The R.E.A.L. Formula for attracting grantors

There are approximately 1.5 million nonprofits vying for funding from approximate 100,000 foundations every year.  Standing out in that crowd requires a strong survival strategy.

There are a few core criteria that every funding source adheres to when sifting through grant applications. Those criteria can be summed up in the R.E.A.L. formula, as follows:

• Relevancy.  Does your organization's application match up well with the donor's mission, vision and geographic limitations?
• Efficacy – If the funder gives you money, will their mission get the most bang for the buck from your organization, or will it just enable you to keep the lights on a little longer?  Various sources have reported that between 30 and 60 thousand nonprofits disappear from the IRS database each year, prompting grantors to confine their support to those organizations that can deliver benefits well into the future.
• Accountability – Does your organization have a strong track record of transparency relative to your previous operations, outcomes  and funding partnerships? Can you provide concrete examples to prove your successes and verify your financial data?
• Legitimacy – are you a legally recognized nonprofit with good references and strong outcomes?

Increasingly, as detailed in an article by Rick Cohen in the Nonprofit Quarterly, foundations are simply refusing to accept unsolicited applications. While some of that reluctance is due to recent economic factors, it is also due to simply receiving too many applications from organizations that obviously can't accomplish their mission.

Other foundations are adding restrictions to application requirements, such as not funding startups, or those whose current revenues are under a preset amount. Most have always required that you provide copies of the long form 990, indicating that your revenues are above six figures.

All prospective grantors use some sort of rubric, either written or implied, to separate the wheat from the chaff. Failing to deliver on funder expectations in any of the above areas can and probably will kill your application.

Some  shortcomings I see often are a lack of data and an unprofessional public persona.

For instance, let's look at legitimacy. The first thing I do when approached by a new nonprofit client seeking grants is to look for them online. I'm looking for a website that actually tells me something about the organization and its key personnel and programs. I want to see some sort of evidence of positive outcomes. There should be a link to the financials and  a copy of their determination letter, or at least the ability to request them.

I am also going to check all the databases for verification of their nonprofit status, including the IRS website, if necessary. While I also check out social media, the most important thing for me is to see if they present well on first impression, since I know that any funding source will be doing the same.

Grantors that ask for a website URL are going to click on the link. Even if they don't ask, they may well include your online presence as a scoring metric.

Master the R.E.A.L. formula and your funding success rate is going to go up dramatically.

Don't know if you will fit the formula?  Drop me a line at rightwords@ida.net for a review.   

Is your charity meeting donor expectations?

Given the high trust level that charities are expected to measure up to, could you look a donor in the eye and swear that all their donations will go to the mission?  More importantly, should you?

Donor confidence is not just important to your nonprofit, it is critical. If donors get even a faint whiff of something a little off, it can take years to regain that confidence.

In an article on 9/11 of this year, the Huffington Post noted that  even the venerable Red Cross took a hit for misleading donors after 9/11/01. The article noted that in the wake of the problem, donor and public confidence in charities in general dropped from 25% approval in July 2001 to 18% by May of 2002.

Charities that lose donor confidence don't survive intact. Some may not survive at all. The above-referenced article also noted that out of about 300 9/11-related charities started after 9/11, only five were surviving by 2006.

The best way to retain donor confidence is to be able to prove effectiveness and be up-front with the donors regarding the use of funds.

Given what I do, i.e. grant writing and funding research, I see this statement a lot.

"Once we get some grant money coming in, we can use part of it to pay you."

Ah…no, you can't. Nor can you pay the back rent or the overdue power bill. Almost every RFP plainly states that funds may not be used to pay debts incurred prior to the grant award. This is known as "restricted" funding, i.e. the use of the funds is restricted by the donor to certain costs for defined programs.

Most of them also state that "usual and customary expenses unrelated to the delivery of mission-related goods and services" (or words to that effect) are not eligible to be paid out of grant funds. The exception would be any grant funds received that state the use of the funds is unrestricted, or may be used for "general operating support".

But what about those individual donors?  The ones that chip in a few dollars every month, or write one check a year?  Of course you would never outright lie, but should you sort of gloss over the fact that you are paying the utility bills with their money? After all, shouldn't they just know that you have to pay some administrative expenses out of donations?

