It becomes increasingly obvious to me that the nonprofit sector suffers from a lack of confidence. Centuries of being sidelined as “charities” while the real work of the world (business) took center stage has made the nonprofit sector continually apologize for the work they do and how they do it.
Nowhere is this more true than in the financing of their work.
But for the nonprofit sector to start to demand a seat at the big money table, nonprofits must stop apologizing for needing money. To truly begin to use money as a tool, nonprofit leaders have to stop regretting their need of it and start demanding that they receive enough and the right kinds of money to successfully accomplish their work, which is the topic of today’s installment in the ongoing Financing Not Fundraising series.
Note that this post is included in the recently released Financing Not Fundraising, vol. 3 E-book.
You can’t simply decide to stop feeling bad about asking for money. Instead you have to find the confidence to identify and secure the right financing for your work.
Ask for Change, Not Your Organization
You shouldn’t be asking for money for your organizational needs, rather you should be asking for money as a vehicle to help your organization create social change. Everyone is uncomfortable when asking for a handout. If instead you are asking for resources to make positive social change, which a donor cares about, it is much more powerful, compelling and confidence-inspiring.
Find the Right People
It surely can be awkward asking for money if you are asking the wrong person. Don’t fall into the trap that many nonprofits do by thinking that anyone with money is a potential donor to your nonprofit. People give based on values, therefore you only want to target people for whom your mission and your work resonate deeply. No matter who your target is (an individual, a foundation, a corporation) think about whether they have the Capacity to give at the level you need, have a Connection to someone at your nonprofit, and have a Concern for your nonprofit’s mission. Being strategic about who you are targeting makes you much more confident when you finally make the ask.
Tie Money to Your Goals
If you know as an organization what you are trying to accomplish and how much that will cost, you will have much more confidence asking for money. Instead of just asking for money, you will be asking for the financing necessary to accomplish your strategic goals. If you have a smart organizational strategy you can confidently ask a potential donor to invest in a solid, well-thought out plan for creating change to a problem they care about. And that’s much less awkward than asking someone to just give, right?
Take Out the Middle Man (or Event)
So many nonprofits sidestep the awkwardness of asking for money for their mission by holding a big gala event instead. The thinking is that if they camouflage the ask inside twinkly lights, great music and food, and a loud band that people won’t mind opening their wallets. Aside from the very real fact that you are leaving money on the table, events simply enable the lack of confidence I am describing. Instead of feeling so guilty about asking for money that you run your board and staff ragged by staging a huge event, take out the middle man and identify, cultivate and solicit donors who truly care about your work and will give more significantly through a major donor campaign.
Share Your Results
If your nonprofit is truly creating social change, then you can very confidently ask others to join you as partners in making that change continue to happen. Collect, analyze and share the results of your nonprofit’s programs. Demonstrate the change that you are creating and that donors care about. With solid results to point to, you can confidently ask other people to invest in your successful work. At the end of the day, if your nonprofit is creating positive community value then you should confidently be asking for the money necessary to make that value grow.
Stop apologizing for needing the financing necessary to do the work and start finding and confidently inviting interested investors to partner with you. In so doing you will be moving your nonprofit from fundraising to financing.
Photo Credit: myguitarzz
I am delighted to announce today’s release of the newest volume in the Financing Not Fundraising e-book series, Financing Not Fundraising, vol. 3.
The idea behind Financing Not Fundraising is that the traditional way nonprofit leaders, boards and donors have approached funding the work of nonprofits doesn’t work anymore. Traditional nonprofit fundraising forces nonprofits to work harder and harder for a smaller and smaller return. Nonprofits must break free from this vicious cycle and take a much more strategic approach to securing the overall financing necessary to achieve their goals.
The first step in this process is to fully integrate money with the mission and core competencies of the organization. In creating such a strategic financial model for her organization, a nonprofit leader will be setting her organization on a path towards financial sustainability, growth, and ultimately change to the social problem her nonprofit attempts to address.
The Financing Not Fundraising, vol. 3 E-book expands on the basic elements of the Financing Not Fundraising model and helps those nonprofit leaders who are ready to start moving away from fundraising to really dive into this new approach.
Contained in this e-book are new ways of thinking, new tools of analysis, new questions to ask. All with the intent of pushing your staff, your board, even your donors, to fund your work in a more effective and sustainable way.
