The majority of nonprofits struggle to bring money in the door. And they often don’t know why. When you are on the inside of an organization that is used to doing things a certain way it can be nearly impossible to see new opportunities, to understand what you could do differently. There can be many reasons why a nonprofit doesn’t bring enough money in the door.
But here are the top 5 reasons a nonprofit struggles financially:
- Too Many Programs Drain Money From Your Organization. It sounds like a truism — you struggle with money because your programs cost money. But the reality is that few nonprofits analyze their programs to determine each one’s individual impact on the bottom line. Often they will add a new program because it has an impact on the mission (or because a single funder wants the program), without understanding how the new program fits into the organization’s overall financial picture. The end result is an organization that is stretched to the breaking point. Nonprofits must analyze all of their programs to understand their impact not just on mission, but also on finances, then they can make decisions about where to more sustainably focus resources.
- You’re Leaving Money Up to One Person. The financial engine of a nonprofit must be a team effort. Yes, it is important, if you are large enough, to have a staff member whose sole job is to think about money, but you cannot leave it all up to her. The entire organization, from the front line program staff all the way up to the chair of the board must understand the critical importance of money and what role they individually play in securing it. Although program staff won’t actively solicit donors, they can still share client stories with donors, write blog or newsletter articles, participate in program tours with donors, and even suggest new ideas for tying money to their programs. And there are countless ways for board members to bring money in the door, but you have to make sure they are aware of and doing their part.
- You’re Not Effectively Telling Your Story. It is so common for nonprofit staff and board members, who believe so passionately in their cause, to think that it’s obvious to outsiders why they should get involved. But it isn’t. And in an increasingly crowded social change marketplace it is more important than ever that nonprofits be able to articulate, in a compelling way, what value they are providing a community.
- You’re Doing What Everyone Else Does. It drives me crazy when a nonprofit that is struggling financially witnesses another nonprofit’s fundraising activity and tries to replicate that perceived success, without analyzing if it makes sense. Just because it looks like a recent gala or a new thrift store rakes in the money doesn’t mean a) that it did actually make a profit for the nonprofit and b) that it would make a similar profit for your nonprofit. The key is to make the best use of your specific assets as an organization. Think about what value you have to offer and who might be interested in paying for that value. For example, a homeless shelter could financially partner with local businesses to move people away from storefronts and into more stable and life-changing accommodations. You have to analyze what you have to offer and who specifically would be willing to pay for that value.
- You’re Not Investing In Your Money Raising Function. If you don’t have enough or the right kind of staff in place to raise money it is little wonder that you struggle. And if you’re not giving them effective tools they will be at a loss. Think about your financial engine and the various revenue streams you employ. Do you have the technology, staffing, systems, materials, space you need to raise money well in those ways? For example, if you want to raise money from individuals you need an effective database system that tracks contact information, interactions, history, interests. Whatever ways you bring money in the door, you need to ensure you have enough and the right kind of tools to do it well.
If you’d like help to both assess why your nonprofit isn’t raising enough money and create a plan to raise more, join us for the Financing Not Fundraising E-Course. I’ll analyze how your organization brings money in the door, give you ideas for increasing your financial engine, and help you put together a new financing plan. You’ll also get to hear from and work with other nonprofit leaders in your shoes. Find out more about the Financing Not Fundraising E-Course here.
Photo Credit: tuppaware_001
I’ve been talking lately about nonprofits needing to make more investments in their organization, in their sustainability, and in their future. Well, I have the perfect opportunity for you to do just that. I’m excited to announce the newest Social Velocity tool — the Financing Not Fundraising E-Course. Over the course of two months I will be leading a group of 15 nonprofit Executive and Development Directors to determine what’s holding them back from raising more money and create a comprehensive financing plan for their organizations.
This e-course will take you from Fundraising to Financing. We’ll start with a fundraising assessment of where your organization currently is in your efforts to bring money in the door, and we’ll end with a comprehensive, actionable financing plan to move your organization forward.
Here’s how it will work:
- We’ll kick off with a webinar to help everyone understand what a fundraising assessment looks like and what it includes.
- Everyone will be sent away to complete the detailed fundraising assessment I will provide them.
- I will then analyze each individual fundraising assessment.
- The 15 participants will be split into two groups. I will lead a 90-minute coaching session with each group to go individual-by-individual to explain what their fundraising assessment revealed and where they should focus their change efforts.