Maybe they should, but they don't. However naïve it may be, casual donors think that every dollar buys a meal, a coat, a bag of dog food, or whatever else your appeal is highlighting.

The best way to avoid that is to either define the percentage of each donated dollar that goes to the charitable purpose, or state in the appeal that funds received are used for both general and program support.

In the beginning, that administrative percentage could be 50% or more. Once you have your infrastructure in place, it should be reflected in your program-to-administrative cost ratio.

Just don't over-promise. It is usually unrealistic to claim that your administrative expense-to-mission allocation goal is five or ten percent of total donations. If you've done a proper business plan, you should have at least a rough idea of what percentage of the money will eventually be used for organizational support versus program expenses.

Be sure to let donors know about the good things their money has purchased. If your food pantry  fed 100 people every Wednesday of the last year, put it in your year-end report and plaster it all over your website and social media accounts. If your program participants are willing, tell a few personal stories. Have an animal rescue?  Along with all the animals needing homes, have a page for those that found their forever homes.

Like your Mom always said…honesty is the best policy. 

Decoding government RFP announcements

Grant applications are initiated by a request for a proposal or RFP.  Most newer nonprofits think that all RFP's are for grant money, i.e. non-repayable funds that they can use for one of their own programs or other mission-critical area.

That's generally true, if the RFP is issued by a foundation, corporation  or other private funding source.  While your application must conform to, and further the aims of, the general interests of the grantor you are free to design your own program and set your own goals and budgets.

When the funding source is a government agency, the picture is less clear.

Some government-related RFP's are simply notices of bid openings. The agency wants something, either a service or a product, and the RFP is calling for a bid.  In those cases, the issuing agency has full control of the project.  So many miles of paving fitting government specifications, so many offices to be cleaned, or so many reams of paper or desks to be furnished. While these might be listed on the state or federal agencies so-called "grant" website, they are not grants, they are contracts.

Then there is a sort of hybrid RFP.  The issuing agency has a need to be met, such as after-school care, or improving English literacy in non-native speakers.  The goal and desired outcomes are still set by the agency, but the applicant may have some discretion in how that goal is met. These funds are typically derived from what is known as pass-through money, i.e. it doesn't come directly from your local tax base, but comes from federal or state funding.

For instance, say a county child services agency wants to provide after-school care for 100 low-income children.  The agency will define the quantity of slots you must supply, and probably a list of "must-have" qualifications, such as a specified square-footage allowance, a certain type or amount of supplemental nutrition, caregiver/child ratio, or the educational and professional qualifications of the personnel.  The goal is to keep children safe and off the streets after school. 

As the provider, you may be free to take one of your own programs and tailor it to meet the negotiable parts of the criteria.  Let's say that your focus is teaching children about the arts. You can submit the mechanics of what the after-school curriculum will be, using your  program as the service delivery model.

Community Development Block Grants, or CDBG's fit that model. These are the so-called pass-through grants.

Although the funding source is not local, it is meant to address the needs of your specific community. For instance, the government is currently big on obesity-prevention programs.  The over-arching goal of the Federal government is to combat obesity, and the government issues general guidelines controlling the use of the money. They then parcel out funding to the state government, and that government passes it through to the communities.

The specifics are then designed and incorporated into a city or county-level RFP. The desired  result is already defined, i.e. to reduce the number of obese people in the community.

Various types of nonprofit programs could potentially qualify under that model.  That might include a nutrition education program, a structured sports or physical training program, or a food drive to provide healthy food to low-income participants.

As you can see, it pays to read the RFP carefully.  If you can't meet the non-negotiable criteria, then spending the time to apply is not going to be productive. On the other hand, reading it too narrowly can result in not applying when one of your programs might be just the new and innovative approach the issuing agency wants to see.

One other thing...typically government programs tend to give far greater consideration to programs that are can be replicated and are expandable outside your local area. 

Just reading and understanding government RFP's is a challenge, but the rewards can be pretty awesome.  Most of these RFP's have a contact person's phone and/or email information, but it pays to read the whole thing carefully and compile a short list of questions that you can fax or email.  Government employees generally have little patience with someone that obviously didn't get beyond the "potential funding available" line.

If you need help understanding an RFP or would like to respond to one, drop me a line at rightwords@ida.net and let's talk.   

Grants for the Arts

The Shubert Foundation has announced the opening of a new funding cycle.

