Tuesday, December 23, 2014

Federal Apprenticeship grant FOA announcement

The following FOA opened on December 11, 2014, and closes on April 30, 2015.

American Apprenticeship Initiative
Department of Labor
Employment and Training Administration

Note:  The lead organization, i.e. the award designee, MUST be a nonprofit, although for-profits are encouraged to participate in the training protocol and delivery phases.

The entire announcement is available through grants.gov and is, as noted, offered through the Department of Labor. The synopsis is available at: http://www.grants.gov/web/grants/search-grants.html. Click on the DOL link, and then on the FOA number. From there you can download the full announcement and supporting documents.

This is a large-scale program, with a minimum award amount of $2.5 million and a maximum individual award of $5 million, with a funding program cap of $100 million. There are more than 1100 potentially eligible occupations and persons as young as 16 may be eligible to take advantage of the program.

There are significant minimum results required, with the lowest funding level requiring 300 apprentices to be served, so this is probably best suited to nonprofits already working in the general job training or skills development fields that have existing partnerships at the business, state and local government level.

Wednesday, December 10, 2014

What impact statements say about your nonprofit

What do the people you help think of your nonprofit?  How about your partners?

That's a question I ask when I am working on impact reports. You'd be astounded at how many people can't provide the answer.

Impact statements are an important part of getting grants at any level. 

If you operate a nonprofit, you obviously get something concrete out of it. Whether it's emotional satisfaction or a feeling of being part of a larger cause, there has to be something in it besides a monetary return.

The problem is, no grant maker wants to know what good you derive from your organization.

To some extent most impact statements are about statistics, but numbers don't tell the whole story.

Take the case of a nutrition-focused nonprofit. Their mission was to provide not just more food, but better food to the low-income population in their area. To that end, they held what you might call healthy eating food drives, gave cooking classes and were looking for support to purchase more healthy foods like raw vegetables and fruit.

They had all the numerical data documenting how many meals they had provided, nutrition tables and comparisons of calorie substitutes. They were very proud that they "introduced people to foods they might not have considered previously." They were also trying to start urban gardens.

What I noticed was that they didn't seem to be serving near as many people as the statistics would indicate that they should. Some months, they actually threw away food that had aged past it's safe shelf life.

When I asked the opening questions above they had no answers, because they had never asked them of their clients.

After a lot of prodding, they agreed to collect some data, and the results shocked them.

People didn't like their approach. It was described variously as preachy, stuck up, and out of touch with the community members they wanted to help.

For instance, one respondent shared that she couldn't keep a lot of fresh food on hand, because her refrigerator was 40 years old and had a very tiny freezer. She used a lot of boxed and canned foods, because that's what she could store.

Another said that her "stove" was a hot plate, so she couldn't fix anything that needed an oven.

Still another lady wrote back and said "My kids aren't going to eat brussel sprouts or alfalfa shoots, so why should I waste the gas to go get them?"

And one that typified why their mission wasn't working in the community…"I work two jobs now. When would I have time to do all that canning, and why would I when I can buy the same thing in a can at the store?"

No matter how noble your cause, or how great it makes you feel, if you can't prove to grantors that it benefits others, they aren't going to support you.

Ask for honest feedback. Your impact statement will benefit, and so will your clients or beneficiaries.

Monday, December 1, 2014

Happy New (giving) Year!

If you waited too long to maximize the holiday giving season, your appeal just isn't  generating enough funding, or grants are a significant part of your revenue planning, it's time to start your planning for next year.

If you're reading this you might be saying "Aaagh!!  I'm not up for another big campaign right now!"

You and your staff may still be in the middle of all the seasonal charity events, Twitter and Facebook campaigns, and endless envelope stuffing. Sleep might be the only thing on your wish list.

That's known as the post-Christmas burn-out effect. Since the holiday season is often the highest point in most organization's revenue cycle, it's natural to go all out at the end of the year.

That doesn't really matter to grantors. Grants  are awarded at set intervals, and they can take a very long time to produce funds.

A webpage on the site of the  W.M. Keck Foundation perfectly illustrates why you need to be transitioning into next year's grant planning NOW.

Notice that next December's awards are in the planning stages right now. Applications to be awarded June 2016 open up in July 2015. In other words, the grantor is planning a full year ahead. That means you should be too.

To compete effectively for grants you need to have a forward-looking plan, meaning that you should be defining your needs well in advance of needing the funds.

