It used to be that a nonprofit leader receiving a check from a donor would smile politely, say a big “Thank You” and go on her way. But just as (seemingly) every aspect of the world as we know it is changing, so too is philanthropy. We are starting to question long-held assumptions about how money is given and how it should be spent.
As a nonprofit leader, if you want to start securing and using money in a more strategic way, if you want to move from fundraising to financing, you need to bring your donors along with you.
It is up to you to enlighten your major donors about how they can use money more effectively. So that instead of being merely the recipient of your donors’ largesse, you become a true partner in putting their money to work for real social change, which is today’s topic in the ongoing Financing Not Fundraising blog series.
The Financing Not Fundraising blog series encourages nonprofits to move from the exhausting hamster wheel of fundraising to a long-term, sustainable financing strategy for their work. You can read the entire series here.
We simply can’t sit around and wait for philanthropists to suddenly understand the hurdles nonprofits face. So the next time you meet with a major donor (an individual, foundation or corporate donor with whom you have a one-on-one relationship), make time to have a deeper, different conversation aimed at enlightening them about the realities you face.
Here are some ways to start that conversation with your donors:
“Overhead Isn’t a Dirty Word Anymore.”
The notion that “overhead” expenses, like administrative and fundraising costs, are unseemly in the nonprofit sector is becoming antiquated. Instead there is a growing effort to evaluate nonprofits based on the results they achieve, not the way they spend their money. And effective nonprofits need strong organizations behind their work. Take some time to educate your closest donors about this growing movement to support all aspects (including staffing, systems, technology) of a nonprofit organization.
“These Are The Hurdles Standing In Our Way.”
Let’s face it, most nonprofits struggle with some key organizational challenges. Perhaps you struggle to secure sustainable funding; or you can’t recruit and engage an effective board; or you want to grow, but lack an effective growth plan. Whatever your challenges are, start being more open with your funders about those challenges. It is a risky conversation, to be sure. But I bet that your long-term funders have probably already recognized some of those roadblocks, and your open and honest approach to facing them might start a new conversation about solutions.
“Here Are Some Solutions to Those Hurdles.”
You don’t want simply to tell your donors a laundry list of woes. As my mother always said “Don’t come to me with your problems, come to me with your solutions.” So before you tell your close donors what is holding you back, do your research about how you might overcome those hurdles. If you struggle to bring enough money in the door, perhaps a Financial Model Assessment could help. If you can’t effectively track and communicate with donors, you may need new technology and systems. If you don’t have enough staff to grow your programs, analyze the additional expertise you need and calculate how much it would cost. Put together a thoughtful plan for how you can overcome the obstacles you face.
“Here is How You Can Help.”
Which brings me to the key conversation you need to have to enlighten your donors. You cannot execute on a change plan if you don’t have the resources to do so. That’s where your key donors come in. If you’ve spent the time educating them about organization-building, the key obstacles in your way, and your plan for overcoming those obstacles, then the next logical step is to ask them for help. If you have invested them in the need and direction for change, you are ready to ask them to invest in the solution.
I know it’s difficult for nonprofits and their major donors to have open and honest conversations. But we will never move forward if nonprofit leaders don’t start initiating some difficult, but potentially game-changing conversations with their donors. Indeed, effective social change depends on it.
A new report from the Dorothy A. Johnson Center for Philanthropy and 21/64 gives us the first real glimpse into the minds of the next generation of philanthropists, and it’s fascinating. These are not your father’s philanthropists. Millennial and GenX donors (wealthy individuals, or individuals who will inherit wealth, born between 1964-2000) will control more philanthropic dollars than any previous generation. And more importantly, they think about giving in very different ways than their parents or grandparents did. Which means nonprofits need to pay attention.
This next generation of philanthropists is so critical because it’s estimated that $41 trillion will transfer from the Baby Boom to these next generations in the next 40 years. And since much of this wealth could become philanthropic, some have predicted “a new golden age of philanthropy.”
But it’s not just the unprecedented wealth that makes this new generation of philanthropists so important, it’s the fact that they want to fundamentally change philanthropy. According to the report: “They want to make philanthropy more impactful, more hands on, more networked.”
The key findings from the report are that these NextGen donors are:
- Focused on Impact. “They see previous generations as more motivated by a desire for recognition or social requirements, while they see themselves as focused on impact, first and foremost.”
