Tuesday, July 28, 2015

Understanding grant cycles

Funding sources, even those run by the Federal government,  are not bottomless wells of money.  Case in point; the SBA has just announced it is out of money for FY 2015 for its 7a small business loan program.

One of the hardest concepts to get across to  new businesses and nonprofits is that you can only apply for funding when the money is made available.

A large part of my business consists of finding suitable funding matches for nonprofits and small businesses, but that's just the start.

Once a suitable candidate is located, the next step is to ascertain when and how they award funds.

Typically, foundations in particular derive the funds they award from earnings on investments.  Like most of us, they can't spend money until they have money.

That produces various cyclical open application periods.  For some foundations, that's annually, while others may have two to four open sessions per year.

Ideally, and assuming that there are suitable matches, a nonprofit should plan on having a mix of grantors to approach that award funds at different times of the year.

Of course, given the funding landscape, that isn't always possible so the next best strategy is to locate funding sources that award at the times when you most  need the money

That involves planning ahead.

For instance, a nonprofit that needs funds for back-to-school supplies might want to look for awards that pay out in the early summer. Since applications typically open from 30 to 90 days before the award, that means having a list of prospects that accept applications as early as mid winter.

It also means being ready to apply at that early date.  There's nothing more frustrating to a grant writer than getting a panicked call to apply for funding with an application close date a week or less out, and finding out the organization hasn't even worked up budget figures yet.

Understanding grant cycles is one of your most important management tools. Use it well and it is an asset, but ignore it and you are going to be in a perpetual state of financial panic.

Need funding leads?  Contact me for assistance

Monday, July 20, 2015

Need grants? Collaborate and conquer!

Is your charity solving problems or just spending money? Many funders are asking that question, and sometimes just that bluntly.

The question of whether there are too many ineffective nonprofits competing for too few non-government dollars has been an ongoing discussion for quite some time. The advent of the 1023EZ is onceagain creating interest not just in answering that question, but solving the problem.

There are two polarizing reasons why nonprofit funding woes continue to proliferate. One,  nonprofit founders feel that they are serving a need not otherwise addressed in their local area, and two, funders have hit the wall in terms of how many small organizations they can fund while still achieving their own missions.

One bone, many dogs

Obviously, some nonprofits are all chasing the same dollars for the same causes.

One of the first things I do when a prospective nonprofit founder contacts me for help starting a new venture is to see how many other groups are tackling the same problem in a relatively tight (say within a fifty mile radius) geographic area.  I also check to see how many national groups have chapters or members in that area.

You know what?  Grantors do exactly the same thing and woe be onto you if you are just one face in a crowd.  

One very popular type of charitable focus, and a crowded one,  is on alleviating hunger. Quite frankly, one or two national groups pretty much have that arena sewed up tight, speaking strictly from a funding standpoint. You can become one of their network members, but striking out totally on your own may not result in success.

Sure, your new food pantry might be the only one in its area, but where is the money going to come from to sustain it? Taking in a few thousand dollars a year might have a positive local outcome, but is it sustainably resulting in fewer hungry people?

Generally, when nonprofits think about mergers they think of other similar agencies. For instance a soup kitchen might collaborate with a larger food pantry or food bank.

That could be the wrong approach.

A new look at an old problem

What about partnering with organizations that remove the root cause of hunger, which is generally considered to be poverty?

Consider forming a sort of local or regional alliance that addresses all the causative factors that result in hunger.

A local food bank could seek out another local group that provides help in getting GED's. Those two could enlist the aid of a group that provides specific technical training or scholarships. Those three could work with a local economic development group seeking to bring in more jobs to the area. Those four could work with a group providing childcare for working parents.

Each of those groups has their own particular expertise, but together, they could actually offer grantors the chance to end the need for supplemental feeding programs.

That's the kind of impact that impresses grantors.

By forming a regional or even local community improvement collaboration, each agency could pool their manpower, marketing and yes, their dollars to create complete outcomes.

