Tuesday, July 9, 2013

When you need a big grant

Your small nonprofit has a three-year plan to create, manage and expand services for a program. Your estimate is that it will require $500,000 to fund the program for three years. Your average annual revenue is about $100,000. What's next?

The first place most nonprofits turn to for funding is THE GRANT. You know, that single-source, highly committed funding partner that can make this program a reality. I work with quite a few organizations that start out with the idea that one grant is the only acceptable outcome.  About 1% of the time it actually works out that way.
There are definitely big foundations out there that can fund at this level, and some of them actually will spread the funding out over three years. The trick is to make them want to support your program.

The hardest part of expanding from a small nonprofit to a bigger nonprofit is funding. Big foundations tend to support big nonprofits, and they almost never want to be your sole source of funding. So the first step is to give up. No really…you have to give up the idea that one grantor is going to be your angel investor. You are going to have to approach several possible partners, and you may have to fund your program in phases.

The first thing you have to do is have a rock-solid program strategy. Big foundations didn't get that way by chasing rainbows. They have great name recognition because the programs they support get results, the uses of the funds are well documented, and the outcomes are measurable.

If you haven't done a feasibility study on the program you must start there, and all the data needs to be verifiable. Who or what will the program benefit, how will it benefit them, what kind of reports or research will you employ  to measure effectiveness, what resources do you already have to get started (including human resources)?  Start by proving your statement of need and detailing your method to measure outcomes. When I am working with an organization, this seems to be the part that causes the most heartburn. What's good enough for your board meeting is probably not going to measure up with a major grantor. 

You have to have realistic budget figures. If you say that you need $100,000 for equipment, list it with price estimates in detail. In construction or manufacturing, they call this a bill of materials. What do you need, what benefit is it to the program, when do you need it, and what will it cost? Is it a consumable (paper, ink, food)  or is it a depreciable acquisition (building, racking, vehicle, server)?  Is it a subcontracted service?  Is any of it potentially or actually going to retained past the life of the funding cycle?  Even if the initial grant application or LOI doesn't request this much detail at first, you will have to produce it eventually, and it will be useful during the program as well.
How much of your own existing funding are you going to invest in this program?  Don't forget that volunteers can often be used as matching capital. They have a monetary value.

Don't try to hide normal operating costs in the program. If you are expecting some of the money to be used for program-related additional daily costs (such as an increase in utility costs, fuel or supplies) be sure that you keep the two classifications separate. It is perfectly fine to include things such as utility costs in a grant request, as long as they are program-related. It is not OK to expect the grant to pay your normal operating costs unless you disclose that up front.

It should go without saying, but if you are already operating in the red, you don't stand a ghost of a chance of  getting funding. Audited financials that show enough existing income to keep the doors open are a must.

Along with that premise, if you are a truly tiny organization, with revenue under $50,000, there is little chance that you will receive major funding for a big program. You would be far better off to scale back your plans to something that local foundations can get on board with, succeed with those and build your revenues and donor relations to the point that you can move up to bigger programs. Many foundations do not even accept the e-postcard as a valid 990 filing, because they know that means you don't have a lot of capital to invest in a big program.

A major funding campaign is a lot of work. It will cost money up front. Be sure that you can sustain the effort before you invest too much time or money into it. Some very large foundations will tell you right on their website that they can only fund about 10 or 20 percent of the requests they receive. Do your homework, qualify the foundation as a viable candidate to approach, and don't assume that because your program is worthy it will be funded. Sometimes, the best outcome will only be getting on that particular foundation's radar for a future year. 

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