- Giving Based on Values. “They fund many of the same causes that their families support and even give locally, so long as that philanthropy fits with their personal values.”
- Looking to Be Engaged. “Giving without significant, hands-on engagement feels to them like a hollow investment with little assurance of impact.”
- Paving Their Own Way. “While they respect their families’ legacies and continue to give to similar causes and in similar ways as their families, they are also eager to revolutionize philanthropy.”
This report is further proof of the major trends changing the nonprofit and philanthropic sectors. Given where the sector is heading, there are three things nonprofit leaders should understand and embrace:
- Outcomes are here to stay. In order to compete for funding you must be able to prove the results of what you are doing, what change you are creating. NextGen donors are doing their homework and want to understand what impact their dollars will have. To stay relevant, you need to start by creating a theory of change and then figure out how you can being managing to outcomes.
- Giving has gone social. NextGen donors rely heavily on their social networks to make decisions, including their giving. And they offer their knowledge of worthy causes to their friends as well. So if you aren’t part of the social network you will be left behind. Start to open your organization to become a networked nonprofit and watch your support and influence grow.
- Donors are more than a checkbook. This next generation of donors doesn’t want to just write a check, have their name on a wall and be done with it. They want to really get to know the causes in which they invest. And the word “invest” is an apt one. These donors want to give money, time, mind-share, networks to things they believe in. And if you can employ that passion and investment effectively you will get so much more than just dollars. So figure out how to engage donors in much deeper, more meaningful ways.
This is a really exciting time for philanthropy and ultimately for the nonprofit sector it funds. But it’s up to nonprofit leaders to understand these fundamental shifts and adapt accordingly.
Photo Credit: www.nextgendonors.org
Amid increasing competition for dollars, it is more critical than ever that nonprofits explore new opportunities for money. To help in this effort, I am delighted today to announce our newest step-by-step guide “Creating a Major Donor Campaign,” which joins our growing list of tools to help nonprofits grow and become more financially sustainable.
This guide helps small and mid-sized nonprofits create a strategy for securing major donors–those wealthy individuals, corporate leaders or foundation officers who you get to know on an individual basis in order to convince them to invest in your organization.
What constitutes a major gift varies by nonprofit organization and depends on the size of the organization and the depth of their donor base. It could be as little as $100 for a small, grassroots organization and as large as $1,000,000 or more for a large, established organization. But this guide will help you determine that and much more.
Typically major donor campaigns are undertaken by larger, older nonprofit organizations. But I believe that any nonprofit organization can turn their board and staff into an army that can secure larger gifts.
Which is why I created this guide. The guide gives you concrete strategies for how to:
- Get your board involved
- Organize your staff
- Find prospects
- Establish a major donor fundraising goal
- Ask prospects for gifts
- Thank donors
- And much more
At the end of each section of the guide, the “Your Major Donor Plan” part walks you through a series of questions or tasks. Your answers there become the basis for your final Major Donor Plan. Your plan will organize your staff and board to raise major dollars for your nonprofit.
This 15-page guide is broken into the following 6 sections:
Section 1: Major Donor Goal
Section 2: Finding Prospects
Section 3: Moving Prospects to Donors
Section 4: Staff and Board Roles
Section 5: Building Fundraising Infrastructure
Section 6: Operational Plan
My hope is that this guide shows small and medium sized nonprofits that major gifts are not out of the realm of possibility for them. To the contrary, major gifts could be the missing link to a bigger, better, more effective organization.
For most small and medium sized nonprofit organizations there is a huge untapped revenue potential in individual donors. But, as this month’s Reader Question pointed out, many nonprofit leaders don’t know how to find those donors.
And many others don’t realize that individual donor dollars are a much bigger opportunity than foundation grant dollars are. When I speak to groups of nonprofit boards and staff, they are often shocked when I reveal how money flows to the nonprofit sector. Thinking that foundation grants are the holy grail of funding, many nonprofits hire a grant writer and spend countless hours and resources chasing highly competitive grants. But the fact is that barely 2% of the money flowing to the nonprofit sector comes from foundations. A much larger portion, over 11%, comes from individuals.
Individual donor fundraising can help diversify a nonprofit’s funding picture, and major donor fundraising in particular, which requires a one-on-one relationship building model, can be a great way to systematically expand a nonprofit’s network and funding. It is also the highest and best use of a board member’s fundraising time.