Make no mistake, this type of organization is no picnic to form, and even less easy to manage. This definitely a time when you want expert legal and financial advice.

Too many egos, too many pet projects and too little money dooms more than a few collaborations. If one organization gets money from a major donor restricted to say, just purchasing food, and another gets nothing for  school supplies, all hell breaks loose.

I have intimate knowledge of how that works, having written a successful five-year grant for several million dollars, only to have the partners start fighting over the funds when they were awarded. Within less than a year, the cornerstone charity backed out, leaving four smaller agencies incapable of meeting the renewal terms of the grant in the second year. In the end, no one got the rest of the money, and no one benefited.

This "collaboration" was strictly a gentleman's agreement, and when issues arose there was no contract or formal agreement to prevent the largest participant nonprofit from bolting.

Funders currently hold all the aces

If nonprofits don't find better ways to fix problems, funders will do it for them. The reason the big-money, high-profile charities get all the money is because they are perceived as being more effective.

As I look for funding for smaller organizations, I'm seeing more and more foundations closing their public application processes. Others are starting to set minimum revenue qualifiers in the hundreds of thousands and even millions of dollars for consideration of proposals.

Still, some funders do recognize that size isn't necessarily an indicator of effectiveness, and they are looking for innovative proposals.

A relatively small collaborative venture might well be more effective than a huge national organization that is strangled by its own size. Many large nonprofits have been plagued by scandal that resulted primarily because the national organization was far too insulated from accountability by its sheer size.

Nevertheless,  faced with the inevitable reality that there just isn't enough money to go around, funders are attacking the problem by prioritizing in favor of larger or at least potentially more effective organizations.

Community collaborations could be the answer to being shut out all together. 

Sunday, July 19, 2015

Independent Contractor or Employee?

As a person who considers themselves to be among the ranks of the independent contractor or solopreneur population, both my clients and I have an interest in how to maintain that relationship legally. Indeed, I have at various times had to sever or refuse relationships with clients that wished to control me as an employee, while still paying me as an independent contractor.

In many cases, I have had a hard time explaining why and how I make that distinction. To many users of so-called freelancers, just the mere fact that their workers are offsite, or their services are covered by a contract is enough to justify 1099 status.

In all fairness to the client side of the equation, in many cases they truly believe that anyone not occupying a desk in their offices or who has signed a contract  is not an employee, particularly if they engage the contractors services through one of the many labor broker or middleman sites like Elance or other similar websites.

I, on the other hand, tend to define the relationship by how much autonomy I have to produce the deliverables that serve the purposes they want or need.

When I come across a client who actually advertises for a contractor on one of the middleman sites, or who after I contact them wants to work through one of those sites, the relationship becomes even more complicated than usual. 

Needless to say, that can create significant misunderstandings.

So, whenever a government agency takes a stab at clarifying the differences, I am interested.

On  July 15, 2015, the U.S. Department of Labor's (DOL)Wage and Hour Division issued an Administrators Interpretation, No. 2015-1 that for the first time seeks to clarify the distinctions used to determine the legal status of workers for employment classification purposes.

While declaring that the intent of the document is not to discourage people from being legitimate independent contractors, it nevertheless has an emphasis on attempting to crack down on misclassification of workers.

Interpretation 2015-1 relies heavily upon defining the somewhat ambiguous phrase "suffers or permits" in determining the relationship of workers to the people benefitting from their work.
By citing numerous examples of legal precedent, administrator David Weil seeks to explain the differences under consideration.

Among the many legal decisions cited, none directly address the proliferation of so-called labor brokers, specifically businesses which depend upon what could be termed "captive labor" i.e. people whose work product the business needs to control in order to earn revenue.

