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. Really, what the sector needs is a financing strategy, not a fundraising strategy.  By that I mean that 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.

The idea is that nonprofits can no longer work towards social impact on one side and throw a gala event (or send out a direct mail appeal or write a grant) on the other side and think that this disjointed, haphazard way of funding their work is sustainable. To truly achieve social impact, nonprofits need to take a huge step back and figure out how to employ all of the financial tools available to them in an effective, integrated way.  This is how you finance, rather than fundraise for, social impact.

Over the next few months, in an occasional series titled Financing Not Fundraising, I will elaborate on this argument and demonstrate what financing, as opposed to fundraising, for social impact looks like.

Today I will launch the series with the core element of the idea, which is a financial plan. In essence, a financial plan is a key element of, not separate from, a nonprofit’s strategic plan. That means that the goals of the strategic plan are created with the full knowledge of 1) what it will cost to reach those goals and 2) how the money to cover those costs will be secured.

A financial plan differs from a fundraising plan in a number of ways. A financial plan, unlike a fundraising plan:

• Includes ALL activities that bring money in the door (individual donors, foundation grants, earned income, corporate sponsorships, government contracts, loans, etc.) and fully integrates them into an overall strategy and execution plan.
• Supports the short AND long term goals of the organization
• Funds the programs AND infrastructure of the organization. It recognizes the necessity of and supports not only the nonprofit’s direct service activities, but also, the infrastructure, systems, planning and other organization building that will ensure that those services thrive and grow
• Understands the characteristics and uses of different kinds of money (i.e. revenue versus growth capital, loans versus grants) and employs each available financial vehicle in the most effective way
• Employs money-securing activities that are in line with, not opposed to, the core competencies of the organization

What I am suggesting is that nonprofits stop exhausting their boards, staffs, donors, friends, and clients with a series of disjointed activities that are meant to raise money, but actually just end up making poor use of a nonprofit’s already limited resources. Instead, nonprofits need an integrated, thoughtful, strategic financing plan that makes social impact a reality.

Photo Credit: Steve Wampler

About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. In addition to leading Social Velocity's efforts to accelerate social innovation, she is a regular contributor to Change.org's Social Entrepreneurship blog and speaks at social innovation gatherings.

Related posts:

1. Financing not Fundraising
2. Financing Not Fundraising: Finding Individual Donors
3. Financing Not Fundraising: A Social Velocity Blog Series

I’ve written before about how revenue in the nonprofit sector is often thought about separately from mission and core competency.  It is sometimes (more often than not) viewed as the step child of the true work of an organization.  Money is the stressful, dirty, tireless work that takes an organization away from what they should be doing.

However, if an organization can fully integrate money into their overall organization, it can become a powerful resource which can help the organization do more in a more sustainable way.  But how does an organization get there?

The first step is a comprehensive, easy to implement strategic plan.  When working with organizations, I employ an 8-step process for creating a strategic plan that takes away the mystery and ineffeciency present in many strategic planning processes.

But what does strategic planning have to do with fundraising?  Absolutely everything.  Without a clear vision and direction for an organization–a clear path forward–what donor wants to invest?  No one wants to throw money at a problem.  People want to understand what they are buying, or investing in.  What is the end goal? How are you going to get there?  How do you know this is the right approach?  Even the smallest donor will give more over a longer period of time if they can understand how what they are giving fits into a larger picture and will result in some significant change in their community.  So an overall organizational strategy will reap tremendous financial rewards.

But any effective strategic plan must have an integrated financial plan.  What are the resources at your disposal (staff, technology, buildings, materials, programs), how much will they cost and how will you generate the money to pay for them?  You cannot have a realistic strategic plan without a corresponding financial plan. The financial plan lays out the revenue and expenses over the period of the strategic plan.  What is it going to cost to get to your goals (expenses) and how will you pay for them (revenue)? Going back to the critical importance of aligning your mission, resources and core competencies, you must weigh your expenses against your realistic ability to raise that amount of money.  Can you really raise enough money, given where you are right now, to meet all the goals of your strategic plan?  If not, then one of two things has to change. The first option is to limit the goals of your plan to make them more affordable.  The second option is to increase your revenue engine to meet the cost of these goals.  Therefore the strategic plan and financial plan have to be created in conjunction with each other.  It is a back and forth process where one plan feeds and is altered by the other.

Once you have a realistic financial goal, you need to create the annual revenue plan to get there.  Notice I didn’t say “fundraising plan.”  Nonprofit organizations need to elevate how they think about the money required to reach their organizational goals.  Fundraising, raising money from private sources (individuals, foundations, corporations), is just one part of the revenue options available to nonprofits.  Other options include: earned income (selling a product or service), government grants, fee for service, corporate sponsorships, debt, growth capital, and so on.  By using the term “revenue plan,” as opposed to “fundraising plan,” a nonprofit begins to explore other revenue opportunities.  That is not to say that every nonprofit should explore every revenue opportunity.  Nonprofit organizations do, however, need to expand their options.