Here are the chapters in the Financing Not Fundraising, vol. 3 E-book:
- Overcome Nonprofit Taboos
- Remove Money Hurdles
- Find and Keep a Great Fundraiser
- Recruit a Money Raising Board
- Set a High Board Fundraising Bar
- Enlighten Your Donors
- Break Free From the Starvation Cycle
- Create Donor Personas
- Calculate Opportunity Costs
- Stop Apologizing
- Get Started
If you are tired of hitting your head against the unmovable fundraising wall, I invite you to explore a new way of sustainably financing the critical work you do.
Yep, it’s true, the nonprofit sector doesn’t have enough money. There are lots of reasons for that, but part of it stems from the taboos the nonprofit sector (and the staffs, boards and donors within it) perpetuates. But perhaps if we lay them bare, we can start to break free from them, which is the topic of today’s installment of the ongoing Financing Not Fundraising blog series.
If you are new to this series, the idea is that nonprofit fundraising is broken. Instead of continuing to hit their heads against the fundraising brick wall, nonprofit leaders must take a strategic approach to financing their work. You can read the entire Financing Not Fundraising blog series here.
Nonprofit taboos are so insidious because they are unwritten and unquestioned. But that has to stop. If we want to move the nonprofit sector forward, we must uncover certain taboos and determine whether they are really unacceptable anymore.
Here are the five most egregious taboos in the nonprofit sector:
- Nonprofits Shouldn’t Raise a Surplus
For some reason it is unseemly for a nonprofit to have more money than they immediately need. If a nonprofit is not just barely breaking even, it is somehow unworthy of raising more money. To the contrary, a nonprofit that has operating reserves can invest in a more sustainable organization, conduct R&D to make sure their solution is the best one, recruit a highly competent staff, and weather economic fluctuations. It is far better to invest in an organization that is well poised to attack a social problem than one that is barely able to keep the lights on.
- Nonprofits Shouldn’t Pay Market Rate Salaries
I won’t join the crazy controversy that surrounds nonprofit executive salary levels, but let me simply point out that nonprofits exist within a market economy, that is a fact. If someone is great at what they do, and they can make more money elsewhere, eventually they will do so. It is simple economics. I understand that mission is a driving force for people attracted to the nonprofit sector, but as competition in the social change space continues to grow, the best and brightest will be lured away by other nonprofits, government entities, or for-profit social enterprises. So if you want to attract and retain a really talented employee, you’ve got to pay them accordingly.
- Nonprofits Shouldn’t Demand Board Members Fundraise
Why not? Seriously, I don’t get this one at all. If your governing body is free to make strategic and programmatic decisions without understanding, first hand, the financial implications of those decisions, you are setting your nonprofit up for failure. Mission and money must be strategically aligned, and the first and most important place that alignment occurs is at the board level. There are plenty of ways for board members to get involved in the financial engine of their nonprofit. Let’s stop apologizing for having to make money in the nonprofit sector and start requiring every single board member get actively involved in the process.
- Nonprofits Shouldn’t Question Donors
Donors hold the purse strings so nonprofit leaders are unwilling to tell them how it really is. But if the sector continues to act like a grateful recipient of a wealthy person’s or institution’s largesse, that power imbalance will continue, as will the dysfunctions that accompany it. If instead nonprofits and funders were equal partners working together to solve a problem, maybe we could get somewhere. But this will only happen if nonprofit leaders become more confident at telling their donors (and board members) how it really is. And if nonprofit leaders are more strategic about diversifying their financial model so they are no longer beholden to a few funders.
- Nonprofits Shouldn’t Invest in Fundraising
In the nonprofit world the fundraising function is equivalent to the sales and marketing function of the business world. No one expects Apple to create amazing gadgets and then sit back and hope people show up and buy them. They have an extensive and well-financed marketing and sales function. But nonprofits are expected to spend as little as humanly possible on fundraising. Added to that, nonprofits are even more challenged because they have two, not just one, set of customers: 1) the clients they serve who often can’t pay for services, and 2) the funders who pay for those services. So we are telling nonprofits to recruit and serve two sets of customers on a shoestring. That’s crazy. We have to get over the idea that investing in fundraising (high quality staff, technology, expertise, planning, marketing) is a bad thing.
At the end of the day, we have to stop apologizing for the realities of the nonprofit sector. It’s time nonprofit leaders stand up and start demanding the end to some serious strictures that hold them back from doing their jobs. And, let’s remember, those jobs are to solve some of the most complex problems facing our communities. Those jobs are probably more easily and effectively done in the absence of crazy taboos.
If you want to learn more about moving your nonprofit from fundraising to financing, check out the Financing Not Fundraising page.