This one of those rare general support grant opportunities that is NOT program-related.  The NYC-based Shubert Foundation primarily funds nonprofit professional resident theater companies with an emphasis on producing, rather than presenting, organizations. A smaller amount of funding is provided for dance companies. This year, applications for dance, arts related and education categories are due by October 15, while theater applications close on December 1.

One caveat...you are not allowed to specify a sum.  The Foundation will determine the amount of the grant if it chooses to fund an organization. Other restrictions apply as well.

For full details, visit the Foundation website at:

http://www.shubertfoundation.org

Why waste money on a business plan?

Received from "Fred" (not his real name).

"I guess I need a business plan writer. I am trying to recruit board members for my new nonprofit and all the ones I want on the board want to see a business plan, preferably one done by an outsider. I don't understand why I should do a business plan. I'm going to be a nonprofit, not a business.  Even if it was a business, what's the use of filling out a bunch of phony financial stuff when I have no idea what the numbers really are? And why do they care about my "competitors"?  I think this is just a waste of money, but I would like a quote so I can explain why I can't do this right now."

Have you ever felt like Fred? You're supporting your nonprofit (or your fledgling small business) with your own credit cards, and now someone you apparently respect or at least see value in being associated with, wants you to spend more money on something other than your mission. WHY?

First, Fred doesn't seem to understand the legal responsibilities inherent in serving on a board. To him, these are just names in front of titles. The people he is approaching know that isn't true. Before they commit, they want to know that this has a chance of (a) succeeding) and (b) will not expose them to unnecessary legal complications.

Second, it was fairly obvious that Fred hasn't thought about the financial realities of being in business, even if that "business" is a charity.  Like so many people, he assumes that because the goal is awesome and a lot of people will be helped, the money is just going to flood in to support the mission. That's probably why his potential board members want an outsider to do the plan.

What the business plan will do is give focus and clarity to the process of fulfilling Fred's dream. It will ground him in the day-to-day realities of making that dream a reality.

 

Might it also force him to see that the way he wants to go about realizing that dream isn't feasible at the beginning? Absolutely.

That's what I think stops a lot of people from writing a business plan. Sometimes it's simply a case of them not knowing what it takes to get to the end goal.  Sometimes it's a case of not wanting to know.

I write business and strategic plans, and the number one frustration for my clients is that the plan doesn't support their idea of how much money they will make or attract on the timeline they envision. In other words, reality doesn't line up with the timeline of the dream. Done properly, business plans will sidestep the pitfalls of unreasonable expectations.

I can tell them what the norms are, what's a reasonable rate of growth, research competition or funding streams and get average cost of doing business figures, but if they need or want a six figure income and I don't see that happening in one year, I can't tell them that it will happen.

You do, or have a business plan done, to prepare you for reality. Then you can show potential associates that you recognize not just the benefits, but also the problems. You can show you have a strategy to deal with the problems so the benefits are realized as quickly and efficiently as possible. You plan to manage challenges, instead of being managed by them. A plan helps you to realize that your dream involves entering a marathon, not a sprint.

I gave Fred his quote and wished him luck. I hope he follows through and his dream comes true. 

Making your crowdfunding appeal work.

Crowdfunding is a nonprofit (and small business!) financing option that has generated a lot of interest, both here on this blog and throughout the internet. For nonprofits in particular, it can bridge the three-year development gap before you can hope to attract significant grant funding.

"Joel" responded to my last post on the subject in an email saying he had tried crowdfunding and hadn't even met his modest goal of $500. He mentioned that he posted it, checked back just before it was due to close and only had eighty-five dollars in contributions.

That points out the reality of any type of fundraising, especially crowdfunding.

As Joel found out, making crowdfunding actually work isn't as easy as it sounds. One well-known site reports that less than 10% of the campaigns it hosts actually meet goal. Others report success rates of up to 55%. None report 100% success. Success isn't a sure thing.

Crowdfunding isn't a passive exercise.

To put it as simply as possible, your crowdfunding appeals are investor presentations. Small businesses tend to get the idea of presenting value for money, nonprofits not so much. This is especially difficult because the real value for donors is not quantifiable in dollars and cents.

Think about how you invite people to a party. Would you just tack a post-it note to your front door and expect to have a fabulous turnout?

