Investing in a Sustainable Nonprofit Future

I wrote last month about the crippling nonprofit fear of investment. Related to that, nonprofits need to understand and embrace the concept of Return on Investment. Nonprofit leaders often exist in such a world of scarcity that they don’t recognize that an investment today can have a huge payoff down the road. And not recognizing the value of a return on investment, particularly when it comes to a nonprofit’s fundraising function, can keep nonprofits in starvation mode.

One of the ways I consult with nonprofits is coaching a development director or executive director to increase money flowing to the organization. We work on getting board members to bring money in the door, identifying new donors, crafting a compelling message, launching new revenue streams, developing an overall financing plan.

This work could have a huge future payout:

• Board members no longer sit on their hands but actively recruit new donors to the organization.
• New donors are acquired through a thoughtful, strategic major donor campaign.
• A compelling case for investment convinces foundations and major donors to invest at higher levels and for longer periods.
• A new earned income stream brings in unrestricted revenue.
• An effective financing plan puts scarce resources to their highest and best use.

If you think of this in terms of return on investment it’s a no-brainer. You have two options:

1. Continue to struggle day-to-day for the foreseeable future, or
2. Make an investment today in order to dramatically increase funding and sustainability tomorrow

Let’s do the math. If a nonprofit with a budget of $1 million were to spend, say $5,000 on hands-on coaching to develop a financing plan, create a compelling case for investment, get their board engaged in fundraising, and launch a major donor campaign those elements could translate into well over $100,000 of new money annually for the nonprofit.

Here’s how:

• A financing plan clarifies and marshals resources so staff and board know exactly where the money flows and who will do what to make it happen. The very act of creating and monitoring a financing plan could increase funding by 5%, or $50,000.
• A case for investment, when done well, becomes the backbone of any and all money-raising efforts. It can be integrated into your website, your social media efforts, your donor letters, your presentations. Telling a concise, compelling story makes donors sit up and take notice and adds perhaps another 2% increase, or $20,000.
• If your entire board starts (in their own unique ways) bringing money in the door that could increase your bottomline as well. If each member of a 15-person board starts to increase their own giving and/or the giving of those in their network by $1,000 each, that’s another $15,000.
• A major donor campaign charts a logical, strategic way for you to identify and acquire new donors. Getting strategic about how you find and recruit those donors will ensure much greater success, perhaps a 5% increase, or $50,000.

So with very conservative estimates the original $5,000 investment in coaching translates to $135,000 in new money every year thereafter.

My favorite example of this is when I helped KLRU, Austin’s PBS station use $350,000 in capacity capital to do many of the above things. After 3 years of implementing a new financing plan, using a new case for investment, and more, they were raising $1.6 million in NEW REVENUE each year. That’s a huge return on investment.

If you make a smart investment in improving the money engine of your nonprofit, that investment will pay off many times over, creating a more secure financial future for your organization.

If you’d like to learn more about how I coach nonprofit staff to bring more money in the door, check out my Coaching services, or send me an email to schedule a time to talk further.

Photo Credit: MeckiMac

Tags: case for investment, case for support, foundation donors, fundraising function, individual donors, major donor campaign, nonprofit development director, nonprofit executive director, nonprofit fear of investment, nonprofit financing plan, nonprofit fundraising, nonprofit fundraising plan, nonprofit return on investment

How Nonprofits Can Thrive While Awaiting Economic Recovery

After 3+ years of a difficult recession it looks like the economy might be starting to turn around. That’s great news. But for the nonprofit sector, which is always the first hit by and last to rebound from a recession, it might still be awhile until they enjoy the looming economic recovery. But it does no good for nonprofit leaders to throw up their hands and curse the economy. Instead, nonprofits should seize this opportunity to rethink how their organization brings money in the door.

There are some key things nonprofit leaders can do to create a sustainable financial model in the midst of lingering economic uncertainty:

• Take a Step Back. Stop putting your organization in the “fundraising” box and take a big step back. Figure out an overall financial model for your organization that connects with your mission and your organization’s core competencies. Don’t just go through the regular fundraising motions (direct mail, events, grants). Rather, analyze how to create a long-term financial model for your organization.
  




• Harness Your Board. Your board of directors ideally is a group of people who bring connections and expertise that could help your organization. Tap into that. Educate them on what your organization needs and brainstorm how they can help. Now is not the time to be shy. Be strategic about what your board can do and get them to do it.




