A New Strategy for Nonprofit Financing in 2012

If you are serious about finding a way out of the nonprofit starvation cycle in this new year, you need a clear plan to get there. It amazes me how many nonprofits think that they can raise enough money through disjointed activities and hope. The only way you can raise the money it will take to accomplish your goals is to get strategic. And that means you need a strategic financing plan. Our upcoming Financing Not Fundraising webinar “Creating a Financing Plan” on January 24th can help you do just that.

This webinar is part of our ongoing Financing Not Fundraising webinar series. Based on the popular Financing Not Fundraising blog series, the monthly webinar series breaks down this new approach to finding enough money to achieve a nonprofit’s mission into the steps necessary to get there. You can learn more about all of the upcoming webinars in this monthly series here.

A nonprofit financing plan is different that a typical nonprofit fundraising plan for many reasons. Here is how they differ:

• A fundraising plan sets goals only for private revenue streams (foundation grants, individual gifts), but a financing plan includes goals for all money flowing to the organization (government grants, earned income, etc).
• A fundraising plan’s dollar goals are based on what the nonprofit thinks it can raise, but a financing plan’s dollar goals are based on what the nonprofit needs in order to meet the goals of their organization’s strategic plan.
• A fundraising plan is created only by the fundraising staff with no input or knowledge from the rest of the organization, but a financing plan is created with the whole organization’s input (board and staff) and is fully integrated into the organization’s overall strategic plan.
• A fundraising plan only includes activities that raise money for programs, but a financing plan includes strategies for raising infrastructure dollars as well.

This interactive “Creating a Financing Plan” webinar will help nonprofit leaders break down the steps of creating a financing plan. Webinar participants will think through how to:

• Set goals for ALL revenue streams flowing to the organization
• Tie their financing plan to their organization strategic plan
• Determine the infrastructure dollars they need to raise
• Create tactical steps to make the plan a reality, with activities, deliverables, people responsible, timeline
• Divide tasks by staff and board members
• Develop ways to monitor the plan going forward

I hope to see you there!

Financing Not Fundraising: Creating a Financing Plan
A Social Velocity Webinar
Tuesday, January 24, 2012
12:00 noon -1:00 pm Eastern
Cost: $40.00
Register Now

Photo Credit: kolix

Tags: financing not fundraising, fundraising plan, nonprofit fundraising, nonprofit strategic planning

5 Nonprofit Trends to Watch in 2012

My annual predictions for the coming year are probably a bit more wishful thinking than actual prediction. It’s hard to say if my predictions for 2011 became a reality for the sector as a whole. But I am ever an optimist and continue to think that the nonprofit sector is getting smarter, more effective, and better able to create real, lasting change in our communities. I truly believe that our challenging economy offers nonprofits a real opportunity to reinvent themselves.

So here are my predictions (hopes) for what the nonprofit sector will move towards in 2012:

1. More Open, Engaging Organizations
   Smart nonprofits are getting better at engaging armies of supporters. In order to do that, they have to cede some control. Nonprofits that can allow volunteers, donors and advocates to engage their friends in their own way will unleash a growing army of support for their organizations. Those  nonprofits that continue to control the message and the method, that only engage their donors when they need money, and ignore the increasingly networked world will wither on the vine.




2. Smarter Boards
   I am an endless optimist when it comes to nonprofit boards of directors. Boards are, for the most part, dysfunctional, but I believe that they are getting smarter and more effective. I think boards will start asking more and better questions, increasingly put themselves to their highest and best use, focus more on strategic issues as opposed to day-to-day tasks, empower their staff leadership to take the organization in more innovative directions, and start putting their money (and their networks) where their mouth is. Because this new harsher environment absolutely necessitates a smart, strategic, innovative board.




3. More Honest Communication Between Nonprofits and Their Donors
   Oh yes, I do, I do believe it. The nonprofit sector’s proclivity to endlessly beat around the bush, tell donors what they want to hear, and sugar-coat the truth will start to wane in the new year. Because the reality is that a severely under-resourced nonprofit sector is the new normal.  That truth is harder and harder to hide. Nonprofits need more money for infrastructure, more and better staff, technology. And they need their donors to step up to the plate and fund it.  Those nonprofits that continue to fear their donors will continue to struggle. Those that take the leap and tell donors how it is, how it REALLY is, will propel themselves out of the starvation cycle.