You can't wait until two weeks before an application is due to start planning for it. A perfect example of that can be found on a National Institutes of Health (NIH) webpage: 

If you clicked on the link, you might notice that the suggested lead time to preparing to submit the application for funding is two months, and the award review could take "…days, weeks, or months."

That assumes that you have all your data ducks in a row. Your budget is complete, your procedures are in order, and your actual or projected results are verified, or will be by the time you actually begin the application.

Only then should you start researching possible donor matches.

If you don't have good data at your fingertips, now would definitely be the time to compile and organize it.

Monday, November 24, 2014

Holiday fundraising – Planning ahead

Many nonprofit organizations are looking at the end of the year, particularly in terms of revenue raised. Those that met or exceeded their goal have one thing in common – they thought ahead.

Every year about this time the internet blossoms with ads seeking help to "design a holiday appeal" or "boost our end-of-year giving campaign".

If you've waited until now to think about holiday revenue, you are about six months late.

In terms of grants, most foundations have already closed their application window for the year. While it is true that many grantors disburse a lot of their funding at year's end, they already know who is going to receive it.

In terms of local funding and many of the traditional campaigns such as Giving Tuesday (which occurs  December 2 this year) the participants have already been selected and the advertising, web pages, emails and even snail mail reminders have been delivered.

At best, your choices are social media blasts, and at this point that can throw you into competition with a maelstrom of carefully planned campaigns, many of them coordinated with big-budget marketing strategies.

Social media usually succeeds best with a broader, well-defined base of followers, so if your pages are mainly being visited by a few friends and relatives, social media may not immediately provide the oomph you need for serious fundraising.

One of the things that many organizations fail to account for is other people's budgeting.

Whether it is a huge foundation or your next-door neighbor, most available funding has already been allocated.

There is and will always be a certain type of last-minute donor, just as there are last-minute shoppers, but these tend to be one-time gifts.

Your goal is, or should be building  sustainable donor relationships well in advance of seasonal campaigns.

Seasonal campaigns rely on traditional marketing tactics. Building your contact lists, developing your media kits, lining up success stores or examples of need and tracking your appeal success rate all require implementing a cohesive plan with clearly defined steps and goals.

Any holiday fundraising is likely to  produce some revenue.  If you come up short of your goals, it might be a good time to consider preparing for the spring grant season, and begin developing next year's holiday campaign plans now by broadening your contact list and seeking out partners to help you expand your prospective donor base. 

Monday, November 17, 2014

Understanding how program development increases funding

All nonprofits have goals, or as they are usually stated, missions. Feeding the hungry, providing shelter for victims of domestic violence, supporting veterans, or rescuing animals are all goals, or missions. They are the reason your nonprofit exists.

To support the main mission, action plans, i.e. programs, are developed to reach the main goal.

In addition to solving or alleviating an adverse condition or circumstance, programs also provide funding parameters for supporters. To put it another way, they provide opportunities for people sympathetic to the main goal or mission to collaborate in achieving that goal, without being directly involved in the management and operation of a nonprofit.

Criticism of nonprofit effectiveness is seldom related to mission. Almost without fail, when nonprofits get in trouble with donors or grantors it is related to failure of the program or programs to achieve the mission.

One of the shortcomings of newer nonprofits is failing to communicate how a program advances mission accomplishment.

Interestingly, sometimes that goes back to the mission concept. Vague or overly ambitious missions can make it difficult to design realistic programs that can be developed to deliver the desired results.

Go back and re-read that last sentence, especially this part. " …design realistic programs that can be developed to deliver measurable optimum results." This is often one of the first things I address when working with new clients.

If your program, or programs aren't designed well, they can't possibly develop methods that achieve the best possible outcomes.

To design realistic programs you need to have a realistic program model in relation to your ability to deliver results.

Reality trumps vision

By way of explanation, let's look at the "No Child Left Behind" mission, a product of the George W. Bush presidency resulting in the 2001 legislation of the same name. The goal was to see that every child in the United States receives access to a quality education.

That's a totally realistic mission in terms of the resources available to support it, i.e. the Federal budget.

If that same nationwide mission was to be undertaken by a nonprofit in a town of 400 people in rural America, then the mission is not realistic in terms of scope, and no program could be designed that would achieve it.

Organizations need to take the availability of resources to achieve the mission into account at the time they decide to become a nonprofit. That limiting factor will determine the initial design and development of the programs. Ideally, future planning incorporates an "if-then" component so the program can be expanded as resources become available.

Well-designed programs provide better funding opportunities

Funding, especially from grants, is seldom sustainable from one source, so having a variety of funding opportunities is critical to mission success.