- After the coaching sessions I’ll host an informal Google Hangout where participants can discuss questions, hurdles they are encountering, where they need help.
- Then I’ll lead a second webinar to explain how to create a financing plan.
- I’ll give everyone a Financing Plan template and detailed instructions on how to create their own financing plan.
- Then I’ll analyze everyone’s completed financing plan.
- We’ll do a second round of coaching sessions where I will go individual-by-individual to explain where their financing plans can be improved.
- We’ll end with a final Google Hangout where everyone can discuss, ask questions, get support and move forward.
- And throughout the process you can always reach out to me via phone and email with additional questions or for guidance.
The registration fee for the e-course is $499.
Of course I’m biased, but to me this investment just makes sense. With this e-course you can set your nonprofit on a path to a much larger, more sustainable financial engine. This is about making an investment now in order to enjoy a much larger payoff down the road.
If you’d like to join us, register soon. The e-course is limited to 15 people, and it’s already filling fast.
I hope to see you there!
This month’s Reader Question is about convincing people to give. A reader wants to know why it’s so hard to get people to understand that their nonprofit’s work is important.
Here’s the question:
I am tired of trying to convince people who don’t understand the importance of our work to give us money. It’s so obvious that the work we are doing in the community is important. How do I get people to understand?
And here’s my response:
You can see other reader questions and my responses on the Reader Questions page of the website.
And if you have a question you’d like to see me answer on the blog, submit it to firstname.lastname@example.org with the subject line “Reader Question.” I look forward to hearing from you!
But it’s time to move beyond that. I’m starting a new series today about the many different forms of Nonprofit Fear and how to move the sector beyond them.
Because there are many:
- Fear of making an investment
- Fear of change
- Fear of losing a donor
- Fear of being honest
- Fear of money
- Fear of competition
…and the list goes on. Because these fears are so crippling and have the potential to really hold nonprofits back, I want to unpack each one in order to start a conversation about how we move past them.
So today, let’s discuss one of the most crippling, which is the fear of making an investment.
Most nonprofits live hand-to-mouth. They exist in a hamster wheel of raising just enough money to keep going. But if they took a step back, marshaled their resources and made an investment in real transformation they could break free from that hamster wheel.
Nonprofits come to me with a long list of woes: we don’t have enough money, our board isn’t doing anything, our funders are worn out, we can’t meet client needs, we are just getting by, we are worn out. They desperately want to break out of this endless cycle of not having enough and not being able to do enough. I explain that in order to make a significant change, in order to break free from this beast, in order to really transform business as usual, they must make an investment.
Not just an investment in help, but an investment of time, energy, and mind share. They need to rally their board, staff, funders, and advocates around a transformation plan. They need to be willing to take a risk and make an investment in a new way.
Some nonprofits decide that the risk is too great. That instead of overcoming their fear of investment they would rather pull back and continue on as usual. They may still cobble together a strategic plan, or write up a new board recruitment policy, or put together a fundraising plan, but nothing has really changed. They are still thinking and operating in the way they always have.
But the nonprofits that I do work with decide to take that first step. They decide to put a stake in the ground and chart a new direction for their organization. They release the status quo and instead make an investment in their future, a better future for their organization and the community change they seek. They are willing to ask hard questions, to make hard decisions, to take risks, to try a new approach.
Instead of shrinking from the opportunity, they stand up and say “enough is enough.” They decide that in order to achieve the vision that sparked their organization’s beginning long ago, they must make an investment in their future.
Photo Credit: briandeadly
There was a really interesting article in the Chronicle of Philanthropy recently about a Los Angeles nonprofit for aging Hollywood actors that was in danger of closing its doors but is now raising hundreds of millions of dollars. It’s a rags to riches story that demonstrates how nonprofit leaders who embrace change when change is necessary can completely transform an organization.
Arguably the Motion Picture & Television Fund (MPTF) is not your average nonprofit organization. Set up in the 1920s by Charlie Chaplin, Douglas Fairbanks Sr., and Mary Pickford it asked actors to donate spare change to help fellow actors down on their luck. MPTF later expanded to become a $100 million organization that serves 150,000 needy actors with healthcare, housing, and retirement services. And although MPTF enjoys a budget with a few more zeros than the average nonprofit, their approach to change can serve as a model for other nonprofits.