4. More Strategic Approaches to Solving Social Problems
   It’s increasingly meaningless for nonprofits to talk about the “good work” they do. In order to attract donors, nonprofits must be able to articulate what they do and how it results in change. This necessitates an overall strategic approach to their work. From creating a theory of change, to developing on a comprehensive strategy, to raising the money required to execute on that strategy, to aligning money and mission, to evaluating their efforts, to translating their evaluation into a compelling story, nonprofits have to get more strategic. Those organizations that take a step back and create, and fully integrate their organization into, a long-term plan will be much more successful and sustainable.




5. More Financed Nonprofits
   As part of this more strategic approach, nonprofits will (must) move towards a broader, more strategic approach to funding their work. They will realize that the hamster wheel of chasing receding dollars in a scattered approach just isn’t going to cut it anymore. As the fundamental economic restructuring that we are currently experiencing continues, nonprofits must create a financial model for their work.  The financial status quo just will no longer work in the nonprofit sector.

I’m not a fortune teller, but I am an optimist. I have tremendous hope for our great nonprofit sector. We may be in the depths of an on-going, structurally transformative recession, but it in no way is the death knell for the nonprofit sector. It is simply an opportunity for nonprofits to get smarter, more honest, more open, more strategic, and more sustainable. And that’s exciting.

Photo Credit: riptheskull

Tags: Board of Directors, capacity capital, challenging economy, nonprofit donors, nonprofit fundraising, nonprofit predictions for 2012, nonprofit strategy, nonprofit trends, Philanthropy

A New Approach to Nonprofit Funding: Financing Not Fundraising Webinar Series

I’m delighted to unveil today our new Financing Not Fundraising Webinar Series. In each of the last three months I held an overview Financing Not Fundraising webinar that explained the concept and how nonprofits should approach their money generating activities in a very different way. This webinar is based on our popular Financing Not Fundraising blog series. Because the overview webinar was so popular and there was such a demand for more in-depth, topic specific webinars, I decided to launch a webinar series beginning this coming January. This series will take the individual concepts within Financing Not Fundraising one-by-one.

Below are the first four webinars in this series. As the year progresses, we will add additional webinars. There will be one Financing Not Fundraising webinar each month. And if you missed the overview webinar, you can still view a recording of it here.

I hope you’ll join us for these webinars!

Financing Not Fundraising Overview-Recorded Webinar
This recorded webinar from December 2011 shows nonprofits what this broader approach to securing the overall financing necessary to create social change looks like, including:

•    How to align your nonprofit’s mission with the money needed to deliver on it
•    Why a message of impact results in more money
•    Understanding the critical difference between revenue and capital
•    Why overhead isn’t a dirty word anymore
•    How and why to calculate the net revenue of money raising activities
•    When to explore new revenue streams

Download the Webinar

Creating a Financing Plan
Tuesday, January 24, 2012
12:00 noon -1:00 pm Eastern

This webinar will help nonprofit leaders create an overall financing plan to bring money in the door. This interactive webinar will help nonprofit leaders develop a plan that includes:

•    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

Register Now

Finding Individual Donors
Wednesday, February 22, 2012
12 noon-1:00pm Eastern

Individual donors make up 80% of the private money flowing to the nonprofit sector, yet many nonprofits don’t know how to find and communicate with individual donors. This webinar will give you tools and strategies to:

•    Engage your board in individual donor fundraising
•    Use social media to connect with individual supporters
•    Create events that resonate with individual donors
•    Identify prospects
•    Create a system for engaging individual donors
•    Launch a major donor campaign

Register Now

Creating a Message of Impact
Tuesday, March 27, 2012
12 noon – 1:00pm Eastern

No one likes to beg for money. And donors increasingly aren’t moved to give through the tin cup approach. A far more effective way to communicate with potential donors is to talk about the impact your nonprofit is having in the community. This webinar will help your nonprofit:

•    Differentiate between donations and investments
•    Talk about what your nonprofit does in the community
•    Create a compelling case for support
•    Target donors who care about your work
•    Get your board excited about asking for money
•    Articulate a social return on investment (SROI) for donors

