Although the definition of a “startup” is an organization that has been around for only a few years, there are many nonprofits that are still in startup mode despite their 20+ years of existence.
But the good news is that you don’t have to wait around for a knight in shining armor to save you from the endless startup existence, which is the topic of today’s installment in the ongoing Financing Not Fundraising series.
The power to begin scaling the startup wall is actually in your hands. Here are the steps to begin:
- Create Your Business Plan
Probably a big part of the reason that you are still struggling as a startup (more than) several years in is that you haven’t strategically connected operations and financing to your mission. A business plan that answers questions like “How will you finance the business?” and “Who are your target customers (clients AND funders)?” and “What’s the right staffing structure?” and “What are the goals of the business?” and much more. Just because the profits from your business enterprise go back into the organization (nonprofit) instead of into the pockets of the owner or stakeholders (for-profit) doesn’t mean you don’t need a business plan. Figuring out how to align money, mission and operations is the first step to a stronger future.
- Grow Your List of Champions
If your nonprofit’s inner circle consists of a founder and a few friends you will never grow. You have to convince people beyond those who already love you to internalize the work of the organization and become actively involved as board members, advisors, fundraisers. But you cannot target anyone and everyone. You have to identify people whose values connect with your work and your mission. And they have to have some specific skills, experience and networks that will help your organization move forward. But if you’ve only ever had your friends behind you, how do you convince outsiders to become champions and board members? Keep reading…
- Develop a Value Proposition
If you are unable to articulate among internal board and staff what your nonprofit is hoping to accomplish and the value it provides the community, how can you possibly convince others to become involved? The first step in really taking things to the next level is to develop that value position, or a Theory of Change. A Theory of Change is basically an argument for why your nonprofit exists — how you take community resources (inputs) and create changes to program participants’ lives (outcomes). To move from merely getting by to really making strides, you must create this argument.
- Convince Others to Give
Once you have your Theory of Change in place you need to make a compelling argument for how more inputs (funding) will help you create more outcomes. A case for investment is a logical, reasoned argument that helps you to make this case convincingly. Once completed, pieces of your case for investment can be used in fundraising appeals, on your website, in thank you letters, in marketing campaigns and much more. It is the fundamental building block to attracting more dollars to your nonprofit.
It doesn’t have to be a rule that the vast majority of nonprofits subsist in an endless startup mode. If you need some help finding your way out of startup mode, download the Nonprofit Startup Tool Bundle.
Photo Credit: Chad K
I’ve recently witnessed some behavior from nonprofit leaders that made my jaw drop:
- A board chairman convinced the rest of his board to turn away a donor who wanted to give the nonprofit a significant amount of money to fund organizational capacity (strategic planning, coaching, fundraising training) because he felt the nonprofit already knew how to do the work internally for free.
- An executive director who was really struggling with wrangling her board and developing a strong financial model bravely asked a close foundation donor for advice and support. When the foundation offered to fund some leadership coaching, the executive director rejected the offer for fear her board would think she didn’t know how to do her job.
- A board charged their nonprofit’s Development Director with increasing revenue in a single year by 30%. When she asked for a donor database to help more effectively recruit new and renew current donors the board said “No” because they felt she should already be able to do that without the aid of new technology.
More often than not it is nonprofit donors who hold back efforts to build stronger, more sustainable nonprofits by not providing enough capacity capital. I talk about that all the time (like here, here and here).
But sometimes, and more shockingly, nonprofit staffs and boards stand in their own way.
It takes courage for a nonprofit leader to admit that she doesn’t know how to do something and needs help. I am reminded of a fascinating interview I heard on NPR earlier this fall with Leah Hager Cohen who recently wrote the book, In Praise of Admitting Ignorance. She describes the freedom that comes from admitting when you simply don’t know how to do something. That moment of honesty can lead to transformation, as she says, “I think those words can be so incredibly liberating…They can just make your shoulders drop with relief. Once you finally own up to what you don’t know, then you can begin to have honest interactions with the people around you.”
I would love to see nonprofit leaders take this advice to heart. Once you have the courage to admit (to your board, to your donors, to your staff) that you don’t know how to do everything, you just might finally get the help you so desperately need.
Nonprofit leaders have been given the Herculean task of: developing and managing effective programs, managing a diverse and underpaid staff, crafting a bold strategic direction, creating a sustainable financial model, wrangling a group of board members with often competing interests, and recruiting and appeasing a disparate donor base. All with little support along the way. It is easy to see why the position of nonprofit leader is such a lonely one.
So instead of continuing to bear that enormous burden, take a step back and admit that you simply don’t know how to do it all. You need help, guidance, advice, support, organization building. If you are lucky enough to have funders, board members or others outside the organization that want to help, admit (to yourself, to your board, to your donors) that you need that help. And don’t let anyone (including, and especially, yourself) stand in your way.