If a program is designed to provide both an immediate benefit and an opportunity for expansion, it can continue to grow as resources become available.

Setting realistic goals that are measurable and achievable allows the nonprofit to show donors that the program does provide tangible benefits at varying levels. When the organization can document positive results, it can attract more funding.

Thus, a neighborhood literacy program for ESL learners can start with a phased in program that first funds community outreach to raise awareness of the mission, then seeks funding for books or electronic readers, then expands to purchase furniture for a rented space, and finally seeks funding for a building to provide a permanent base of operations.

Each of those phases will attract a slightly different donor audience. For instance a corporate donor in the public relations field might fund a PR campaign, a tech company might provide in-kind donations of tablets or e-readers, a furniture company might grant funds to purchase desks and chairs, and finally, major foundations might grant  substantial funds to purchase the building.

Instead, far too many newly formed nonprofits start out with trying to fund the building before they can even prove that the community is deriving a benefit from the mission. All that accomplishes is to drive grantors and major supporters away.

As frustrating as it can be, good program planning pays dividends far beyond the time it takes to do it.

Monday, November 10, 2014

How to make your first budget work for you

One of the things that seems to frustrate most new businesses, especially nonprofits, is the "imaginary budget," also known as the projected budget, an exercise required by most lenders and grantors.

Of all the sections of a business or strategic plan, this is the most one often ignored or done badly.

Having looked at too many start-up budgets to count, I find that most people tend to pick a desired revenue number and make the budget arbitrarily fit that figure.

I see a lot of grant requests from new nonprofits that begin "We need $1.3 million dollars this year  to accomplish our goals." In reality, that's what they will need a few years down the road, not now.

That leads to things like allowances for a $20,000 website, $1 million buildings and marketing budgets that would be the envy of a lot of Fortune 1000 companies.

Budgets like this turn off donors, grantors and bankers. They advertise that the person or organization hasn't done their due diligence, or that they have no concept of financial development and management.

That's a bad place for you to start.

A beginning budget isn't going to look anything like your eventual goal.
You have to start with where you are, not where you want to be in the future, and then build up to your desired goal.

Let's inject a modicum of realism into the process.

Let's take the $20,000 website. There is no doubt that you can sink that much money into developing a website, but do you really need it in your first year? I would submit that given all the hosting companies that want to capture your business, you can probably get one that will suffice for the first year or two free or nearly free, and many of them don't require any coding knowledge at all.  Even if you need to process payments or donations at the start, most of the major players offer e-commerce packages for under $50.00 a month, sometimes substantially under.

Investors and supporters know that too, so your line item of $20K for a website simply tells them that you won't be spending that money on your core business or program.

Good budgets start with realistic planning. You may eventually want to feed 10,000 hungry people or sell 100,000 handbags, but you aren't going to do it today, next week, or this year.

Take the time to find out what things actually cost.  I well remember getting a budget for a charity wanting to provide a safe after-school environment that allowed $10/day for a single snack for each child. A quick check of the national averages showed that the range was from $.60 to $1.50/day, making it impossible for me to sell the $10 snack to any grantor.

Your dream may be to have a 20-room building for sheltering domestic violence victims, but you may have to budget for vouchers at a motel in the beginning.

The other side of any budget is the revenue side, and your base revenue target is dependent on your break-even cost.

If your initial costs are out of line, then your revenue target will also be out of line.

I once got a request to construct an investor-grade proposal from someone with one of those ideas to manufacture something that makes you say "Wow! Why hasn't anybody thought of this before?"

The marketing and manufacturing process side of the proposal was well done, but when it came to manufacturing costs the client had made some very unrealistic assumptions. That resulted in his costs of manufacture being some 2.5 times higher than he could cover with his targeted selling price.

That impacted the whole proposal. Now instead of a product with a cost that was easily manageable by almost anyone, his target market shrank to upper-middle class and above customers, shrinking his projected sales figures and thus his revenues, by more than half.

If you don't know how to fact-check costs, or simply don't have the patience to do it, hire someone that can do it for you.

In conclusion, budgets aren't sexy or inspiring, but doing them right will pay off big in the long run. The first thing you need to sell is yourself or your organization, and good budgets make good first impressions.

Monday, November 3, 2014

What to expect from your consultant

"My consultant hates me!"

That's the first line of an email I got last week. Here's the second line.

"I need someone who believes in me and supports what I'm trying to do."

If you are thinking of hiring a consultant, don't expect a cheerleader. That's not what we do.

