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Development

What’s Holding Your Nonprofit Back From Raising More Money?

It is the ultimate question for many nonprofit leaders. But often one that they can’t answer on their own. Perhaps because nonprofit leadership may be so mired in the weeds, or so used to doing what they’ve always done, or simply lack fundraising expertise or  knowledge of new trends and tools. The end result is that they simply can’t figure out how to raise money in new and better ways. Which is where a revenue assessment can turn the tide.

Let me give you an example.

Institute for Human Services (IHS), a large social service agency for homeless men, women and children in Honolulu, Hawaii, enjoyed success in government grant funding, but had been unable to diversify their funding as much as they would like in individual and corporate areas. At the same time, their small fundraising staff was over capacity and struggled to keep up with the volume of work. The board of directors was eager to help fundraise but didn’t know the best way to get involved.

The organization knew they had the opportunity to raise more money, but didn’t know how to prioritize their resources to do so.

IHS hired Social Velocity to conduct a revenue assessment to find opportunities for growing their funding. I interviewed board, staff and external funders to get their insights about fundraising at IHS. Then I reviewed organization financials, materials, technology, staffing, planning, and other processes. From this analysis, I wrote a 30-page analysis with specific recommendations for improving fundraising in each revenue area and presented my findings to the staff and board.

With Social Velocity’s revenue assessment, IHS has hit the ground running making improvements to their fundraising function. They have already hired a new Development Director who has been able to shoulder more of the responsibility for fundraising, freeing the Executive Director to participate in more donor relations activities. They are looking forward to reviving past donors through more targeted fundraising strategies, caring for existing donors and creating broader opportunities for constituents to support the mission more personally. The staff and board are energized by the specific fundraising role and responsibilities I outlined for them. The assessment really turned the tide for them, as executive director Connie Mitchell explained:

The analysis and recommendations turned on the light bulb for me about how an investment in one key development staff could multiply our results over a short time. We’re also confidently using our resources more wisely for a better ROI when it comes to fundraising tools and media strategies.

A revenue assessment is for nonprofit organizations that know they want (or need) to raise more money, but don’t know how to get there. Here are the steps I go through in a nonprofit revenue assessment:

  1. Interview Stakeholders. I conduct in-depth, one-on-one interviews with the executive director, key staff, key board members, and key funders and other external constituents to understand what is working and what isn’t.

  2. Review Documents. I analyze all organization documents, policies, procedures, financials, systems, and materials to understand the internal and external processes for raising money.

  3. Assess Organization. I look at 6 elements of the organizational structure (mission and vision, strategy, operations, etc) to determine how well they contribute to fundraising effectiveness.

  4. Analyze Revenue Streams. I look at all current and potential revenue streams to uncover opportunities for increases.

  5. Review Fundraising Infrastructure. I 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.

  6. Deliver Analysis and Recommendations. I write  a 15-20 page detailed analysis with recommended actions for increasing funding streams.

  7. Present Assessment. I present the assessment and recommendations in-person to staff and board for questions and discussion.

It doesn’t have to be so hard. A revenue assessment can give you a clear road map for moving your organization from financial insecurity to long-term financial sustainability.

To learn more about Social Velocity’s revenue assessment, check out our Revenue Assessment Consulting Service, or email us at info@socialvelocity.net.

Photo Credit: Julia Manzerova

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Can PRIs Support Fundraising and Capacity Building?

Lucy Bernholz is hosting a great conversation on her Blueprint Research and Design website called “What Capital When?” As part of their work with the John D. and Catherine T. MacArthur Foundation in their Digital Media & Learning initiative, Blueprint is hosting this online conversation around the theories and strategies of program-related and mission investing to advance knowledge and research in the field. They asked that I do a guest post on using PRIs (program related investments) to improve the fundraising effectiveness of nonprofit organizations. Below is that post. You can also read the post on their What Capital When site here, and you can read the whole series here.

I think there is a tremendous opportunity that most foundations and nonprofits are missing.  PRIs (program-related investments) are an under-used tool that could provide much needed capital for nonprofits to transform how they finance social impact.