To help nonprofits understand individual donor fundraising and how to get their board and staff moving in that direction, the next webinar in our ongoing Financing Not Fundraising webinar series focuses on how to bring individual donors in the door.
The “Finding Individual Donors” webinar will give you tools and strategies to:
- Define a major gift for your organization
- Use social media to connect with individual supporters
- Create events that resonate with individual donors
- Identify prospects
- Engage your board in individual donor fundraising
- Create a system for engaging individual donors
- Launch a major donor campaign
- Break an individual donor dollar goal into pieces to make the goal achievable
If you want to attract individual contributors to your nonprofit, but don’t know how to get started, or if you would like to expand the individual donors you already have, this webinar will show you how.
Financing Not Fundraising: Finding Individual Donors
On Demand Webinar
The registration fee will get you:
- A link to a recording of the webinar, which you can watch as many times as you like
- The PowerPoint slides from the webinar
- The ability to ask additional follow-up questions after the webinar
Photo Credit: HikingArtist.com
Last month I launched a new regular series on the blog called Reader Questions. I receive so many great questions from readers that I decided that at least once a month I would pick a reader’s question to answer. It can be about anything related to nonprofits, social entrepreneurship, boards, financing, fundraising, social innovation, philanthropy, you name it.
This month’s question comes from a nonprofit leader in Hong Kong. But his question is universal:
Congratulations on this great idea! Also for the excellent training given by your Webinars. I have one question–I am working in Hong Kong in a charity. Our goal is to organize a fundraising office here. As you may know, Hong Kong is a place where most of the people speak Cantonese. I speak English, and my staff is very limited–we are two. We are trying to develop our major donor program but it is quite difficult for us to expand and grow our portfolio of major donors. Any advice about how to expand our major donor list?
Thank you for your answer.
This is a great question and one on the minds of many, if not most, nonprofit leaders. Major donors can sometimes seem to be the holy grail of the nonprofit world. In order to expand your major donor list, you need a network of more than just you and your fellow staff member. The first place to look is your board. If correctly trained and successfully integrated into an overall major donor process, the board can instantly expand your network, your knowledge base and your ability to secure major gifts. And especially in your case, they can expand your ability to reach beyond your own language and cultural networks.
There are several steps to finding major donors for your organization.
- Define a Major Gift. Your organization’s major donor level completely depends on the size and capacity of your current donor base. A major gift for a nonprofit is a level at which you have a few donors, so it’s not outside the realm of possibility, but most of your donors reside below that level.
- Create a Goal. Once you have defined a major donor level you need to develop a major donor goal. How much are you currently raising at and above the major donor level you have just defined? What level of investment are you willing to put into this effort (additional staff, materials, database, etc)? Given that investment how much do you think you can grow those major donor gifts in this first year?
- Break the Goal into Pieces. If you want to raise, say $100,000 from major gifts in the first year, you need to determine how those gifts will come in. You should get a lead gift of 10-20% of the goal, so your lead gift would be say $15,000. And then develop gift amounts at each levels below that, $10,000, $5,000, $2,500 and so on. You determine how many prospects to ask by the rule of thumb that it takes 4 asks to get a yes.
- Create a Prospect List. Prospects must meet 2-3 of the three “C”s: 1)The Capacity to give a gift at or above your major donor level 2) A Concern, or interest in your mission and 3) A Connection to someone at the organization. So don’t just put together a list of anybody and everybody, work with your board, friends, other donors to the organization, staff, volunteers to brainstorm names of people who fit 2 or 3 of these criteria.
- Begin to Cultivate. Once you have a list of people who meet 2 or 3 of the Cs, start to get to know them and let them get to know you and your organization’s work. Invite them for a tour, a meet-and-greet, a friend raiser. Start to develop a relationship.
- Make a Compelling Ask. When you think they are ready, make an in-person, specific ask in an amount that you think is right for them, for a project that fits with their interests. Make sure that you have a compelling case for investment that you draw upon in order to convince a major donor prospect to invest.
If you want to learn more about finding major donors, watch our Finding Individual Donors webinar or download our Creating a Major Donor Campaign step-by-step guide.
