In our ongoing series “Financing Not Fundraising,” we are exploring the argument that nonprofits need to stop fundraising and start financing social impact. The idea is 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, they must work to create a broader approach to securing the overall FINANCING necessary to create social change.
The next piece of the puzzle is to create alignment in your nonprofit organization between mission (your reason for existing), core competencies (what you do better than anyone else in the world), and money (how you sustain yourself financially).
An organization in alignment looks like this:
The mission is supported by the organization’s core competencies which both feed into how it brings money in the door.
When one or two of these three elements are out of alignment, chaos can ensue. For example:
Mission is misaligned: An organization that can generate money and operates great programs, but can’t bring it all together in a coherent single purpose, this is otherwise known as “mission creep.”
Core competencies are misaligned: An organization that has a great, clear idea of what they do (mission) and can raise money around it, but can’t deliver. This is reminiscent of the dot com era when there were countless businesses with fabulous ideas that successfully raised VC or angel money, but didn’t really have a core competency or product to deliver and eventually went bust.
Resource engine is misaligned: This final misalignment is the one nonprofits are most familiar with. An organization has a great mission and can produce great results, but they can’t find a way to make the organization financially sustainable.
And it is this money misalignment where Financing Not Fundraising comes into play. Traditional nonprofit fundraising is often an example of money misalignment. It looks like this:
- The development staff (money) and program staff (mission) sit in separate parts of the building, rarely ever talk to each other, and make their respective decisions without consulting the other
- The board and non-fundraising staff disdain money and refuse to participate in bringing it in the door
- A nonprofit creates fundraising events that have nothing, or very little, to do with the mission of the organization
- A nonprofit raises money around gimmicks and donor benefits instead of around the mission and impact of the organization
- The organization’s strategic plan only contains goals for program delivery (mission), not how to finance that delivery (money)
And that’s just a beginning list. Shoving money to the side and ignoring it is the equivalent of a business owner saying they don’t need to pay attention to sales. “Nonprofit” means that individuals (private owners or shareholders) don’t gain financial benefit, it doesn’t mean that the entity doesn’t make money.
To get money back in alignment with mission and competencies nonprofits need to do several things:
- Embrace the idea that money is not a necessary evil to your organization, but rather an equal and supportive partner to your mission
- Train your entire board and staff on money in the nonprofit sector in general, and how money comes in the door at your specific organization
- Make sure that your strategic plan has a realistic and thoughtful financial plan attached to it
- Move fundraising activities and special events away from convoluted ways to extract money from people and towards celebrating and educating the community about the impact you are achieving
- Be up front with board members, donors and staff about how much it costs to fund every aspect of the organization’s operations and the various ways that money offsets those costs
Instead of sequestering fundraising away from the “true work” of the organization, nonprofits must fully integrate financing into their mission. It’s the only real way to create social impact.
If you want to learn more about applying the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series, or download the 27-page Financing Not Fundraising e-book.