PRIs are loans that foundations make to nonprofits at low, or no interest.  At the end of the loan period (typically 3-7 years) the loan is repaid, or forgiven.  PRIs are usually used for capital projects or land purchases in the nonprofit world.  But they could also be used to increase the fundraising capacity of a nonprofit organization, through increased fundraising knowledge, planning, tools and staffing.  The current economic climate seems like the perfect opportunity for this new use of PRIs when foundations are trying to hold on to their dwindling corpus while maintaining their past level of community support.

A nonprofit could use a PRI to improve their fundraising infrastructure in several ways:

  • Create a strategic development plan. Many nonprofits don’t have the expertise or time to put together a strategy for how they will bring money in the door.  With funding to hire an outside consultant to put together such a plan, the nonprofit would have a much better chance of increasing their fundraising revenue.
  • Get fundraising training for their staff and board. If a nonprofit staff and board have the tools and expertise for successfully raising money, they will be more likely to do so.
  • Hire a seasoned Development Director. Many nonprofit organizations can only afford to pay the bare minimum for a Development Director, which means that they are often forced to hire someone with little experience who must learn on the job.  If instead they had enough funding to pay a market rate salary for a seasoned fundraiser, they could hit the ground running, increasing the likelihood of fundraising success.
  • Purchase a new donor database. A key element to success in individual donor fundraising is an organization’s ability to capture and use data about donors and prospects.  A good donor database makes this effort easier and more successful.
  • Upgrade their website, email marketing, social media efforts. As direct mail appeals (a nonprofit fundraiser’s traditional standby) continues to become less and less effective, nonprofits need to move effectively into the online world.  Funds for technology upgrades and staff could help them do this.
  • Launch a major gifts campaign. The vast majority of private funding in the nonprofit sector comes from individuals (80+%), so to stay competitive nonprofits need to move into the world of major gift solicitation.  But that takes expertise, staff, collateral and other infrastructure elements.

These are just a few examples of how nonprofits could make investments to strengthen their fundraising efforts. But currently it is difficult to find funding to support things like this.

But a PRI could provide an initial investment that sets the nonprofit on a path toward more diversified, more sustainable fundraising for the social impact they are working to create.

There are tremendous benefits to a PRI program like this.  First, for the foundation:

  • Increases their ability to meet past levels of giving, despite any losses they might have found in the market, because the loaned money will eventually come back to them.
  • Encourages their nonprofit grantees to be proactive in creating fundraising streams that will make them more sustainable.  Thus, increasing the likelihood that their nonprofit grantees a) won’t have to come back to them year after year for ongoing support and b) will become more sustainable and thus achieve greater social impact.
  • Stretches their capacity-building dollars further. Because PRI money eventually comes back to the foundation, they can increase their level of impact by helping more nonprofits improve their capacity than they could with grants alone.
  • Increases the level of accountability among nonprofit recipients because of the expectation of repayment.

And second, for the nonprofit:

  • More diversified and sustainable fundraising streams.
  • Increased fundraising knowledge and experience.
  • Increased ability to work towards social impact.

Although PRIs used in this new way seems, at least to me, to be an obvious win-win, very few foundations are doing it.  PRIs in general are used (according to the Foundation Center) by only a few hundred of the thousands of grantmaking foundations in the country.  And I know of only one example of a foundation using a PRI to upgrade the fundraisng capacity of a nonprofit (the KDK Harman Foundation in Austin just launched a program like this last Fall, but does not yet have any participants).

So what is holding foundations back from launching a PRI program like this?  A number of things:

  1. Nonprofits lack the expertise to put a plan together and pitch it to foundations. This is where Social Velocity comes in to help nonprofits create a plan to upgrade their revenue function and pitch that plan to foundations and other funders.
  2. Most foundations  have an aversion to capacity building funding and prefer that their money go to direct program service.  However, as more nonprofits can demonstrate to funders that capacity building actually results in even more impact, this aversion can be alleviated.
  3. Foundations lack awareness of or experience with PRIs.  However, this is changing, especially in the last year when the poor economy has made foundations increasingly interested in finding alternative ways to maintain community investment levels.
  4. Foundations that are experienced with PRIs are not aware of using them to improve a nonprofit’s fundraising function.

So there is a disconnect.  But I am optimistic that as nonprofits learn to put a plan together to upgrade their fundraising function and articulate to funders how PRI’s could finance it, more examples of this new use of PRIs will surface.


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