Photo Credit: wheat_in_your_hair
There are some exciting things happening at Social Velocity. I have spent the last several months revising and expanding the e-books, webinars, and step-by-step guides I offer nonprofit leaders in the Tools store of the website. These Tools help nonprofit leaders, board members and donors understand the trends facing the nonprofit sector and how to become more strategic and sustainable at creating social change.
And we are moving to a brand new shopping cart system to make the purchase and download of the Tools much easier for you, with additional payment options, a streamlined process and more. I will reveal the brand new Tools store in the next week or so.
But if you want to hear about the launch of the new Tools store first (and enjoy a discount on Tools purchases) sign up now for the Social Velocity e-newsletter. Prior to the official launch of the new Tools store, we will send all subscribers an early bird announcement and discount code to use.
And, as an added bonus, if you sign up for the Social Velocity e-newsletter now you can immediately download the revised and expanded Financing Not Fundraising, volume 1 E-book (a $9 value) for free. Here’s what one reader of the e-book had to say about it:
“I felt a lot of affirmation when I read your e-book as I too believe fundraising as we knew it is history and sometimes that is hard for the board to understand and accept. Your series was incredibly powerful for me and will have a huge impact on us. I think your e-book will give [board and staff] some confidence to make tough decisions. On lots of different levels your e-book was exactly what I think we need right now.”
So if you haven’t already, sign up now for the Social Velocity e-newsletter.
And stay tuned for our new and improved Tools store coming soon!
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.”
“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.”
“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.”
“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.”
“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
Note: I was asked by Markets for Good to write a post as part of their ongoing online conversation about improving how money flows to social change. Markets for Good is an effort by the Bill & Melinda Gates Foundation, the William & Flora Hewlett Foundation, and the financial firm Liquidnet to improve the system for generating, sharing, and acting upon data and information in the social sector.
Over the past several years, Markets for Good has been a forum for discussion and collaboration among online giving platforms, nonprofit information providers, nonprofit evaluators, philanthropic advisors, and other entities working to improve the global philanthropic system and social sector. Below is the post I wrote. You can see this post and the others in their series and contribute to the ongoing conversation at the Markets for Good blog.
As we talk about creating a space “where capital flows efficiently to the organizations that are having the greatest impact” we must address the elephant in the room: how nonprofits are funded.
Currently that’s a pretty broken model. And if we are ever to direct more money to more social change, we must fix it.
In an ideal world, a social change organization would create a potential solution to a social problem, prove that the solution actual resulted in change, and then attract sustainable funding to grow that solution.
But that’s not currently happening because the way nonprofits are funded is broken in three key ways:
Nonprofits don’t articulate a theory of change. 10 years ago it was enough for “charities” to “do good work.” In an ever-increasing drumbeat nonprofits are being asked to demonstrate outcomes and impact. And for good reason. If we are truly interested in social change then we must understand which organizations are actually creating it and thus deserve our investment.
But you cannot demonstrate outcomes and impact if you have not first articulated what outcomes and impact you think your solution provides. Those nonprofits that truly want to solve a social problem (as opposed to simply provide social services) must articulate a theory of change. A theory of change is an argument for how a nonprofit turns community resources (money, volunteers, clients, staff) into positive change to a social problem. It seems simple, yet most nonprofits working toward social change have not done this.
We need to change that. This simple argument is the first step in creating real, lasting social change and attracting money to be able to do it in a financially sustainable way.
Nonprofits struggle to prove impact. Once a theory of change is in place, nonprofits need to prove whether that theory is actually becoming a reality. Nonprofits have struggled for years to figure out how to measure whether they are actually achieving results. But they cannot figure it out on their own.
Philanthropy needs to step up to help fund the work, or on a much larger scale, social science could prove the impact of overall interventions that nonprofits can then implement.
Either way, the burden of proof can no longer rest solely on the shoulders of individual nonprofits.
Fundraising isn’t sustainable. Once social change is actually happening, we want to grow that effective solution in a sustainable way. But that necessitates a real financial model.
Most nonprofits chase low-return fundraising efforts that lock them into a band-aid approach that is far from financial sustainability. Few nonprofits create and execute on an overall strategic financial model that aligns with the impact they want to achieve and their organizational assets.
We have to stop the madness.
We must help nonprofits create an overall financial engine that strategically and effectively supports the social change they are working toward.
Philanthropists must provide nonprofits the runway necessary to find the right financial model for their organizations. Capacity capital funding could do this, allowing nonprofits the space to analyze their current money-raising activities and create and execute on a plan for transforming those into a sustainable financial model. The end result would be nonprofits with a great solution to offer suddenly have the ability to grow the solution in a sustainable way.
