Transforming the Nonprofit Fundraising Function

I see it a lot.  A nonprofit organization is struggling to raise enough revenue.  Their fundraising function, everything that goes into their fundraising effort (development staff, database, website, messaging, collateral, board assistance, etc.), is hobbling along, barely generating enough to keep the organization going.  And especially in times like these when the economy is so poor, fundraising efforts are stretched to the breaking point, held together by band-aid solutions (an Excel spreadsheet instead of a functional donor database, an inexperienced fundraising staff, weak collateral, poor-performing events, need-based messaging instead of impact messaging, and the list goes on).

Nonprofits in this situation might complain  that they would like to do more, they would like to upgrade their fundraising function (who wouldn’t?) but there just isn’t a way to do it.  So they continue on this vicious treadmill of killing themselves just to raise enough to survive.  This reality of financially struggling nonprofits is a result of the fact that the sector is undercapitalized.  It would be wonderful if one day we all woke up and suddenly individuals gave 5% of their income to the nonprofit sector, foundations grew 100 fold, corporations began integrating their giving program into their business model and thus gave significantly more money, and the list goes on.  That probably isn’t going to happen any time soon.

But there is a solution.  Nonprofit organizations can raise “capacity capital.”  Capacity capital is the money required to upgrade the organization’s capacity, or in this case, their fundraising function.  By putting together a plan for how they might upgrade their fundraising infrastructure (hire additional staff, revamp their website, purchase a donor database, upgrade their messaging and collateral, etc.) and then securing investors in that plan they can revolutionize how they raise money and dramatically improve their fundraising results.

But where do these investors come from, especially in times like these?  Right in your backyard.  I have yet to meet a nonprofit organization that doesn’t have at least a handful of people who are passionately committed to the organization.  And those people, when convinced in a compelling way of what it is going to take to increase the organization’s infrastructure and thus their sustainability, are more than likely to want to invest themselves, or connect the organization to people in their network that can invest.

Let me give you an example. When I joined KLRU, Austin’s PBS station, in 2005, their revenue picture was bleak.  Individual donors were declining, much as they were at PBS stations across the country.  At the same time, the number of days KLRU interrupted programming to fundraise on-air had grown to an all-time high, and among the highest in the country.  Online giving was almost non-existent and there were few major or foundation donors. I put together a fundraising function upgrade plan which cost $350,000 over 3 years and included a new donor database and online giving software, a Webmaster, staff training, and market research.  We secured a handful of foundation and individual donors (who were already KLRU donors) to fund the project. The result at the end of 3 years was an increase of $1.6 million in annual operating revenue per year.

Not every nonprofit has access to potential donors with $350K to give, but this same scenario could easily be played out on a smaller, or larger, scale. If you’re interested in learning how to create a plan to upgrade your nonprofit’s fundraising function, check out Social Velocity’s upcoming seminar:

June 23, 2009
8:30am-12 noon

Click Here to Register

Tags: capacity capital, Fundraising, KLRU, nonprofit, PBS

A Strategic Approach to Generating Revenue

The one common frustration shared by the various organizations I work with is money.  How do we get more of it, how do we use it more effectively, how do we generate it more easily, how do we make it sustainable?  My answer to all of these questions is to take a more strategic approach.

I’ve written before about how revenue in the nonprofit sector is often thought about separately from mission and core competency.  It is sometimes (more often than not) viewed as the step child of the true work of an organization.  Money is the stressful, dirty, tireless work that takes an organization away from what they should be doing.

However, if an organization can fully integrate money into their overall organization, it can become a powerful resource which can help the organization do more in a more sustainable way.  But how does an organization get there?

The first step is a comprehensive, easy to implement strategic plan.  When working with organizations, I employ an 8-step process for creating a strategic plan that takes away the mystery and ineffeciency present in many strategic planning processes.

But what does strategic planning have to do with fundraising?  Absolutely everything.  Without a clear vision and direction for an organization–a clear path forward–what donor wants to invest?  No one wants to throw money at a problem.  People want to understand what they are buying, or investing in.  What is the end goal? How are you going to get there?  How do you know this is the right approach?  Even the smallest donor will give more over a longer period of time if they can understand how what they are giving fits into a larger picture and will result in some significant change in their community.  So an overall organizational strategy will reap tremendous financial rewards.

But any effective strategic plan must have an integrated financial plan.  What are the resources at your disposal (staff, technology, buildings, materials, programs), how much will they cost and how will you generate the money to pay for them?  You cannot have a realistic strategic plan without a corresponding financial plan. The financial plan lays out the revenue and expenses over the period of the strategic plan.  What is it going to cost to get to your goals (expenses) and how will you pay for them (revenue)? Going back to the critical importance of aligning your mission, resources and core competencies, you must weigh your expenses against your realistic ability to raise that amount of money.  Can you really raise enough money, given where you are right now, to meet all the goals of your strategic plan?  If not, then one of two things has to change. The first option is to limit the goals of your plan to make them more affordable.  The second option is to increase your revenue engine to meet the cost of these goals.  Therefore the strategic plan and financial plan have to be created in conjunction with each other.  It is a back and forth process where one plan feeds and is altered by the other.

Once you have a realistic financial goal, you need to create the annual revenue plan to get there.  Notice I didn’t say “fundraising plan.”  Nonprofit organizations need to elevate how they think about the money required to reach their organizational goals.  Fundraising, raising money from private sources (individuals, foundations, corporations), is just one part of the revenue options available to nonprofits.  Other options include: earned income (selling a product or service), government grants, fee for service, corporate sponsorships, debt, growth capital, and so on.  By using the term “revenue plan,” as opposed to “fundraising plan,” a nonprofit begins to explore other revenue opportunities.  That is not to say that every nonprofit should explore every revenue opportunity.  Nonprofit organizations do, however, need to expand their options.

Just like a strategic plan, a revenue plan should have 3-5 broad goals.  So, perhaps you break your revenue types into 3-5 buckets.  Then create the road map for hitting those revenue targets in each area.  What infrastructure needs to be in place, what campaigns will you take on, how will you go about bringing that money in the door, who is responsible for each activity, what is the timeline?  And you begin to craft a comprehensive revenue plan.  It can seem like an overwhelming process, but if you are strategic and systematic about it, you can break an overwhelming goal down into manageable chunks and pretty soon you are raising more money that you thought possible.  I did this at KLRU, increasing annual operating revenue by $1.6 million.  And I’m helping several of my clients create and implement similiar revenue plans.

There is a way, even in the midst of a recession, to generate the money necessary to achieve your goals.  But it requires an integrated, strategic approach.

Tags: financial plan, Fundraising, KLRU, Nonprofits, revenue, strategic plan