However, on pages 14 and 15 of the interpretation, the document does provide a hypothetical comparison of circumstances that approximates a common scenario found in the actual operational model  of  the labor brokerage business segment, as follows:

"Example: A registered nurse who provides skilled nursing care in nursing homes is listed with Beta Nurse Registry in order to be matched with clients. The registry interviewed the nurse prior to her joining the registry, and also required the nurse to undergo a multi-day training presented by Beta. Beta sends the nurse a listing each week with potential clients and requires the nurse to fill out a form with Beta prior to contacting any clients. Beta also requires that the nurse adhere to a certain wage range and the nurse cannot provide care during any weekend hours. The nurse must inform Beta if she is hired by a client and must contact Beta if she will miss scheduled work with any client. In this scenario, the degree of control exercised by the registry is indicative of an employment relationship.

Another registered nurse who provides skilled nursing care in nursing homes is listed with Jones Nurse Registry in order to be matched with clients. The registry sends the nurse a listing each week with potential clients. The nurse is free to call as many or as few potential clients as she wishes and to work for as many or as few as she wishes; the nurse also negotiates her own wage rate and schedule with the client. In this scenario, the degree of control exercised by the registry is not indicative of an employment relationship."

Whether this actually addresses the business practices of such examples as Upwork, Elance, ifreelance, Demand Media, Creative Circle or any other of the well-known middleman businesses currently in operation remains to be seen.

In another section of the document concerning the control of the worker by the other party to the relationship the document includes this citation:

"…see also Superior Care, 840 F.2d at 1060 (“An employer does not need to look over his workers’ shoulders every day in order to exercise control.”)

Also addressed in the administrative interpretation is whether the middleman or client's main business could exist without the exercise of control over the worker, i.e. is the "control" factor an integral part of the middleman or client's revenue from business operations.

In the case of those businesses that derive a significant portion of their income only if a worker produces a billable deliverable for the end buyer, that relationship becomes central to answering the question of whether the worker is in fact, an employee of the labor brokering business.

For the millions of freelance writers, coders, programmers, and others currently deriving the main portion of their income through their association with the many middleman websites, this document is not likely to fully answer their questions.

In my own case, I virtually quit even responding to clients that advertise for help on these sites, although several years ago I did have several wonderful clients that accessed my services in that way. 

At first glance, the document would tend to support the premise that most of the sites that control access to and/or place limitations or impose standards upon how or even whether workers can access clients, could be in for a rough ride.

For those needing a concrete real world  example of the differences addressed, sites like Elance.com and its corporate progeny, Upwork.com would seem more akin to the first example (Beta Nurse Registry) quoted above, while sites like flexjobs.com, craigslist.com or idealist.org more closely approximate the second scenario(Jones Nurse Registry), essentially providing the same service as the classified ads in your local newspaper.

Although the DOL is to be commended for trying to address this issue, the resulting document does little to provide absolute clarity for the millions of so-called freelancers, or the buyers of their services.

The actual status will probably be clarified on a case-by-case basis, only when someone or some group specifically asks for a ruling or files a legal action requesting clarification of employee status to obtain benefits or settle a tax question.

Another interesting thing to watch will be how the sites themselves react to this DOL paper.

Some already provide an option that allows contractors to request that jobs be re-classified as W-2 positions rather than 1099 arrangements, although the buyers are free to refuse. Others are creating subsets of what are essentially employee/employer relationships within the main corporate structure.

In the meantime, I will continue to structure my contracts so as to leave no doubt about my status. 

Monday, July 13, 2015

How do funders pick award winners?

Successful grant proposals illustrate these key points.

·         Your proposal delivers an important idea relative to the grantor's mission by addressing a significant issue.
·         You show that you understand the grantors mission by providing an innovative approach to that issue.
·         You set reasonable objectives and present a detailed plan, including a budget, to achieve them.
·         You can provide proof to the funder that you are capable of success.
·         You can explain how the project will advance the funder’s mission.
·         You can show that the project is sustainable beyond any support the grantor may provide.
·         You don't apply if you aren't qualified.

Grantors receive from dozens to hundreds or even thousands of proposals when they announce an open application period.