Just like a strategic plan, a revenue plan should have 3-5 broad goals.  So, perhaps you break your revenue types into 3-5 buckets.  Then create the road map for hitting those revenue targets in each area.  What infrastructure needs to be in place, what campaigns will you take on, how will you go about bringing that money in the door, who is responsible for each activity, what is the timeline?  And you begin to craft a comprehensive revenue plan.  It can seem like an overwhelming process, but if you are strategic and systematic about it, you can break an overwhelming goal down into manageable chunks and pretty soon you are raising more money that you thought possible.  I did this at KLRU, increasing annual operating revenue by $1.6 million.  And I’m helping several of my clients create and implement similiar revenue plans.

There is a way, even in the midst of a recession, to generate the money necessary to achieve your goals.  But it requires an integrated, strategic approach.

About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. In addition to leading Social Velocity's efforts to accelerate social innovation, she is a regular contributor to Change.org's Social Entrepreneurship blog and speaks at social innovation gatherings.

Related posts:

1. A Strategic Path Out
2. A Better Way to Fundraise
3. Financing Not Fundraising: The Plan

I realize that much of the lack of affection for strategic planning comes from the fact that it can be an organic process.  And sometimes a strategic planning process can waste a lot of time but result in very little.  Or, if it does result in a plan, that plan sits on bookshelves gathering dust.

A real, successful strategic plan lays out a clear path over a future period (3-5 years) with concrete steps to get there.  Then, the plan is revisited, measured, updated by all involved monthly, if not daily.  In essence a good strategic plan is very simple:  this is where we want to be, this is how we are going to get there, now get to work.

So here is my suggested strategic planning process.  I will preface this with my bias that an outsider should be involved in some of the facilitation of this process.  If a staff or board member facilitates there will be a bias to the process and the results will be suspect.  An objective third party can ask the hard questions that others within the organization are afraid to, make sure that discussions stay on track, keep the end goal  always in sight, and ensure that an organization doesn’t just settle back into their normal way of doing things.

There are 8 basic steps to a good strategic planning process:

1. Conduct a SWOT: strengths and weaknesses (of the internal organization) and opportunities and threats (facing the organization from external circumstances) among staff, board, and other key constituents to the organization.
2. Do some research on your competitors (those providing similar services in the community) and your consumers (funders and clients) in order to understand trends and reactions to those trends.  This will help you determine how your organization needs to react in the coming years.
3. Revisit/refine the vision and mission of the organization.  These two things are very different, but are often confused.  The vision of the organization is the future reality in the external world that the organization would like to see, for example:  “An end to homelessness.”  It isn’t necessarily achievable, but it is what the organization is striving to make happen.  A mission is how the organization is working towards that vision.  It describes the impact point and what the organization exists to do, for example: “To move the homeless population of Phoenix off the streets through access to education, healthcare and job training.”
4. Create 3-5 broad goals for the organization in the specific timeframe of the plan.  What is it that you want to accomplish in the next X years that will help you achieve your mission?  More than 5 goals are too much for staff and board to focus on.
5. Break each of the 3-5 broad goals into activities, or steps to get there.  What is it going to take to make each goal happen?  What are the specific activities that need to occur?
6. Create a timeline with deliverables, people responsible and due dates for each activity.
7. Create an electronic, interactive format for the timeline so that each staff member can update their piece of the plan on a regular basis.
8. Monitor and measure achievement of the deliverables and the overall goals at least quarterly, and revise the plan as needed.

The key to a successful strategic plan is getting staff and board members involved early and often.  That is not to say that the entire board and staff should participate in each step of the process.  Rather, create a team to lead the process and then find ways throughout to get feedback from others (surveys, retreats, lunches, meetings, etc.).

Finally, a good strategic plan doesn’t have to be long, arduous and difficult to comprehend.  To the contrary, the more basic and simple you can make it, the better.  The end goal is that everyone in the organization will understand the overall plan and how their efforts fit into it.  With everyone on the same page marching toward a shared vision success can be achieved.  And those scarce resources will be made to reach even farther.

About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. In addition to leading Social Velocity's efforts to accelerate social innovation, she is a regular contributor to Change.org's Social Entrepreneurship blog and speaks at social innovation gatherings.

Related posts:

1. Grow Programs
2. Financing Not Fundraising: The Plan
3. A Strategic Approach to Generating Revenue