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nonprofit funders

How to Rebut Crazy Donor Demands

frustrationNote: I’m out of the office this week, so here is a blog post from the Social Velocity archives. This post originally appeared on the blog in April 2012.

One of the biggest challenges the nonprofit sector faces is the sometimes dysfunctional relationship between nonprofits and their funders. I’ve talked before about how nonprofits should stop lying to their donors. But now I want to discuss the flip side of the issue–how to respond to some of the crazy things donors demand.

I firmly believe that nonprofits should not sit idly by when donors make crazy demands or give impossible instructions. It is the responsibility of a strong nonprofit leader to stand up to their donors and help educate them about the realities of the sector.

So the next time one of your donors throws one of the below at you, here’s how you can respond:

When a donor says: “Don’t spend any of my money on fundraising or infrastructure.”

Respond with:

“It might seem more effective to have all of your gifts go to support direct services, but actually those services will be stronger and more sustainable if there is a healthy, effective organization behind them. That means our organization needs a capable, well-trained and paid staff; a sustainable financial engine; adequate equipment, systems and space; and efficient technology. Occasionally you might think about supporting those infrastructure items so that your program gifts can go even further.”

When a donor says “I want to know exactly how every penny of my money was spent.”

Respond with:

“I hope that you are investing in our program and our management team because you believe ours is the right solution to this social problem, and we are the right team to execute on that solution. We will be happy to provide you, on a regular basis, results about how the program grows and the impact it achieves, but the kind of extensive, detailed, and funder-specific reporting that you are requiring would take us away from delivering the program and creating impact, and I know you don’t want to do that.”

When a donor says “I won’t fund your program without proven results, but I won’t fund an evaluation study.”

Respond with:

“When you say that you are putting our organization into a catch-22 of needing a key element to get funding, but not having the funding to get the key element. It’s an unwinnable situation. We would love to be able to demonstrate the kind of results you are requesting. However, we have not yet identified a donor or group of donors who is willing to fund that kind of project. Would you be willing to lead an effort to get a small group of funders together to fund such an important evaluation study?”

When a donor says “I want your nonprofit to make huge changes from my $10,000 gift.”

Respond with:

“We agree that the change you would like to see is very exciting. We have done our research on the type of change you would like to see and it would cost approximately $100,000 [insert the correct figure] to bring to fruition. Is $100,000 a gift you would like to make to our organization? If not, would you be willing to identify a group of funders who could join you to fund this change? And if not, then we would gratefully accept your $10,000 gift to support our regular program operations.”

 

We have to create the nonprofit donors we want to see in the world. When a donor makes an unrealistic demand, use it as an opportunity to educate them about the reality of the nonprofits they support. In so doing, you are creating a better donor for the whole sector.

Photo Credit: Zach Klein

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5 Things Nonprofit Donors Can Do to Transform the Sector

Nonprofit donors, particularly foundations and wealthy individuals, have an enormous amount of power in the sector. Sometimes they use that power for good and sometimes (often unknowingly) they use it for ill. And because of the power imbalance between funder and fundee, it is unusual that anyone ever tells nonprofit donors what they could do to really help the sector and the organizations they love.

So here are the five things I would LOVE to see more nonprofit donors do. And if they did, it might just transform the sector.

  1. Take Risks
    The higher the risk, the higher the potential payoff. A nonprofit organization may not be able to guarantee the outcomes or numbers that they are projecting, but you can’t realize big numbers and outcomes without taking risks. What if instead of always taking the safe route of investing in well-proven programs, you took a chance every once in awhile and funded a new innovative solution? What if you set aside a portion of your giving to invest in those crazy, bold, awesome new ideas? Because the complex problems we are facing require completely new solutions, and those require risk.

  2. Provide Capital
    I know I sound like a broken record sometimes but a nonprofit can not survive on revenue alone. Every once in awhile a nonprofit organization needs money to build or strengthen their organization. Money for technology, systems, staffing, evaluation. You may not think these things are sexy, but they are incredibly necessary. Because how in the world can you have an effective, efficient program if you have no mechanism for tracking data, or evaluating results, or streamlining systems?

  3. Provide Patient Capital
    If you make an investment in something risky or in building an organization, that investment takes time to pay off. You cannot expect a nonprofit to execute on a change plan in a couple of weeks or months. The bigger the investment and change you seek, the longer it takes to see results. Take a deep breath and let your investments pay off, over time.

  4. Leave Your Ego at the Door
    Oh please, please, please don’t assume that just because you have money you have all the answers. Most nonprofit leaders are program experts who have been working on their particular social problem for some time. They may not have all the answers, but they probably know more than you do. They live in the trenches. That’s not to say they shouldn’t be open to new ideas, questions and insights, they absolutely should. But at the end of the day, invest in them and get out of the way so that they can do what they do best.