Any consultant in any field absolutely does want to help you succeed. After all, you are supposedly hiring us to do just that, so we can't succeed unless you succeed.

When a consultant goes into a business, their job is to find the things that you can change that will help you to be more successful. If everything is already perfect, then you wouldn't need a consultant, right?

In the beginning it might feel like all the consultant does is find fault with everything, but to fix a problem, you have to focus on the problem.

Make no mistake, it takes real guts to bare your operations to an outsider, and your consultant knows that. We also know that we are going to deal with a certain amount of hurt feelings and bruised egos. No one on earth loves criticism, no matter how tactfully it is given.

Still, you are paying a consultant to give you advice and strategies for improvement.

Consultants should be asking you tough questions. That doesn't mean they don't see the good things you are doing. It's just that the good things are already working, so while they need to be considered and credit given for them, they aren't the problem.

When I start working with a client, the first thing I do is ask what is working and what isn't, relative to the overall goal. For instance, maybe your community outreach or marketing is bringing lots of new faces to your website or store, but you aren't seeing an income bump from them.

It's my job to find out why that happens. Are you targeting the wrong market demographic? Does your sales team provide lousy follow-up after the initial contact?  Does your program or product fail to perform as advertised?

To answer those questions, I need to find the cause.

For instance, maybe your customer follow-up is slow because you don't have enough staff to handle all the new inquiries. Perhaps you need to provide better training, or maybe your team leader isn't tracking performance.

Whatever the problem, as I evaluate your organization I am going to look at numbers and talk to people below the management level. When I have a picture of that area, I'm going to report back to you. I certainly don't want to insult you, but I also don't want to lie to you.

You may not like what you hear. For instance, if your team leader is a close friend or family member, you might not like it when I tell you that the person needs to have better tools to do their job, or be held more accountable for their performance. You might even dismiss what I say completely.

That's your prerogative.

I can't force anyone to adopt different practices. If your team leader is your spouse or other family member you might feel that you can't  "treat them like an employee". If that's your decision, I can't force you to do otherwise. I can suggest ways to make the process less painful, but I can't ignore the need for the action.

All any consultant can do is to  accurately identify problems and suggest solutions. As the old saying goes, "to make an omelet you have to break a few eggs".

You should expect a consultant to investigate thoroughly, report honestly and suggest solutions.

There should be logic behind those suggestions. Don't be afraid to ask "If I do this, what is the result I should expect?"

Working with a consultant will probably have its tense moments, but at the end of the process you'll be glad you did it. 

Monday, October 27, 2014

The questions you're asking.

Sometimes a lot of question topics I receive start to repeat themselves, so to cover more of them for more readers, here is a round-up from the last few weeks.

Q. How can I get a stable income for my nonprofit administrative expenses?

A. The only way to have a reasonably secure source of nontaxable income is to have a product or service that you sell that aligns with your mission. For instance, healthcare related organizations generally contract with a government agency to provide services paid by Medicare, Medicaid or a state or city department of health. Community organizations might have a thrift shop. After-school government-funded programs may utilize nonprofits as paid caregivers. In some cases, and assuming a large enough base, you might try a membership model with the dues being allocated to general support (must elect this when applying for IRS determination).

Alternatively, if you are in a position to pay the upfront costs, some larger NPO's rely on one or two large fundraisers each year.

Q. I want to start a nonprofit, but I hate fundraising. Can't I just apply for grants?

A. Even grants are a form of fundraising, but in the practical sense, if you hate fundraising then you need to recruit people for your board or as volunteers that love it. Nonprofits spend a lot of time (as much as 40 to 60% in the early years) securing funding, and grants are a small percentage of the total. Grant income during your first two to five years is likely to be very small, and it's nonexistent during the first year. Nationwide, grants only comprise about 12-14% of all nonprofit income. That makes ongoing fundraising a necessity.

Q.  I keep applying for grants but I either never hear back or they reject me. What am I doing wrong?

A.  Grant applications are usually not funded for one of three reasons. One, your organization goals are not closely related to those of the grantor. Two, you are not in their geographic focus area. Three, your proposal doesn't show why you would be the best choice for success of the grantor' s mission. Of the three, it is the last that usually gets a " thanks but no thanks" response. Very new or very small organizations often aim for very large grants, but are not prepared or able to deliver the level of results the grantor expects. And of course sometimes they just run out of money before they get to your needs. If allowed, I would definitely try to contact the organizations and get feedback on your application.