Securing major gifts doesn’t have to be so hard, even for a very small staff. As long as you have a broader network of people willing to be involved, a compelling case for investment, and a systematic process for moving prospects to donors, you can find major donors. Good luck!
Photo Credit: Mykl Roventine
When I went to get my mail today, I was reminded how some nonprofit organizations simply refuse to change, despite how ineffective their status quo is. In today’s mail was one of four fundraising appeals per year that I receive from a national nonprofit. A nonprofit, I might add, that I haven’t given to in 11 years. I won’t mention the nonprofit’s name because they are a great organization doing important work. I don’t fault their mission or their execution, but I do take issue with their inability to effectively analyze their fundraising activities.
Nonprofits no longer have the luxury of doing what they have always done, simply because they have always done it. Now more than ever, nonprofits need to take a step back and determine when they should invest limited resources in an activity and when they should not.
I made a $50 donation to the local chapter of a national nonprofit when I lived in Washington DC in 1998. A few weeks after my initial donation I started receiving a new appeal from them every two weeks. I found it a bit annoying, but still believed in the organization. So the next year I made another donation. When the appeals continued to come several times a month, month after month, I became increasingly frustrated. I decided the following year that my money was better spent on an organization that used their resources more effectively. However, this nonprofit wasn’t willing to let me go.
For the next two years I continued to receive the same number of appeals, but they stepped up the barrage by including small gifts as an incentive for me to donate. They would sometimes include 4-color brochures about additional gifts I would receive if I gave at certain levels. Aside from the fact that “buying” my donation was completely distasteful to me, I was appalled that they were spending so much money trying to get a small donation from me.
Three years after my last donation to this nonprofit they slowed their appeals, but I was still receiving at least 4 letters per year. To this day, and after 3 moves and 2 new cities, that rate of appeals continues, often with expensive brochures and token gifts included. Today I received the second quarter appeal for 2011 from them. It is appalling to me that they have wasted so much time, energy and resources on me when I clearly demonstrated, 11 years ago, that I was no longer interested.
The sad part is not that they spent all of my donation and more on trying to get more money out of me, as opposed to working toward their mission or building their organization. The truly sad part is that I could have easily become a lifelong donor, perhaps even a major one. To this day I still believe in and admire the work they do. But the fact that they can’t figure out how to raise money effectively completely turns me off. And I don’t think they even realize what they are doing to their donor base. They have demonstrated no interest in getting to know me as a donor or recognizing when I clearly tell them how to treat me.
The nonprofits that are going to attract and retain donors who provide the long-term financial sustainability necessary for achieving real social impact are those that are:
- Constantly evaluating the ROI on their revenue-generating activities and abandoning low return activities
- Getting to know their donors and communicating and interacting with them in a way that meets the donors needs and interests
- Connecting their revenue-generating activities to their mission, not to gimmicks and gifts
- Expanding into new distribution channels (social media, e-marketing, friend-raisers) instead of relying on what they have always done to acquire donors
- Continually improving, constantly pushing themselves to get better, more effective and more efficient
I doubt that my nonprofit stalker has found long-term financial sustainability and really, it’s little wonder why.
Photo Credit: BJ Carter
There is a holy grail in the world of nonprofit fundraising that eludes most organizations. And that is, how to attract individual major donors. Everyone wants them, but few organizations know how to actually find them. However, if you are strategic and systematic, it doesn’t have to be that hard.
Here are the steps to an major individual donor campaign:
- Define a major gift. A major gift is not the same for every nonprofit. A major gift for your organization is a level at which you have a few donors already, but below which the vast majority of your donors are. For some organizations this is $50, for others this is $1 million. It completely depends on the size of your organization and the level of your donor base.
- Create a goal. If you don’t have a dollar goal for how much you would like to bring in this year in major gifts, chances are you probably aren’t going to bring in much. Set a stretch goal for the organization that everyone (board, staff, volunteers) can believe in and contribute to.
- Break the goal into pieces. It’s not enough to say you want to raise $50,000 from major donors this year. You need to break that goal into achievable pieces. Think about what levels make sense for where your current donor base is. Typically you start with one lead gift that is 10-20% of the total goal. Then go down from there, increasing the number of donors you need at each level.
