Monday, January 12, 2015

Can you afford that free money?

One city in New Jersey has discovered what savvy nonprofits have known for years. There are costs attached to free.

As detailed in this news story, a donated helicopter has cost the city of Newark NJ over one million dollars since it was acquired in 2005. That's not surprising when you consider the chopper was over thirty years old when they got it.
A deeper dive into the story shows that most of the costs break down into normal maintenance and repair costs, as well as upgrading its technology.

That's the same problem faced by grantees. The initial award just sets the recipient organization up to need ever more grants to maintain the original goals outlined in the first award.

The trick is in deciding if the added costs provide forward momentum for your mission.

New or proposed nonprofit founders often can't see beyond grants when it comes to funding their mission, so they fail to develop a plan to add the necessary diversity in their funding strategy.

If I had a dollar for every nonprofit that has asked me to find grants to fund their start-up, I could not only retire to an island, I could buy the island.

After verifying the need for your mission, the very next thing I ask people who want to start a new nonprofit is "What's your strategy to pay for it?"

Almost without exception the answer is grants.  Wrong answer!

The answer to that question should be something like this.

1.  Develop a five-year plan that includes a budget projection.
2.  Research the funding options available and develop a fundraising plan.
3.  Make grants the least important part of that plan.

As a new nonprofit, you are not going to be able to qualify for grant funding for a minimum of one year, and more realistically it's going to be three years.

More importantly, grants require that you have at least some infrastructure in place and have real results to offer to grantors, meaning that your, like all businesses are going to have to spend money to get the free money.

Throughout the nonprofit world, grants comprise about 12-14% of all nonprofit funding and many have a matching component, meaning that you have to have enough money on hand that you can commit part of it to achieving the grantor's purposes.

I can help youget your nonprofit off the ground, but if you want me to find you free money you'd better understand the costs to acquire it.

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