Register Now

Raising Capacity Capital
Wednesday, April 25, 2012
12 noon – 1:00pm Eastern

Capacity capital is the money that nonprofits desperately need, but find so hard to raise. It is money for infrastructure and organization building. It supports things like revenue-generating staff, launch of an earned income business, technology and systems, evaluation, training and consulting. If you want to move your organization out of the starvation cycle, you have to learn how to raise capacity capital. This webinar will show you how to:

•    Talk about the importance of capacity capital to donors and your 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

Register Now

Tags: creating a fundraising plan, creating a message of impact, financing not fundraising, finding individual donors, fundraising webinar, nonprofit board of directors, nonprofit fundraising, raising capacity capital

Articulating Your Nonprofit’s Value Through a Theory of Change

If you want to raise more money, chart a strategic direction, make your nonprofit more effective, get your board engaged, and achieve your mission, you need a theory of change. A theory of change is basically an argument for how your nonprofit turns community resources (money, volunteers, clients, staff, materials) into positive change in the community. Articulating this simple argument can dramatically increase your nonprofit’s effectiveness and financial sustainability. In order to help your nonprofit create a theory of change, I’m delighted to announce that we are releasing today our newest Step-by-Step Guide, Creating a Theory of Change.

More and more donors and board members want to understand how the nonprofit they are involved with creates social change. A theory of change helps your nonprofit do that.

A theory of change can strengthen your nonprofit in many ways:

• As the backbone of a case for support or other fundraising collateral. With a theory of change, you can articulate the impact you are working to achieve, in a compelling way.
• To revise the vision and mission of your organization, making them stronger and more compelling.
• As a filter for new opportunities as they arise. Do new opportunities fit within your theory of change? If not, perhaps you should not pursue them.
• To guide your strategic planning process. If you understand the organization’s overall theory of change and what you exist to do, it is much easier to chart a future course.
• To get board members and other volunteers, friends and supporters engaged, committed, and excited about your work. If people understand the bigger picture, they will be more inclined to give more time, energy, and other resources to the work.
• To help staff understand how their individual roles and responsibilities fit into the larger vision of the organization. This can increase staff morale, productivity, communication and overall commitment to the organization.

The Creating a Theory of Change Guide is organized around the parts of a Theory of Change. In each of the 8 sections of this guide there is a series of questions, which you will answer. Your answers to these questions become the basis for your final theory of change.

The sections of the guide are:

1. Community Need
2. Inputs
3. Activities
4. Outputs
5. Outcomes
6. Impact
7. Final Theory of Change
8. Next Steps

You can find out more about the Creating a Theory of Change guide here. And for information on our other Step-by-Step Guides, like the Revenue Plan Guide, Business Plan Guide, Case for Support Guide, check our Tools page.

Tags: logic model, nonprofit case for support, nonprofit evaluation, nonprofit fundraising, nonprofit outcomes, nonprofit outputs, nonprofit strategic plan, Social Velocity Step-by-Step Guides, theory of change

Why Nonprofit Overhead is Destructive

It’s that time of year when donors make key decisions about their end of year giving. But a recent post on the Social Earth blog advising donors about questions they should ask nonprofits perpetuates thinking that actually hurts, rather than helps the nonprofit sector. The author, Tarini Chandak, asks “How do you know where your charitable dollars are going? Are they going to the cause you want to support or are they going to administrative and fundraising expenses?” In reinforcing old, and destructive binary thinking about program vs. overhead expenses, Tarini is doing nonprofits and their donors a real disservice.

Tarini lists 4 key questions she thinks every donor should ask of the nonprofits they consider donating to:

As various charities vie for your charitable donations, there are many questions you can ask them directly, including:

1. How much goes to the cause? How high are their expenses?
2. How efficient is their fundraising? What is their cost-per-fundraised-dollar ratio?
3. Is the charity run properly? How efficient and effective is their human capital? Management team?
4. Do they even need your money? Will your money just be lying around in their reserve?

I think questions #2 and #3 are excellent, but questions #1 and #4 perpetuate thinking that holds the nonprofit sector back.

Let’s start with Question #1: “How much goes to the cause? How high are their expenses?” As I’ve written before, the distinction between program (or “cause”) and administrative expenses is meaningless at best, and destructive at worst. If a nonprofit organization is creating change, then everything they do is in support of that change. How can a program run if there is no financial engine (fundraising) to fund it? If there is no building or space to house it? If there is no financial management or regular audits? If there is no regular evaluation of whether the program is making a difference? How can you possibly separate “program” from “overhead?” We must move beyond this distinction and encourage nonprofits to raise (and donors to give) more capacity capital, or the money that nonprofits so desperately need to create effective and efficient organizations.