- Develop a prospect list. Be strategic about who could actually be a hot prospective donor to your organization. They have to possess more characteristics than simply having money. Anyone who has money is probably a prospect for every other nonprofit in town. Instead analyze each prospect along three dimensions: 1) Do they have a passion for the cause your organization is about? 2)Do they have some connection to the organization or someone within the organization already? If they have absolutely no connection to your organization, they are a waste of time. 3)Finally, do they have the capacity to give at your major donor level? Have they given similar amounts to other nonprofits? Do they have some disposable income? It’s amazing what you can find out about people through a quick Google search.
- Create a tracking system. A major donor campaign is much like the sales cycle in a for-profit business. You find potential customers (prospects), qualify them (along the three criteria in #4 above), get to know their interests and values through one-on-one meetings, make the ask, and finally thank them and demonstrate what their investment has allowed you to do in the community. This process is called the moves management system, and it is simply a way to track how your organization moves people from prospects to donors in a systematic and strategic way.
- Launch the campaign. The rest is easy. Just get out there with your board and staff and start meeting with people, getting to know them and making the ask.
And remember, this is not just the work of the Executive Director and Development Director. You will not find individual major donors without the help of your board. Each board member must have a role in the campaign. And there is plenty for those who hate to ask for money to do.
It is possible for any nonprofit organization to have major donors. It’s just a question of being strategic and systematic.
If you want to learn more about finding major donors, watch our Finding Individual Donors webinar or download our Creating a Major Donor Campaign step-by-step guide.
Photo Credit: lostintheredwoods
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A new year is always a time to re-evaluate things, to forge a new approach, to finally change something that just isn’t working anymore. In the nonprofit world, how nonprofits and their major donors interact could stand a new approach. It is difficult, if not impossible, to be open and honest with those who fund your work, as Ann Goggins Gregory has pointed out. And sometimes nonprofits feel beholden to donors who are taking the organization in the wrong direction, in this case blogger David Henderson encourages nonprofits to “fire bad donors.”
This disconnect between nonprofits working to solve problems and the donors who fund them can sometimes seem a vicious, unending cycle.
But with a new year comes a new opportunity to alter this pattern. Here’s what nonprofit leaders can do to create the donors they really need:
- Inspire your donors. Make your ask for money from a place of impact, not need. Talk about your bold, ambitious strategies for change. Describe an opportunity so compelling, so invigorating, so inspiring that donors can’t help but reach for their pocketbook and follow where you lead. Part of your job as a nonprofit leader is to paint such a clear, desirable picture of a future goal that it becomes a magnet for the resources needed to get there.
- Ask for more. It’s not a donor’s job to automatically give you as much as they possibly can. Rather, it’s your job to convince them to give until it hurts. When a donor gives you less than you asked for, or less than it’s really going to cost, push back. Don’t just thank them and walk away. If they truly can’t or won’t give more, ask them to help you find a funding partner. If you want donors who share the burden of your work, treat them as such. Encourage them to give more, bigger, better. Not just with their pocketbook, but with their rolodex too. Be honest with them about how they could really make a difference and at what level.
- Command respect as an expert. Donors sometimes carry a hubris that they know best how to spend the dollars they invest in an organization. Work to forge a partnership with your donors that recognizes you and your organization as the solution provider. A donor’s ideas and insights as an investor should be welcome, but at the end of the day you know what is best for your organization, its mission and the impact you are working to achieve. Make sure your donors know that.
- Stop apologizing for administrative costs. Educate your donors about how significant social change can’t be bought on a shoe string. If your donors are committed to the work your organization is doing, then they must invest in the personnel, space, technology, fundraising and other needs that are integral to that work. Don’t let funders only fund “direct program expenses,” as if such a thing even existed. Don’t let your donors make meaningless distinctions that end up crippling your organization financially.
- Educate donors about capacity capital. To take the last point even further, capacity capital (or money for personnel, technology, systems, space) is a new concept for philanthropists who tend to like to fund programs alone. But capacity capital could actually have a much higher social return on investment for donors because it strengthens an organization so that it can create more impact in perpetuity. But donors won’t understand that on their own. You need to make that case. Figure out what it will actually cost to hire the staff, secure the space, buy the technology you need. Then educate your donors about how funding those things could transform your organization and your impact.
It’s exhausting when you lack the donors you really need. But you can’t just wait around hoping they’ll see the light. It’s up to you to transform a mediocre or troublesome donor into a competent and willing partner in change.
Photo Credit: WTL Photos
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