  5. Support the Sales Function
    We all understand that in the for-profit world a business can’t exist if it doesn’t have a process for selling the products it creates. And that process takes money. Whether you hire a sales team, or do advertising, or shout from a megaphone you must have a way to encourage people to buy your product. The same is true in the nonprofit sector. The only difference is that “sales” is called “fundraising.” Nonprofits must have a process for bringing money in the door in order to keep providing programs. And that process has costs–a Development Director, a donor database, materials. Don’t thumb your nose at the sales function. It is absolutely critical to the success of the organization. So help fund it once in awhile.

God love them, but sometimes nonprofit donors drive me nuts. Their hearts are in the right place, there is no doubt. But if we could encourage them to provide more risky, patient, self-less capital it could transform the sector.

Photo Credit: yellowmeansgo

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Fall Webinar Lineup for Nonprofit Leaders

I’m delighted to unveil the Social Velocity Fall Webinar Lineup. I received an amazing response to my call for webinar ideas last month with lots of really great ideas. Thanks so much to everyone who submitted an idea. Four lucky winners had their ideas chosen and will be receiving a free registration to the webinar they suggested.

Below is the lineup for this Fall. In addition to continuing to add to the Financing Not Fundraising webinar series, we are also adding other nonprofit management webinar topics. These include “Moving Beyond Your Nonprofit’s Founder” about overcoming founder’s syndrome and creating a succession plan for your organization, and “Leading Difficult Conversations with Funders, Board Members and Employees” that will help you be more assertive in telling people what they need to hear.

And remember if you can’t make the date or time of a live webinar, all of our webinars are recorded and available 24-7 as on demand webinars. So you can still sign up and get everything you would get if you could be there live. Similarly, don’t forget to check out our library of past webinars. You can see the entire list of upcoming and past webinars here.

When you register for a live or on demand webinar, you will receive:

  • Access to the live, interactive webinar (live webinars)
  • 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 (on demand webinars)

And we are constantly adding new webinars to the list. If you have a new webinar idea email us at info@socialvelocity.net.

Financing Not Fundraising: Calculating the Cost of Fundraising
On Demand

Key to any smart nonprofit financing strategy is an analytical approach to focusing on your most profitable activities. To do this, you must know how to calculate the cost of fundraising for every revenue-generating activity your organization engages in. This webinar will help you:

  • Calculate the return on investment of all your revenue-generating activities
  • Give you the net revenue raised and cost to raise a dollar formulas you need
  • Analyze which are effective fundraising activities and which are not
  • Articulate to board and staff why this analysis is important
  • Provide case studies of other nonprofit ROI calculations
  • Give you a process for analyzing and categorizing all of your fundraising activities

Moving Beyond A Nonprofit’s Founder

Founder’s syndrome is a real problem in the nonprofit sector. It happens when the organization’s founder, or a leader who has been there for a long time, becomes the sole decision-maker. And even if a nonprofit isn’t suffering from founder’s syndrome, they likely don’t have a succession plan in place for what happens if or when their leader leaves. The lack of a succession plan or an over-reliance on a founder puts an nonprofit’s future at great risk. Nonprofits must learn how to vest leadership not in one person but in the broader organization. This webinar will help nonprofits to:

  • Determine if they are suffering from founder’s syndrome
  • Move organization leadership from one person to a more sustainable, diversified leadership model
  • Create an effective succession plan
  • Communicate the plan to funders and other external stakeholders
  • Integrate your succession plan into your strategic plan

Financing Not Fundraising: Creating a Financing Plan
On Demand

If you want to move your nonprofit from the exhausting hamster wheel of fundraising to a sustainable financing model, you need a financing plan to get there. This webinar will help you create an overall financing plan to bring enough money in the door to achieve your mission, including:

  • All revenue streams flowing to the organization
  • A strategy for funding programs and operations
  • Opportunities to raise money for infrastructure
  • Tactical steps with activities, deliverables, people responsible
  • How to divide tasks by staff and board members
  • Ways to monitor the plan going forward

Leading Difficult Conversations with Funders, Board Members and Employees

Let’s face it, leading a nonprofit organization can be a very lonely, thankless job. And it often involves really hard conversations like telling a funder you can’t launch that new program, asking a board member to resign, correcting or firing an employee. But in an increasingly resource-strapped environment, your job demands more of these hard conversations. This very interactive webinar will give you tools to respond in these tricky situations. Participants can submit scenarios ahead of time, as well as during the webinar itself. Learn how to approach sticky situations in an assertive, graceful way, while positioning your organization to thrive. This webinar will give you:

  • Concrete language to use with funders, board members, staff and others
  • Case studies and examples of difficult situations
  • A process for thinking through future scenarios and focusing on what’s best for your nonprofit
  • A forum for putting your toughest situations to the test
  • The opportunity to hear what challenges other nonprofit leaders face

Financing Not Fundraising: Creating an Earned Income Stream

This webinar builds on the earlier Financing Not Fundraising: Evaluating Earned Income webinar. It is intended for those nonprofits that have a business idea and are ready to pursue an earned income stream. This webinar, complete with case studies of other nonprofits that have launched earned income businesses, will show participants how to:

  • Pilot a new business idea
  • Find customers
  • Price products/services
  • Project future business income and expenses
  • Create goals for the business and monitor progress on them
  • Report progress on the business to the board

 

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A Monster List of Social Innovation Books, Blogs, Conferences, Funders

Since today is Halloween, I thought I’d offer a monster list of resources for nonprofit leaders, social entrepreneurs, philanthropists, board members and others involved in creating social change.