In the early 2000s MPTF lost its way. Financial hardship forced the organization to consider closing one of its retirement centers which drew the ire of celebrities like George Clooney. But unlike other nonprofits that lose their way and have to eventually close, Hull House being the most recent and troubling example, MPTF turned things around.
Here’s what the MPTF story teaches nonprofits about embracing the challenge of change:
- Remove What Stands In Your Way
In order to survive it’s critical that nonprofits do something not easy for the sector: recognize and address the obstacle. Whether it’s an unmovable executive director, a deficient board, a broken financial model, or a distracting funder, a nonprofit must face the challenge head on. MPTF realized that they needed new leadership and replaced the fund’s president in 2010. Hull House’s board, however, refused to address changing the organization’s financial model despite seeing glaring financial issues for several years.
- Force Honest Conversations
When George Clooney voiced his dismay at MPTF’s decisions, new MPTF president Bob Beitcher approached Clooney and listened to his concerns. Beitcher explained that they were facing closure of the center because of financial dire straits. Over time he turned Clooney’s concerns into passion for the organization and eventually convinced him to c0-chair MPTF’s capital campaign. Hull House board and staff, on the other hand, kept conversation light. The staff sugar-coated financial reports and the board failed to ask hard questions. It is essential that nonprofits tackle difficult conversations in order to emerge stronger.
- Create a Financial Runway
MPTF had a practice of keeping several months of operating reserves on hand. Hull House, by contrast, lived on the edge — to the point of holding negative $2.3 million in net assets in June of 2007, long before the recession really hit. So when it did, they were in big trouble. Nonprofits (and funders!) must get over the taboo against operating reserves. You simply cannot survive, let alone create social change, if you don’t have the financial runway to do so.
- Connect Mission to Money
MPTF now enjoys a large donor base, but that wasn’t always the case. In order to get there they articulated to specific potential donors why their work was so critical and why they should get involved. They are currently raising millions of dollars because they have connected the dots for a specific target audience between their need for investment and the impact they are creating. Nonprofits need to articulate what they are trying to change and then find donors for whom that change is attractive.
The closure of such a stalwart and venerated nonprofit institution like Hull House should have been a wake up call for the nonprofit sector. If it could happen to Hull House, it could happen to any organization. But it doesn’t have to. Instead of blaming the recession, the board, fundraising, or anything else, nonprofits need to embrace the challenge of change.
If you need help addressing a challenge facing your nonprofit, let me know.
Photo Credit: Mary Pickford, 1924 from fotopedia
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.
I announced last month that I was recommitting to the Reader Question Series on the blog. I received some really great questions, thanks to all of you who submitted a question. As I read through the questions, I thought it might make sense to combine two of my new year’s resolutions (the relaunched Reader Question series and using more video on the blog) into this new series. So I’m going to start answering the Reader Questions via video. Below is my answer to this great question from a reader:
“The executive director is often so busy putting out the day-to-day fires that they lose time to work on the big strategic goals. How can an ED break the cycle of jumping from crisis to crisis?”
If you have a question you’d like me to answer in an upcoming Reader Question video, send it to email@example.com with the subject heading “Reader Question.” I look forward to reading your questions. Thanks!
I launched a Reader Questions series on the blog a little less than a year ago, but I have to admit I have been lazy about soliciting questions for it. The one time I asked for reader questions I got great ones and did a couple of blog posts responding to those questions here and here. But then I got busy and stopped soliciting questions.
So I want to reinvigorate the Reader Questions series now. I’d love to more consistently answer questions from readers and turn it into a much more regular series.
And I need your help. I’d love to hear about what issues are really tripping you up, what hurdles you encounter, what you’d like to learn more about.
So send me your questions about:
- Getting your board moving
- Being up front with donors
- Empowering your staff
- Raising capacity capital
- Developing a financing plan
- Finding new donors
- Creating a strategic plan
- Articulating your message
- Growing a nonprofit
- And anything else…
Whatever you struggle with and want to learn more about. Because the beauty of it is, if you are struggling with something, there are probably 100 other people who are as well, and they’d love to learn from your experience.
So if you start sending me your questions, I promise to be more consistent about the series. You can submit your questions on the Reader Questions blog page, in the comments of this blog post, on the Social Velocity Facebook page, or by sending an email to firstname.lastname@example.org. And don’t worry, if your question is a sensitive one, you can ask to remain anonymous.
I can’t wait to hear your great questions. Thanks!
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