If we are really serious about directing more money to more social change, we need to reinvent how money flows to nonprofits. Instead of relying on a broken fundraising model, we need to take a big step back and get strategic. With articulated theories of change, systems for effectively proving impact and the runway to create real financial models, nonprofits will be able to bring social change to sustainable fruition.
Photo Credit: Markets for Good
The nonprofit starvation cycle is one nonprofit leaders know only to well. Nonprofits rarely have the technology, staff, and systems to function effectively. So they scrape by trying to wring one more drop out of a completely dry rock.
But instead of waiting for funders to fix the situation, it is up to nonprofit leaders themselves to break free. And you break free by raising capacity capital. This month’s Social Velocity webinar, “Raising Capacity Capital,” can help you do just that.
Capacity capital is a one-time investment of significant money that can help build or strengthen a nonprofit so that it can create more social change. Capacity capital funds things like technology, systems, a program evaluation, revenue-generating staff, start-up costs for an earned income business. It is money that strengthens the organization so that it can do more.
But often nonprofit leaders don’t recognize that everything they need to raise capacity capital and break free from the starvation cycle is in right in front of them.
The “Raising Capacity Capital” webinar will show you how to:
- Talk about the importance of capacity capital to your donors and board
- Create a budget for the capacity dollars you need
- Develop a campaign goal
- Break the goal into donor ask amounts
- Identify prospective donors
- Give your board a role in the campaign
- Gain the confidence to start asking for the money you really need
This webinar is an encore presentation of one of our most popular webinars. Here’s what some past participants had to say:
“Thank you! this was helpful and wonderfully accessible. I am impressed.”
“Just a note to thank you for the informative webinar. I found it most constructive, as my organization is right at the stage of getting out of starvation mode. I look forward to participating in more sessions.”
On Demand Webinar
And keep in mind all Social Velocity Webinars are “on demand,” so even if you can’t make this date and time you can still register and watch the recorded webinar, receive the slides and get your questions answered anytime.
The registration fee will get you:
- A link to a recording of the webinar, which you can watch whenever you like
- The PowerPoint slides from the webinar
- The ability to ask additional follow-up questions after the webinar
If you are serious about moving your nonprofit out of the starvation cycle, capacity capital can help you get there.
Photo Credit: gfpeck
I see it all the time. A nonprofit leader wants to expand services to meet growing demand, or she is frustrated with a stalled fundraising effort, or concerned that a key revenue source is drying up, or lacks the staff or expertise to analyze where to diversify their fundraising efforts. She wants to raise more money, but she doesn’t know how to prioritize resources to do so.
But a Financial Model Assessment can turn the tide.
A Financial Model Assessment can be eye-opening and, ultimately, game changing. It can give your nonprofit a deep understanding of where you need to focus your efforts and a clear road map for growing the financial viability of your organization.
A Financial Model Assessment is for nonprofits that want (or need) to raise more money, but don’t know how to get there.
Here are the steps I go through in a Financial Model Assessment:
Interview Board, Staff, Funders
I conduct in-depth, one-on-one interviews with the executive director, revenue-generating staff, key board members, and some funders and others outside the nonprofit to understand what is working and what isn’t.
Analyze the Current Organization
I analyze all organization documents, policies, procedures, financials, systems, and materials to understand the internal and external processes for raising money. But because a nonprofit’s ability to raise money depends on much more than their fundraising efforts, I look at six areas of the organizational structure to determine how well they contribute to fundraising effectiveness, these areas are:
- Mission and Vision
- Overall Strategy
- Board and Staff
- Program Delivery and Impact
- Marketing and Communications
- Infrastructure and Systems
Uncover Opportunities for Current and Potential Funding
I look at all current and potential funding streams to uncover opportunities for increases. I also 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.
I create a 20-30 page detailed analysis with recommended actions for increasing funding streams. I present the assessment and recommendations in-person to staff and board for an engaging session of questions and discussion.The nonprofits that receive the completed Financial Model Assessment hold in their hands an in-depth analysis of where they need to focus time and resources in order to increase the funding flowing to their organization. Often the Financial Model Assessment is the catalyst for big insights among board and staff and sets the organization on a path toward fundamental changes to how they bring money in the door.
It doesn’t have to be so hard. With a clear road map, your nonprofit can move from financial insecurity to financial sustainability.
Photo Credit: Images_of_Money
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