A fully functional fundraising strategy is pretty much a necessity for success. That includes the usual elements of PR and marketing you would use if you were planning an in-person event. If you are just starting out and looking for seed money, you will need to do a whale of a sales job to convince donors of your legitimacy, so strong board bios, program descriptions, goals and supporter profiles are recommended.

Some sites allow, or even insist on promotional videos, but if they don't you might consider presenting a short (1-2 minutes max) video on your website or on YouTube or other social media and link to it in your appeal. They don't need to be professionally produced, but they do need to be relative to your appeal. You also need to have a link in the appeal to your website or at least your Facebook page.

Organize your campaign for success.

While businesses can offer a share of tangible profits and a return on investment, nonprofits (and here I mean 501(c)(3) organizations, not L3C's) are not able to do so, since all the money raised (less processing fees) has to go to fulfilling or supporting their missions. Since donors still have to be engaged, or to put it bluntly, enticed to contribute, another strategy is needed.

That is often done through the use of rewards. Those might be as simple as a nice thank-you email,  involve  merchandise like a blanket or cap, or  something more personal, like a photo-op with the board or a prominent supporter. That can mean forming alliances with business supporters who will donate merchandise or services such as printing. Use larger prizes for larger donations. Just be sure the rewards don't violate any IRS rules. You need to secure this support before starting your campaign.

Another pitfall for any crowdfunding hopeful is lack of understanding about how the process works. On one level it's still a sales pitch, but you still  need to create an emotional connection so that people will stick around long enough to actually donate. Having a strong statement of need is critical, so create that in advance. Have a concrete goal for the funds. General appeals with unspecified uses for the money don't do as well.

The truly nice thing about crowdfunding is that unlike a lot of grant applications, you can inject some emotion into the picture. Don't be shy about appealing to people's emotions. If you say "people are hungry" try to have some pictures or first-person stories that illustrate the problem available.

You need to have a strong network.

People you don't know don't just roll out of bed in the morning and say "I think I'll troll the web and find someone to give money to," and they certainly aren't going to put your name in the search terms.

Your network, i.e. your existing supporters and contacts have to help you get the word out as well as being your first donors. If you've ever been to an auction, you know that everybody sits on their hands until the first bid. You need people to start the ball rolling by getting a few donations posted. Also like an auction, most of your support will probably come in the last few days, provided that you really push for the support. Don't give up on the campaign too early.

If you have three people following you on Facebook, that's probably not going to get the job done. Somebody has to email, like, or tweet the message every day to people who will then do the same thing. You may have to use traditional advertising methods like flyers or ads to drive traffic to the campaign. Ask, ask again, and keep asking. This is grassroots networking at its finest.

You need to have good basics.

Some sites require that you  present a formal presentation to the website before they will even list you. That means you will need things like a business plan, program descriptions and a budget. Others require that you are able to respond to inquiries with those documents. Most, if not all the sites require that if you advertise you are a nonprofit, you have the paperwork to prove it.

A web presence is pretty much mandatory. You should have a website where people can get some in-depth knowledge of your mission and competency. A social media presence such as Facebook, or any of the other platforms can substitute, but if you are looking for really big dollars (and that's mid-five figures or more in this world) people are going to check you out. Be sure to add a link to your campaign and the start and end dates in any online copy or email blasts. Don't make prospective donors hunt for the crowdfunding site – they won't do it.

Read all the fine print.

Reputable crowdfunding sites will have a fully detailed terms and conditions section. Find out how much of the money you actually get, how and when it is transmitted, whether you have to meet minimum goals to get the money and what guarantees the site offers to assure that if your goals are not met, the money is returned to the donors. Find out if there are any limits on how often you can post a campaign. Look for reviews or complaints online.

Be realistic.

Your goal needs to be realistic for the phase you are in now. If you are new, asking for a million dollars isn't reasonable, and it guarantees that you won't meet your goal. If you are established, and have a good track record to show that you use donor money well, then you can be more ambitious. Crowdfunding can and has reported campaigns raising well over $100,000.

Crowdfunding might be the answer to surviving that period between initial start-up and the point at which you can compete for grants, but it isn't a simple, easy process. Before you click "sign me up",  do your homework.

Wondering if your crowdfunding campaign measures up?  Drop me a line at rightwords@ida.net if you would like an inexpensive review.