While everyone is thinking and worrying about the economic crisis and the potential detrimental effects on the nonprofit sector, an idea occurs to me. With the continuing volatility in the stock market and a dark economic forecast at least for the next few months, perhaps the next year, foundations and individuals won’t make money on their investments in the market. What if a foundation took say $100,000 from their corpus and made a program-related investment (PRI) in a nonprofit hoping to build their capacity to raise unrestricted dollars. A PRI is basically a loan to a nonprofit at low interest rates.
What if a foundation, or a wealthy individual, loaned a nonprofit $100K+ for a 2-3 year term. Then, the nonprofit could use that capital to invest in their fundraising infrastructure in order to diversify and be more strategic in raising unrestricted dollars. They could hire a seasoned Development Director, purchase a new donor database, upgrade their website and email marketing efforts, launch a major gifts campaign, train their board, and so on. The idea is that all of these investments would pay for themselves in 2 or 3 years, at which time the nonprofit could pay back the individual or the foundation.
We did something like this at KLRU, however it wasn’t with PRIs, but with donor investments, which in a market like this might be harder to come by. With investments from a handful of donors totaling $350K we completely revamped our fundraising function and increased annual revenue by $1.6 million, a 40% increase. That’s a pretty amazing ROI. And donors loved it.
If you applied this idea to PRIs, donors could help nonprofits increase their capacity and sustainability, while the donor protects his corpus in a down market.
Just a thought.
It’s a good thought.
My only concern would be with the time frame. I have yet to find a way to completely revamp something in a year.
Usually, the hardest part of turning a dying or struggling NFP around is the people who are in charge and/or working for it. They know they need to make changes and they know they need help but getting real buy in that is followed up with action is much trickier and requires more than coming up with a good strategy.
Only once did I receive free reign to do what was needed for success and we accomplished our goals in 10 months. It took TREMENDOUS amounts of work/energy but the end result was a thing of beauty.
IF something like this were to happen, what would you do about the people part of things? I’d really be interested in hearing your experiences with that particular dynamic.
Good stuff you put out here. Thank you for sharing it.
Leanne,
You make a really good point that it is very difficult, if not impossible, to turn something around in a year. When I envisioned my PRI idea, I was thinking in terms of 2-3 years. A foundation would make a PRI loan to a nonprofit and then expect it back in 2-3 years. This would give the nonprofit time to implement the strategy and reap the rewards of it, generate enough revenue to sustain the new model and pay back the foundation, and also, in this economy, enough time for us to get out of the recession. I agree with you, 1 year is not enough time.
To answer your question about the people part of the equation, I think human resources are the most valuable resource a nonprofit has. Because money is tight, technology is usually not cutting edge, etc, the people a nonprofit has are critical. That’s why it is important to recruit and train a top notch team. And then invest in training and professional development to keep them high performing. I did this at KLRU, and we found great results, as you read in my blog. But that whole process took almost 3 years, so it absolutely does take time. But what I’m excited about is funders starting to take a more long-term view of nonprofits and understanding that funders have to invest in larger amounts over longer periods of time. This builds capacity and sustainability in the nonprofit sector, and it allows nonprofits to scale their effective programs. We need all of these things in order to really address and solve some of our most pressing problems.
Does that answer your questions?