Q. It seems like every foundation doesn't accept applications. Why are they in business if they don't want to make grants?

A. To a large extent, this is the result of oversupply in the nonprofit market. Simply put, there are too few foundations trying to fund far too many nonprofits. Sometimes it is due to adverse economic conditions, and they are putting their grant-making on hold until their funding catches up. Other times they have simply become comfortable with the grantees they already know, or the staff is overwhelmed with the sheer volume of responses to an open application period.

Q. I applied for a business start-up loan from my bank, but they told me my financial projections (in my business plan) are unrealistic. They're projections!  To me that means my best guess. What now?

A. Without seeing the plan, I can't comment specifically. However, typically I would expect that they were either based on insufficient real data (market research, competitive stresses) or you were too optimistic regarding your growth. I would ask if you can meet with the bank's development officer or loan manager and ask for clarification. If that isn't possible, then you need to have the plan reviewed by a knowledgeable third party. If you are projecting growth rates in the first two or three years outside the norm of 10-30% a year, and can justify that, it could even work for you instead of against you.

Have a question?  Drop me a line at rightwords@ida.net, I'll answer it and maybe even use it as a topic for a future post (without using your name, of course!).

Monday, October 20, 2014

Managing your Mission

Recently I was listening to a nonprofit founder explain that the person's  organization was set up to serve 100 clients onsite at any given time, but was now serving 300-400 onsite. The reason given was that the town had no other resources to handle all the clients who needed help.

The person was taking questions, and two things bothered me.  One of them is the scenario above, and the other was a question from the audience asking how the person could set up a nonprofit doing the same thing, but by taking some of the overflow that was outside the original nonprofit's mission.

The question didn't bother me.  What bothered me is that the speaker completely dismissed it, saying that if the person wanted to help they should just support the existing group.

This is a very well-publicized charity, one whose name you would probably recognize immediately. The speaker had just said that they were over-loaded and that financing this operation was a constant struggle, even before the addition of the extra client load.

This is a glaring example of mission creep destroying an otherwise fine organization.

Without going into too much more background, this charity is offering a service that people are taking advantage of inappropriately and knowingly.

The mission, once closely defined, has now been expanded to serve a population that was never initially part of the plan.

Knowing a bit about the history of this group, I seriously doubt that there is enough money out there to keep the place going unless they take charge of their mission again.

I totally understand how that happens.  It happens when you care too much, and when you won't or can't say "no".

This whole thing is wrong on many levels.
In the first place, people who have been supporting the organization have been sending money to support the core mission, once tightly focused on one target population. If they are donating because of a connection to that target population, they may feel that it is being shortchanged to accommodate a totally different group. That can impact funding.

Second, instead of doing a stellar job with that target population, the charity is now barely servicing any of the clients. The outcomes they desire not only aren't happening, they can't happen.

Third, when someone offered to try to help by setting up a nonprofit working in the same field, the founder blew them off, and even sounded insulted that anyone would even offer to provide another resource.

I sort of understand the response.  It takes a long time to build an effective nonprofit, the organization's need for more funding is immediate and a new organization might compete for already scarce funds. But by being so openly derisive, the founder probably turned the would-be helper into a non-supporter.

A far better choice would have been to say that they would welcome the person as a volunteer, show them the ropes, and then if that resulted in a new organization in the future, turn over some of the clients to them.

The upshot of all of this is that I sort of lost interest in the organization.  If you need help, you're begging for help, but you don't want to fix what's wrong and won't accept help when it is offered, I'm probably not going to feel that supporting you is the best long-term use of my funds.

In short, you have to manage your mission for maximum effectiveness. As hard as it is, no organization can help everyone, all the time.

Monday, October 13, 2014

8 things you should do before starting a new venture

Notice that the title says venture. It doesn't matter whether it is a for-profit or nonprofit, these 8 tips will make your start-up life easier.

1. Define your reason for starting something new.
It doesn't matter whether it’s a charitable cause or a retail business, if no one needs what you are going to invest a lot of your time and energy in, or there are a million others doing the same thing,  it has a greater-than-average chance of failure.

2. Define your strengths and weaknesses.
No, not the strengths and weaknesses of your business or nonprofit idea. Your strengths and weaknesses. Maybe you are an antisocial recluse, but you make beautiful handbags. It doesn't matter what your personal pros and cons are, only that you recognize them honestly.

3. Recruit supporters that complement your weaknesses, not your strengths.
In the example above, you would look for people that love social interaction and marketing to pitch your beautiful handbags to the world.