Tarini’s Question #4 “Do they even need your money? Will your money just be lying around in their reserve?” is equally troublesome because it reinforces the backward notion that nonprofits should not have a reserve fund. As I (and others) have written before, we have to get away from the nonprofit taboo that operating reserves are wrong. Nonprofits cannot plan for the future, have a sustainable financial model, experiment with program changes, take risks, or any of the other things that are absolutely necessary to creating social change, without some operating reserves. If nonprofits are continually forced to go month to month without any cushion they will never emerge as strong, sustainable organizations capable of creating lasting change.

We must move away from thinking that encourages nonprofits to scrape by without the tools and infrastructure they desperately need. We must stop measuring nonprofit performance with meaningless financial metrics and instead evaluate nonprofits on their ability to deliver change. If a nonprofit is creating real change, does the minutia of how they spend money really matter?

Photo Credit: just_a_name_thingie

Tags: nonprofit capacity capital, nonprofit financial management, nonprofit fundraising, nonprofit operating reserves, nonprofit overhead, nonprofit starvation cycle, program vs. administrative expenses, Social Earth

Raising Money to Grow On: Putting the Strategic Plan in Place

Last May I launched a new ongoing blog series that profiles Social Velocity’s work with Charlotte Chamber Music, a small performing arts organization that has a big vision, but lacks the capital to get there. Charlotte Chamber Music enlisted Social Velocity’s help last Spring to create a strategic plan and a capacity capital pitch to raise the money to execute on their big plan. You can read the whole series here.

Capacity capital (or “philanthropic equity”) is the money so many nonprofits desperately need. Capacity capital is dramatically different from the day-to-day operating revenue for which nonprofits are always fundraising. Capacity capital doesn’t fund delivery of nonprofit services (beds for a homeless shelter, new productions in an opera house, books for an after-school program). Rather, capacity capital builds the organizational infrastructure of the nonprofit (technology, systems, administrative or fundraising staff, materials) that allows the organization to become more effective or grow. But you cannot simply go out and ask for capacity capital. First, you must develop a compelling, inspiring, actionable and measurable plan for what you would do with the capacity capital.

After several months of working with Charlotte Chamber Music we had a strategic plan that staff and board were excited about and invested in. But it’s not enough to have a great strategic direction and goals and objectives to get there. You have to make the plan operational. That means you have to tie the big plan to the day-to-day activity of the organization and the price tag need to get there.

The next step in the process was to develop:

1. An annual operational plan built from the strategic plan, and
2. A budget

To do this, Executive Director Elaine Spallone needed to create milestones for each year of the plan. She needed to articulate what had to be accomplished in each year of the plan. This allowed her to start to break the big 3-year plan into annual chunks. Once she was happy with those milestones, she created a laundry list of activities that had to be accomplished in the first year in order to hit the first milestone. Once she was happy with that comprehensive list of activities, she tied each activity to a deliverable, a deadline and a person responsible.

As Elaine said:

Creating the operational plan was intense in the time investment and level of detail required, but worth every minute spent in its creation. It is especially gratifying to check off items and see the progress made. To be fair, it can also be frustrating to realize what is not moving forward. But the good news there is that those issues are clear, and can be articulated, shared and modified.

At the same time, she needed to project revenue and expenses over the period of the strategic plan. It’s not enough to have big goals, you need to understand the price tag associated with those goals (expenses) and how the money (revenue) will flow into the organization to meet those expenses. So Elaine created a 3-year revenue and expense projection that was tied to the goals and objectives of the plan.

Once she had these two key pieces in place (annual operational plan and 3-year budget) she could begin to put some key monitoring pieces in place to ensure that the strategic plan was being executed on. These monitoring pieces are:

• Each monthly staff meeting is tied to the deliverables of the operational plan that are due that month
• Each monthly board meeting includes a dashboard report on the status of the goals of the plan
• At the end of each fiscal year, Elaine will create the next year’s annual operational plan tied to the strategic plan
• Annual employee evaluations will be tied to an employee’s performance on their part of the operational plan
• Each annual budget will be tied to the costs of the annual operational plan

So now that Charlotte Chamber Music had an inspiring, investable strategic plan and a budget and operational plan to ensure that the plan would actually come to fruition, they were ready to go out and raise the capacity capital they needed.