You have to stand out. One of the best ways to do that is to provide documentation of your success in addressing the issues even if it is through a pilot program or another type of program that is still mission-centric.

Sometimes that simply means presenting your program differently.

Homework is the most important part of any grant proposal. You already know about you and your needs. Your assignment is to find out what the funder needs or wants.

Get to know everything you can about the funder. Who have they funded in the past? What type of programs do they fund? Who is on the board? Do they fund the same organizations every year? Is there an opening to present a new twist that those other grantees haven't explored? Don't be afraid to look at those other grant winners and discover their strengths and weaknesses.

 For instance one nonprofit that worked to provide transitional safe housing for domestic violence victims presented their program as "Safer homes mean better educations" and landed a $25,000 grant from a grantor that normally supports early childhood education.

The trend toward online applications that began a few years ago is not your friend. Learn to condense your narratives and program outlines because you may not have several pages to elaborate on your planning and goals.

The last bullet point above is important. Don't apply if you can't qualify. Aside from making you look incompetent, you might very well leave such a bad impression that you hit the funder's blacklist (and yes, virtually every funder has one).

It is rare for a smaller nonprofit to have dozens of potential funder matches. If you can align with a handful each year, you are doing far better than average.

Grantors don't typically fund organizations that have few or no other resources, which is why they almost never fund start-up organizations. New programs are often okay, new organizations, not so much. Grantors are looking for impact potential, and it's hard to have impact if you can't pay the light bill.

On the other hand, if you have managed to grow your organization using financial resources from avenues other than grants, that's a definite plus.

That said, if you have a truly outstanding angle and an ironclad plan of action that offers a new twist on an old problem it might not hurt to try.

Consider these tips and you are likely to connect on more proposals.

Next week – Collaborate and conquer. 

Tuesday, July 7, 2015

Good procedures improve scalability

This question comes up often on grant applications. "How does your organization demonstrate scalability?" and it drives small businesses and newer nonprofits crazy.

In simple terms, scalability refers to the ability to manage growth. For a very small entity, the first private reaction is usually "I don't know…give us the funds to grow and we'll figure it out!"

A natural but fatal flaw in understanding what the grantor is asking.

What the grantor wants to know is that you have a plan and procedures to facilitate growth. The larger the grant sought, the more formal the procedure becomes.

When I work with a very new organization, I often call this developing a what-if strategy.

What if you actually won a million-dollar grant?

What procedures do you have in place that even a brand-new employee could understand?

For instance, let's take Human Resources.  What procedures do you have (beyond advertising to fill job openings) to assure grantors that the people you hire have qualifications that fit their roles?

A hiring procedure manual will outline what educational and experience profile new hires have to meet. It will cover things like job descriptions,  who conducts background and reference  checks, where they look for that information and what they should do with it when they obtain it.

On the grant application you might summarize this by saying "Our  hiring procedure manual clearly outlines the number of new employees needed for expansion, who can place the order for new hires, and defines the step-by-step procedures needed to verify applicants to ensure they meet the standards required."

BTW…I have seen more than one grantor that required actual copies of procedures at the time of the award decision. There's nothing scarier than receiving a letter that says "You have been selected as a grant recipient, contingent upon receiving documentation within three working days of _________ as stated in your application" and realizing you don't have hard copy.

Believe me, you usually can't create that kind of document out of thin air and get the appropriate board approvals and/or management signatures in 72 hours.

Notice that I said board approval.  Any document that sets policy for an organization should be reviewed by the board and carry a signature page showing it was approved, and that approval should be read into the minutes of the board meeting.

The usual procedure for all that is to introduce the policy at one meeting, have it reviewed by the appropriate legal and financial staff, and then approve it at the next board meeting.

Of course a $500 grant from your local big box retailer or community foundation  isn't going to require all that, but part of growth is thinking beyond the moment.

In short…plan ahead to get ahead.

Need a policy manual?  I can help.  Contact me at rightwords@ida.net for more information.