4.  Set attainable goals.
Sure, you have a vision of what your venture will look like when it is a mature business or nonprofit, but give yourself a break. Start with smaller but attainable goals. Nothing breeds success like success, so set yourself up to win.

5. Don't let an occasional failure defeat you.
If you are trying, then you are going to fail in something at some point. Use it as a learning experience and move on. If you are failing constantly, see #6.

6. Be flexible.
It doesn't do any good to build a better mousetrap if there are no mice to catch. Don't get stuck on a mental one-way street. If there are no mice, and mice eat cockroaches, there might now be too many cockroaches, so build a better cockroach trap. Adapt to survive.

7. Accept that you can't do everything.
Rigid things break more easily than flexible things. Some things are worth doing yourself, but insisting on doing everything yourself will eventually lead to nothing being done quite right. Learn when and how to ask for help and accept it graciously.

8. Don't ignore proven methods just because you think they are old school.
The reason some methods hang around for decades or even centuries is because they work. It's fine to innovate, but if the innovation doesn't produce a better quality result or produce it faster or more economically, then it's a waste of money, time, energy or all three.

You may have noticed that all of these hints are about you.

There are a jillion tools out there for you to use in building your new venture, but in the end, it will all boil down to you.

I write all sorts of B2B, B2C and nonprofit verbiage. Grants, brochures, marketing copy, web copy, blog posts, press releases, you name it and I've probably done it for someone.

The things I write are tools. The online courses you see advertised are tools. Formal education is a tool. The shiny new computers and smart phones are tools.

The thing about tools is they need someone to pick them up, learn about them, and then use them, and that's you.

If master these eight things, you are going to be head and shoulders above most of your start-up peers.

Have questions? Feel free to contact me at rightwords@ida.net. Let's talk!

Monday, October 6, 2014

Taking the scary out of start-up

One of the most overwhelming aspects of starting a new business, whether it is a nonprofit or a for-profit, is feeling like you're lost in a maze. Once the initial excitement wears off, it can feel like trying to navigate Africa without GPS or even a map.

The solution for that feeling lies in gaining knowledge and experience, but trying to do that completely on your own can be time-consuming, expensive  and just plain scary.

There are tons of resources for would-be entrepreneurs, from the local SCORE office to a myriad of books, podcasts and videos to one-on-one consultants like me.
So why do so many startup owners seem to flounder for so long? Why do 70% of all start-ups fail within five years?

I think part of it is because people who start businesses tend to be highly independent folks.

It takes a certain type of person to say "I don't want to exist within the corporate world."  They are quite willing to give up the perks of the corner office to make an impact on their own. They tend to be driven to achieve a goal, sometimes to the point of disregarding anything but the vision of that goal already attained. They are dedicated, but not patient.

As a consultant, one of the first things I do is ask about the basics. Does the enterprise have the structure needed to survive and grow?

Often I find that in the entrepreneurial mind, following rules, i.e. having structure, equates to being suffocated by bureaucracy. I explored that in my previous post "Structure Without Stricture".

Some rules of business exist almost as laws of nature. If you are a for-profit, you have to sell things for more than they cost to produce in order to survive. If you are a non-profit, you have to be able to show a real positive change in a circumstance or condition that provides benefits over the long term to prove your value to donors.

None of that precludes innovation or imagination. You can approach problems with new methods or define a successful outcome with new metrics.

I recently had a client who started his email with "People tell me I am doing everything right. I'm  active on social media, I attend local events, I contribute to local charities and all that stuff. My service is far better than my competitors. But I'm still going broke. Can you help me?"

This person was doing all the soft-skill stuff well. But he missed an important point. The service he was selling cost more to produce than he was selling it for, which he attributed to needing to be competitive.

When I pointed out that being competitive meant staying in the race, he simply didn't understand what I was saying. He had a business strategy problem. He thought that by being the cheapest supplier he was going to get enough market share to become profitable.

To set the stage a little on this, this gentleman had been an employee of a firm providing a service to homeowners. When the business abruptly closed, he started a business doing the same thing.

He knew that his former employer had been charging a certain price that was pretty closely in line with the competition, but he felt that if he sold the same services for just a little more than he had been being paid as a wage by his former employer, he could get more customers and undercut the competition.

That part worked. He rapidly had more business than he could handle, but he still couldn't pay his bills.

The problem was that he had never taken the time or wanted to spend the money to find out how much he truly needed to charge to stay in business. Things like having to pay the employer's share of taxes, or carry liability insurance or the cost of advertising were never considered when he set his rates. When those costs suddenly had to be paid, it took what little profit he was making and then some, forcing him into using his savings to stay in business.