The following list comes from the Resources page of the Social Velocity web site. The page includes social innovation conferences, organizations, funders, blogs, books and other things that anyone involved in the social change space should be aware of. It could be a starting point or an ongoing exploration of what’s going on in the space.

We are constantly adding to the Resources page, so if we are missing something, let us know in the comments.

Organizations Moving Social Innovation Forward

Funders

Conferences

Philanthropic Thought Leaders

 

Things to Read

Blogs

Financing Impact

Using Social Media

Being Strategic

Finding Inspiration

Growing Solutions

Leading Well

 

Photo Credit: annabellaphoto

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What Nonprofits Can Learn From Netflix

Even if you aren’t a subscriber to Netflix (the DVD and online streaming video service) you have probably heard about how their bad decisions have cost them thousands of customers in recent months. Although a nonprofit might seem worlds apart from Netflix, there is still much to be learned from their debacle.

Unlike for-profit companies that have only one customer group, nonprofits actually have two. First are those customers to whom nonprofits provide services — their clients. For a homeless shelter these “customers” are their homeless clients. Their second customer group is those who pay for the services — their funders. So for nonprofits, customer management is much more complex. I would argue that nonprofits generally do a good job of understanding and taking care of their client customers. But their second customer group, funders, can sometimes get lost in the shuffle.

Which makes the lessons from Netflix even more important. Here’s what Netflix teaches us about taking care of your supporters:

Listen to Your Supporters
Netflix assumed that their customers were so in love with their services that a 60% price hike wouldn’t phase them. When customers flooded the Netflix blog and took to Twitter to complain, Netflix largely ignored their customer’s anger. Then Netflix was  shocked when customers started leaving in droves. Organizations make mistakes and will at times irritate their customers, the trick is to listen to your customers and quickly correct any missteps. This is particularly important now that social media is so prevalent and is often the first place people go to vent about an organization. Listen to your funders, volunteers, supporters and other community advocates wherever they are and respond to their feedback, concerns, ideas. Don’t build walls around your nonprofit and ignore the outside world. Meet people where they are talking about you and listen and engage in a conversation with them.

Understand How Your Supporters Tick
It’s not enough, however, to simply listen to your customers, you have to understand what they want and need. Netflix assumed that separating DVD rentals from online video streaming was no big deal to customers. Boy were they wrong. The introduction of Qwikster, a separate DVD-only service from Netflix, threw an already angered customer base into a tailspin. Netflix failed to understand how their customers operate. Having two separate websites, two separate passwords and two separate queues for movies was completely untenable to their customers. As a nonprofit you have to understand how your supporters operate and what makes them tick. What about your mission and programs appeals to your supporters? How do they want to be involved? Invest some time in getting to know your donors, volunteers, board members, friends, advocates and what makes them passionate about your nonprofit, how best to engage them, what they’d like to do to support the cause, and how to make it easy for them to do so.

Acknowledge That Your Supporters Ultimately Run Your Business
Netflix forgot that their customers run their business. Without customers, there is no Netflix. Similarly for nonprofits, you may like to think that you exist solely to achieve your mission, but you have no mission without a way to fund it. You cannot separate your mission from how you financially support it. You need to take a step back and understand what types of funding and funders your mission would appeal to (Is your organization a good sell to individuals? Is there an opportunity for school or other government contracts? Is earned income an option?) and then develop a plan for going after and sustaining those funders.

Figure Out a Viable Business Model
Netflix used to have a very viable, profitable business model. But movie studios have realized that there is more money to be made in content, so their financial demands on Netflix have increased dramatically. Which pushed Netflix to increase customer prices. Now Netflix’s business model is out of whack. I’m not a media content expert, so I have no idea what a viable business model is for Netflix, but I don’t think they do either. The trick is to figure out how to get revenue and expenses to create a net positive. For nonprofits, the same is true. Funders will be more likely to support a viable entity with a bright future. Get your financial house in order by aligning your mission with a way to bring sustainable money in the door and funders will be more likely to support you.

Netflix’s missteps have almost been painful to watch. But watch we must if we are going to learn how to avoid their pitfalls. Whether you run a for-profit or nonprofit organization, you must be ever-cognizant of your customers and constantly work to fully integrate them into a successful, viable financial model.

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