In the next post in this series, we’ll talk about how we created a capacity capital pitch and a strategy for going after prospective funders.

Tags: capacity capital, Charlotte Chamber Music, Elaine Spallone, nonprofit budget, nonprofit fundraising, nonprofit growth capital, nonprofit infrastructure, nonprofit overhead, nonprofit strategic plan, philanthropic equity, raising money for nonprofit organization, Social Velocity

Financing Not Fundraising Webinar Series

Because of the popularity of the past two Financing Not Fundraising overview webinars in October and November, I’ve decided to launch a webinar series that breaks the Financing Not Fundraising concept into its various parts and expands on how to approach each element.

I will kick off this new webinar series in January with a new webinar each month. Some of the webinar topics will be:

• Creating a Financing Plan
• Finding Individual Donors
• Developing a Message of Social Impact
• Raising Capacity Capital
• Evaluating Earned Income
• Calculating the Cost of Fundraising
• Moving from Push to Pull
• Getting Your Board to Raise Money

If you want to find out when those webinars get scheduled in the new year, sign up for our the Social Velocity e-newsletter.

But in the meantime, if you want to get up to speed on the overall concept of Financing Not Fundraising, I’m doing one more overview Financing Not Fundraising webinar on December 6th.

This webinar, based on our popular Financing Not Fundraising ongoing blog series will show nonprofits what a broader approach to securing the overall financing necessary to create social change looks like, including:

• How to align your nonprofit’s mission with the money needed to deliver on it
• Why a message of impact results in more money
• Understanding the critical difference between revenue and capital
• Why overhead isn’t a dirty word anymore
• How and why to calculate the net revenue of money raising activities
• When to explore new revenue streams

If you’ve been following the Social Velocity Financing Not Fundraising blog series and you want to learn more, or if the series has brought up some burning questions that you’d like to have answered, join us for this interactive webinar.

If your staff, your board, and your donors are worn out, rest assured, there is a better way. Join this webinar to find out how. I hope to see you there!

Financing Not Fundraising: Rethinking How Nonprofits Bring Money in the Door
Tuesday, December 6, 2011
12:00 PM – 1:00 PM (Eastern Time)
$40.00
Register Now

Tags: board fundraising, capacity capital, financing not fundraising, individual donors, nonprofit earned income, nonprofit fundraising, philanthropic equity, social impact

Financing Not Fundraising E-Book

I’m delighted to announce that, by popular demand, we are releasing today the Financing Not Fundraising, 2011 e-book. This 27-page e-book is a compilation and expansion on the 11 blog posts from 2011 in the Social Velocity Financing Not Fundraising blog series.

In the midst of an incredibly challenging economic situation that is not getting better any time soon, the Financing Not Fundraising, 2011 e-book outlines a new vision for how the nonprofit sector gets funded. Fundraising in its current form just doesn’t work anymore. Indeed, traditional fundraising is holding the sector back by keeping nonprofits in the starvation cycle of trying to do more and more with less and less.

What the sector needs is a financing strategy not a fundraising strategy. Nonprofits have to break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities. Instead, nonprofits must work to create a broader approach to securing the overall FINANCING necessary to create social change.

This 27-page e-book is a compilation and expansion of the Social Velocity blog series Financing Not Fundraising from 2011. The blog series is ongoing, with new posts added throughout each year. We’ll begin adding new posts to the series in the new year, but in the meantime, this e-book captures and expands on the posts from 2011 in one place.

The 12 chapters of the Financing Not Fundraising, 2011 e-book are:

1. What is Financing Not Fundraising?
2. Create A Financial Strategy
3. Align Money and Mission
4. Find Individual Donors
5. Develop a Message of Impact
6. Raise Money for Building Capacity
7. Explore New Types of Money
8. Evaluate Earned Income
9. Calculate Net Revenue
10. Move From Push to Pull
11. Stop Lying to Donors
12. Getting Started

You can download the Financing Not Fundraising, 2011 e-book here.

If you want to learn more about how to apply the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series

Tags: earned income, financing not fundraising, individual donors, nonprofit capacity, nonprofit fundraising, nonprofit growth capital, nonprofit strategic plan, Philanthropy