There is a reason why consultants insist on boring exercises like constructing business plans and cash flow projections or developing a marketing strategy.

Just because you are an entrepreneur doesn't mean you should ignore the basics. If you plan well and use the tools developed by others before you, you can take a lot of the scary out of being a start-up. 

Monday, September 29, 2014

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.   

Monday, September 22, 2014

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. 

Monday, September 15, 2014

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.   

Wednesday, September 10, 2014

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:


Monday, September 8, 2014

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. 

Monday, September 1, 2014

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. 

Tuesday, August 26, 2014

Promoting your nonprofit

Unlike a famous movie line, just because you build it doesn't mean they will come. "They" being the donors you need to attract to actually make your nonprofit dream a reality.

Just like any other small business, you need to convince people you may not even know to spend money to support you, or rather, your mission. So, how do you do that? Especially when as a new charity, you can't qualify for most grants?

You must have a webpage, but you still need people to visit it. How do you drive traffic to your site and hopefully to your "Donate Now" button?

Well, you could advertise, but advertising costs money, sometimes a lot of money. Even a business card size ad in your local paper or a 30-second spot on your local TV station can cost you a few thousand dollars a year. However, many media outlets have public service requirements to fill, so traditional advertising is still possible.

Of course there is always social media. Lots of nonprofits have Facebook pages, but they don't typically generate many dollars, and they don't attract many new faces. Facebookers are generally talking to people who already know them. On the other hand, those people also know people that they can bring to your cause.

Twitter can be a way to attract new blood, provided you understand that the response will be to "hashtag-their interests." If they don't know you, then a key phrase that targets their interest will be far more effective than "hashtag-your charity's name."

Then there is the oft-dreaded personal interaction. Speaking at meetings, attending stuffy events, or even volunteering creates personal connections. While it isn't quite the same as door-to-door sales, sometimes it feels that way.

The point of all advertising to reach people. People are the conduit to the funding that supports  your nonprofit.

To that end, try all of these strategies. Some will work better than others, and then you can refine your campaign. But you can't succeed without reaching out, no matter how awesome your mission statement sounds.

One emerging form of fundraising is crowdfunding. As it becomes more well-known, a lot of nonprofits are posting on sites like Kickstarter, Indiegogo or StartSomeGood.com and a lot of them are not meeting their goals.

The one thing that all of these sites require is that you have a network or nucleus of supporters. People aren't logging on to their computers every morning and typing "find an awesome nonprofit I can donate to". You have to have people that will not only start the ball rolling by donating, but reach out to their friends and direct them to your campaign.

Start developing your PR strategy now, build your network, and the funding end of things will become a lot simpler. Need more information?  Email me at rightwords@ida.net and we'll talk!

Wednesday, August 20, 2014

Evaluating the charity evaluators

As any nonprofit client or prospective client who has worked with me can tell you, I am committed to nonprofits providing documented proof of legitimacy to donors.

I don't work with or support scammy appeals or organizations, and I qualify my clients on many of the same criteria that donors use. Why? Because if they can't meet minimum reporting  requirements, they aren't going to find funding. I do a lot of research to ascertain if they have a shot at succeeding with their funding plans.

Unfortunately, some of the research resources available to me don't cover most of the clients I serve.
I'm talking about the so-called charity rating or evaluation sites/organizations. Most of these organizations do not rate any charity that files anything other than the 990. They don't accept audited financial statements, annual reports, 990EZ's and certainly not the 990N, the so-called postcard.

In effect, that means that if your revenues aren't already well above six and even seven figures, you aren't going to get rated.

For instance, one of the best known and most highly respected evaluation organizations is Charity Navigator (CN). I use them where applicable, and I support their mission to bring transparency to the world of charitable giving, so I definitely don't have an axe to grind with them. And you can access information about some smaller charities, you just can't get a rating for them.

CN's rating criteria is an excellent example of the shortcomings of the methods used to rate public charities. They don't rate every public charity, not even close to it. They rate about 7500 charities as of July 2014, according to their own reporting. The National Center for Charitable Statistics (NCCS) lists over 1 million 501(c)(3) IRS-approved organizations in the U.S. as of 2010.

You can't even get a rating from these ratings organizations unless your nonprofit meets certain criteria.  For example, on CN's website they list this information relative to qualifying revenue dollar amounts and length of time in business required to receive a rating:

"We do not evaluate organizations that file the Form 990-EZ. The Form 990-EZ requires less financial reporting than the Form 990, and as such, we would lack important data needed in our analysis.