• Create a Plan. If your organization doesn’t have a strategic plan and a revenue plan, create them. You raise money by being strategic, first about what your organization is and does, and second about how you are going to create sustainable revenue streams. People give to causes that they care about, and they give even more money to organizations that are strategic about what they do and how. A good strategic plan is an invaluable tool around which you can build investment. And a good revenue plan gives you a step-by-step way to generate money.




• Reallocate Resources. As a nonprofit organization you have limited resources (money, staff, technology, time) with which to raise money. You want to make sure that the effort you put in has the highest return on investment. Calculate the direct and indirect costs of every revenue-generating activity and determine the real net income you generated. Are there better, more effective ways to raise more money for less cost and effort?




• Use Technology. Move your communications with donors and prospects online. You’ll save money and have a better chance of getting more and bigger gifts. Send email newsletters, campaigns, event invites. Survey your donors. Create an online community through social media where people can get to know your organization and become involved. People will become more interested in your work and more invested in the organization.




• Learn from the Best. Now is the time to learn from others, get a fresh perspective, find a mentor or coach for your Development Director. Use social media to find interesting and innovative people and ideas. Talk with your fellow social change leaders locally, nationally and internationally. Attend online conferences and webinars. By getting out and hearing what others have done and how they have innovated you will find new ways to grow revenue.




• Strengthen Your Case. Money is raised around a case for support. It can be tempting when times are tough to fall back on a message of need. “We need to raise $50,000.” But the better way is to clearly connect donors with the change you are creating in the community. If you don’t have a case for support write one. If you have one, revisit it and make sure that it is compelling, clear, concise, inspiring. Invest donors in the change you are creating.




• Clone Your Best Donors. When you are struggling to find new donors, go back to the source. Dig into your database to determine the characteristics (demographics and psychographics) of your best (most years of giving, biggest dollar, greatest upgrade) donors. Then survey them (formally or informally) to find out why they give, what messages resonate with them, what they read, where they get their information. You want to understand how they tick so that you can find others like them.




• Diversify Your Funds. When one revenue stream (or several) are down, you want to be able to draw on other streams. Are there other revenue streams you could launch or strengthen? Have you explored earned income? Could you grow your individual donor base? There are many ways to raise money and always potential for new avenues. Explore whether some of these make sense for your organization.

Things may be looking up, but it’s going to be awhile for the nonprofit sector. Instead of waiting around for a better economy, make some significant changes now to how you raise money. In so doing you’ll be turning this challenge into a tremendous opportunity for your organization.

Tags: case for support, cost of fundraising, fundraiser, nonprofit board of directors, nonprofit donors, nonprofit earned income, nonprofit fundraising, nonprofit fundraising events, nonprofit social media, nonprofit strategic plan

What Social Value Do Nonprofits Really Create?

This post originally appeared on the Change.org Social Entrepreneurship blog earlier this year.

There is a concept that good entrepreneurs know only too well, but nonprofits could stand to explore. A “value proposition” is the unique value a product or service provides a consumer. Without a value proposition a business has no place in the market. For a nonprofit, a social value proposition is just as critical to success, but often ignored. In an increasingly competitive marketplace, due in part to the growth of for-profit social entrepreneurs, nonprofits must analyze, articulate, and deliver on a social value proposition.

In the past, nonprofits could exist without a value proposition. Donors wouldn’t argue that a library, homeless shelter, food pantry or school provided a necessary service. But as we move further down the road of social innovation, the assumption that money will automatically follow good works is no longer valid.

The issue is complicated by the fact that nonprofits have two sets of consumers: those who benefit from the product or service (clients) and those who buy the service (funders, investors, philanthropists). There is increasing competition for both sets of consumers.

In order to attract the consumers who buy services (and who, by the way, increasingly want a social return on their purchase) nonprofits must articulate the value that the consumer (donor, investor, philanthropist, sponsor, whatever you want to call them) receives by writing a check.

In the nonprofit sector the closest thing to a value proposition has been a case for support. But when this is created (which isn’t often) it tends to focus on the organization and its needs rather than on the potential social return on investment for the funder. A good value proposition articulates how an organization is uniquely positioned to create significant social impact that is much greater than the costs associated. It involves an organization analyzing, understanding and delivering on three very important things:

1. Capability: What is the organization uniquely positioned to provide to the community (the marketplace). Why is this organization better positioned than other organizations (nonprofits, for-profits, government) to deliver it?