If you’d like to learn more about the leadership coaching I provide nonprofit boards and staff click here, and if you’d like to schedule a time to talk about how I might help move your organization forward, let me know.
Photo Credit: Wikimedia
Note: I was asked to write a guest post for the Nonprofit About.com site about how to move a nonprofit’s board of directors from fundraising to financing. An excerpt of this blog post is below, and you can read the entire post on the Nonprofit About.com site here.
Nonprofit boards of directors are notoriously fundraising averse.
There are often countless excuses nonprofit staff and their board members give about why some board members should be excused from fundraising. Some of the most popular excuses include:
- “We want client representation on our board, but our clients don’t have money.”
- “Some board members aren’t good at fundraising.”
- “We want board members with program expertise to focus on mission, not money.”
- “Some board members are uncomfortable with asking for money.”
Fundraising is hard, I get it.
But it is absolutely critical that the entire board of a nonprofit understand how fundamental money is to the work — without it, nothing else matters. And you simply cannot understand something that you only observe from afar.
Which is why I strongly believe that every single board member should fully understand and contribute to how money flows to the organization. The board cannot argue that money is the purview of only the staff; money HAS to be part of the board’s job. Until the entire board really participates in making the financial engine run, they will be unable to have substantive conversations about how to raise or spend that money.
I know that this is a fairly controversial view, but perhaps it would be less controversial if we moved away from fundraising for nonprofits and worked to finance nonprofits instead. Just changing the terms can make a huge difference for a board.
We have to recognize that fundraising is a broken model. Most nonprofits chase low-return fundraising efforts that keep them from achieving financial sustainability. Instead nonprofits and their boards must together create and execute on an overall strategic financial model for the impact they want to achieve.
And in so doing, perhaps we will find that nonprofit boards become much more effective, willing, and confident contributors to financially sustainable nonprofits.
A financing approach that effectively involves the entire board looks like this…
You can continue reading the entire article on the About.com site here. And to learn more about moving your nonprofit board from fundraising to financing download the Financing Not Fundraising, vol. 3 e-book.
Photo Credit: ShellVacationsHospitality
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
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.
Bill Shore, founder of Share Our Strength, a nonprofit aimed at ending childhood hunger in America, wrote a really interesting post recently. He argues that nonprofits must be more bold, that the risk aversion that defines the sector is itself holding nonprofits back from creating change.
Shore encourages nonprofit leaders to figure out exactly what they are trying to accomplish:
Nonprofit organizations would be well served to step back from the day-to-day operations and ask themselves what success means, how will they know when they have accomplished their mission, and how will they measure it along the way. It sounds like common sense, but almost no one does it, in part because it’s so hard to do. But if you answer those questions with precision and clarity, and articulate the goal you hope to achieve, everything else falls into place.
And Bill is not alone in making this charge to the nonprofit sector. The Case Foundation, founded by Steve and Jean Case who made millions from AOL, has made its focus getting nonprofits to be more bold, to Be Fearless.
But if we are going to ask nonprofits to think bigger we have to address the elephant in the room: money. Nonprofit leaders often put themselves in a vicious cycle of thinking they don’t have enough money to be risky, so they don’t create ambitious goals, and then their lack of ambition impedes greater outside investment.
It is in fact the very act of being bold that inspires action and investment, that marshals resources to do the impossible. The most obvious example is John F. Kennedy’s 1962 charge to “to go to the moon in this decade.” At the time, the goal he set was crazy. NASA had no idea how they were going to make that happen, and they were already behind the Russian space program. But the very fact that the goal was set, and set so publicly, was inspiring. That simple act of inspiration moved people, money, resources. And Kennedy’s goal came to fruition in July of 1969. The impossible became possible simply because he set a goal.
Often nonprofit leaders are hesitant to set a bold goal because they know they currently don’t have the money, staff, relationships to make it happen. They don’t want to set a goal whose execution is not readily evident. So often nonprofit leaders start from a point of scarcity. They ask the question:
“How much can we accomplish with what we can raise?”
Instead, nonprofit leaders need to start asking the question:
“How much should we raise to accomplish our goals?”
It may seem like semantics, but I believe the distinction is profound. Instead of money holding you back, money becomes a tool to employ in accomplishing something much bigger. If you start by setting bold goals about what change you want to create, that very act, the act of putting a stake in the sand, can inspire. And that inspiration can attract the things you need to make your goal a reality.
In order to set bold goals, nonprofit leaders need to remember why they started their organization in the first place and why they continue to come to work each day. What is that passionate resolve that keeps you going every day? Why are you pouring your heart and soul into the work? What ultimately are you trying to change about the world we live in?
Start there. Create your bold goal from that place. Remove the obstacle of not having enough and watch how you suddenly have more than you could have ever imagined. That’s where real change begins.
Photo Credit: Mission Controls celebrates the moon landing, NASA.
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