Sources of Revenue:  Because our goal is to help individual givers, we evaluate only those charities that depend on support from individual givers. Specifically, we require public support to be more than $500,000 and total revenue more $1,000,000 in the most recent fiscal year. And we do not review charities that receive most of their funding from government grants, or from the fees they charge for their programs and services.
Length of Operations: We require 7 years of Forms 990 to complete an evaluation."

In theory, I don't have a problem with revenue or time in business being used as qualifiers. The 990 is a legal document that implies that the data is certifiably reliable, and that's a good thing. It's not only the criteria that the rating sites use, it's the criteria used by both grantors and individual donors as well.

Substantial existing revenue and longevity certainly impact the effectiveness and scalability of programs, so I understand why it is important to both rating organizations and grantors or donors. It's good in theory, as far as it goes.

When theory meets reality

Between theory and practice there often exists a wide gulf. In practice, these ratings almost guarantee that substantial funding for smaller nonprofits is, if not nonexistent, certainly drastically curtailed.

Again, it isn't the concept of ratings I oppose. Anything that protects donors from the all-to-prevalent con artists using charity as a cover story is a good idea. But it allows for some serious gaps that put both smaller nonprofits and the general public at risk.

As someone who works with both start-up and small but established nonprofit clients, I can attest that concept doesn't serve to maximize diversity in problem solving.

In general, small nonprofits aren't particularly attractive grantee prospects until they have been around for awhile. Typically about three years is the point at which they are somewhat stable and have results to display. That still leaves a big gap between three and seven years, at precisely the point where the nonprofit needs to be actively growing.

Obviously, these rating favor larger charities. But is larger always better?

Large organizations tend to be cumbersome for front line staff working at the grassroots level. There are so many layers of bureaucracy to penetrate that some of the best solutions to problems never make their way into the communities or demographic that the parent organization purports to serve.

Still, size does matter. The larger the organization, the larger the revenue line gets and that supposedly equates to greater effectiveness. For charities working at the local level, that simply isn't true. In a way, when we only donate to the big, visible and well funded charities, we may in fact be perpetuating rather than solving problems.

At the same time, we want to know that the money we donate isn't going to pay for a fancy car or a private island in the Bahamas for the CEO or the charity founder. The only somewhat objective way we have to assess legitimacy is through the rating organizations. It's a vicious cycle. You can't get rated without money, and you can't get money without being rated.

Why should we care about some little grassroots charity?

All industries need new ideas and fresh approaches. The communications industry did not develop the personal computer, the shoe-box sized mobile phone or the smartphone. They exist because someone saw a need to approach old problems in new ways. Every big company was once a small company.

Not every charity should survive, any more than any other small business should survive. Be that as it may, there is a huge gap between 7500 and 1,000,000-plus. Somewhere in that gap there are good small organizations with the potential to become much greater forces for good.

If not this way, then how?

There has to be a better way to evaluate start-ups and smaller organizations for effectiveness than just their revenue.

When revenue is the main criteria for even selecting a charity for review, it does a disservice to everyone.

If a small or newer charity is taking in $50,000 and growing that figure by 10% Y-O-Y and achieving maximum impact with that money,  it may very well have discovered or implemented an approach that can be repeated elsewhere if it can expand. It can't build capacity without more money, and it can't get more money if prospective donors can't research it. Capacity building grants are usually not something that are awarded without considerable research by the grantor and most of them start with the ratings organizations.

 Instead of growing, many of these smaller NPO's struggle at the same level year after year, never realizing their full potential. They can't hire better, more effective staff or attract capital because from a ratings standpoint they simply don't exist.

If the goal of charity evaluators is only to keep existing organizations in business and stifle competition for already scarce support dollars they do a very good job. If they exist to help donors make informed decisions about supporting new blood and better ways to solve problems, I rate them at less than one star.

What's the answer?

There has to be a way for these evaluators to include a "small organization" component.
Perhaps they could reduce or eliminate the revenue requirement in favor of an effectiveness rating for smaller organizations.

Smaller nonprofits could receive a rating like "effectiveness increasing, effectiveness adequate or insufficient effectiveness". The financial reporting might be accomplished by accepting audited or accountant's reviewed financials or annual reports together with the 990EZ. Or even put them on a progress watch list. If they continue to report stable performance for a period of time, they could receive a "OK to donate" stamp.

What are your thoughts on the matter?