfortable with, a capital campaign, and transforms it into a way to raise organization building money, a completely new idea. I’d love to see more nonprofits using financial tools already available to them to accelerate their ability to create social impact.

Like it or not, money is an incredible tool. If nonprofit leaders could better understand it, stop fearing it, and learn how to wield it effectively, the results could be transformative.

Photo Credit: Fr Lawrence Lew, O.P.

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The Power of a Case

Most businesses that are looking for funding know the power of a case for support, although they probably call it their “pitch” or “deck.”  But most nonprofit organizations don’t have an articulated case for support, and this is a real missed opportunity. A case for support is absolutely critical to any kind of fundraising campaign, in the nonprofit or for-profit world, and whether the money sought is investment capital or operating revenue.

A case for support lays out a clear, articulate, compelling argument for why someone should invest in the solution you are providing the marketplace.  Nonprofit organizations do tend to put together a case for support when they embark on a capital campaign to raise significant money for a new building.  But a case for support should be the fundamental building block to ANY fundraising campaign.  Without a case for support, nonprofits are just holding out a tin cup.

I’m not suggesting that a nonprofit create a case for support and then trot it out whenever they meet with, mail or talk to a potential donor.  Rather a solid case for support is a starting point from which the nonprofit can pull arguments and language for use in every aspect of their fundraising operations:  website, appeals, thank you notes, presentations, major donor calls, foundation proposals, etc.

The very exercise of a nonprofit board and staff creating a case statement can be, in itself, transformative.  It makes the organization as a whole articulate why someone should invest in them and what the payoff is.  This articulation can energize and focus the organization and make their fundraising efforts that much  more effective.

A case for support has some key elements:

  1. The Need (Market Opportunity)
    What social problem exists in your community, region, state, country, world that needs to be addressed?  Why is this problem significant, why should people care?
  2. The Solution
    What is your solution to the social problem? Why is this the right solution?
  3. Competitors and Competitive Advantage
    Why is yours a superior solution to other alternatives out there? Something that is often missing in nonprofit articulations of their case is how their solution fits into the competitive landscape.
  4. Value Proposition
    Why is your organization uniquely positioned to deliver on this solution?  What is the value proposition you offer and how do your core competencies feed this solution?
  5. Resources Required
    How much money, what type, and over what timeline do you require for this particular project (start-up, growth, increased capacity, general operating, etc.)? This section will vary based on the fundraising campaign.
  6. Projected Social Return on Investment
    What does the potential investor get by investing in your organization (change to a social problem, increased breadth or depth of service delivery, etc.)?  If you can demonstrate a social return on investment, that’s great.  If you can demonstrate an increase in program and operational efficiency (in the case of a capacity building fundraising campaign) then do.

A full case for support is not something you would normally share with potential donors.  However, the process of articulating your case for support and then using elements of it in all of your fundraising work can dramatically increase your ability to effectively communicate with and secure investments from donors.

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Tuesday, February 16th, 2010 Capacity Building, Fundraising, Nonprofits 4 Comments


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