2. Social Impact: What change is the organization creating in the community, region, world? Why is this significant? Why should/will consumers (funders) care?




3. Cost: How do the costs of the service being delivered compare to that social impact? Is there a social profit being achieved, i.e. are the costs involved in delivering the service significantly less than the benefits? Will a funder (who is paying these costs) receive a significant social return on their investment in the organization?

A value proposition is less about a well-articulated statement and more about an organization’s ability to think through these questions and really understand the marketplace in which they operate. More and more the nonprofit that can effectively execute on a social value proposition will find the financial stability that ultimately leads them to create lasting social change.

Tags: case for support, nonprofit competition, nonprofit strategy, nonprofit value proposition, social impact, social return on investment

7 Things Board Members Can Do To Raise More Money

I am often asked by exhausted board members and executive directors what the board can do to raise more money. My answer, let me tell you right away, is NEVER to launch a new event.  Don’t get me started on my anti-events rant, that’s another post.

But there are other things that board members can do to raise significantly more money for their organization, in a much more effective way.  Here are 7 to get you started:

1. Invest. Make a significant financial investment in the organization.  This is so obvious, yet rarely does a nonprofit organization enjoy 100% giving from their board.  And those that do, often have several board members who are only making “token” gifts.  If the nonprofit on whose board you serve isn’t on the list of your top 3 nonprofits and you aren’t allocating your philanthropic dollars accordingly, then get off the board.




2. Open Doors. Open up your network to the organization. We all have friends, colleagues, co-workers, family members, neighbors.  They may not all be $10,000+ level givers, but you would be surprised at the capacity that probably does exist there.  If you really believe in the organization, then spread the word about your involvement to your network and encourage them to become involved.  If you’re uncomfortable doing this then perhaps you need to rethink how committed you are to the organization.




3. Get Strategic. Demand that your nonprofit create a strategic plan. Without an articulated direction and a strategy for getting there how are you going to get donors to invest? So many nonprofit organizations operate without a plan, and that’s probably why they struggle to raise funds. People donate to a cause, but they invest in a executable strategy for impact.  The former results in small gifts, the latter brings big dollars.




4. Expand the Revenue Model. Often nonprofit organizations take a narrow approach to thinking about bringing money in the door.  They may have a direct mail campaign, get some government and foundation grants and call it a day. Instead, take a bigger picture view of the business that you are in and the various ways you could finance, not fundraise for, the end goal. Executive and development directors are often so caught up in the day-to-day of funding operations that they don’t have the luxury of taking this big picture view, but that’s where the board can step in.




5. Fund Revenue-Generating Capacity. Make sure the organization invests in sufficient development capacity. Budget for and find a top-notch development director. Secure outside expertise to create a solid, executable development plan. Train the board on their role in fundraising. Don’t ask the organization to cut corners on development expenses, because you will just pay the price later.




6. Articulate Why Someone Should Give. It’s so obvious to you why you are involved in your nonprofit. But can you articulate that to others in a compelling way? Can you demonstrate how a significant community problem is being solved by your organization? Can you do it in 2 minutes? Can the other board members and the staff do it? If not, then you need to create a case for support.




7. Get the Board on Board. Once you’ve done all of these things, get your fellow board members on the boat. The nonprofit sector is structured to be led by consensus. So it isn’t enough for you as a sole board member to “see the light.”  You have a responsibility to convince your fellow board members that they can’t think small anymore. They have to invest, get strategic, open doors, and so on.  Once you are all on the same page, you will be a force to be reckoned with.

If you are interested in learning more about how to get your board raising money for your nonprofit, check out our Getting Your Board to Fundraise recorded webinar.

And if you want a roadmap for making your board more effective, download the “10 Traits of a Groundbreaking Board” e-book.

I promise you, there is an answer. It doesn’t have to be so hard. Board members can help their struggling nonprofits to find a path toward financial sustainability.

Tags: Board of Directors, case for support, development director, nonprofit, nonprofit events, raise more money

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.

Tags: capital campaign, case for support, Fundraising, nonprofit