Do you use sales funnels in your fundraising?

I asked a prospective nonprofit client that question.  She replied "what's that?"

In its simplest traditional business sense a sales funnel is a parameter for identifying the customer or target market that is most likely to be interested in what you are selling.

The value of using it is that it produces more sales for less initial investment in marketing.

Here's an example of what happens when you waste time and money on a campaign that doesn't adequately define a market.

Bill, a very well-to-do businessman, was approached by a nonprofit as a part of their major donor development after he was mentioned in an article as being interested in helping to provide food for needy people in his town.

The nonprofit's mission was to send food to starving people in Africa.

He responded politely to the letter by indicating that he had no interest whatsoever in feeding people in Africa while children, the disabled and the elderly in the United States are going hungry every night.

That should have been the end of it. They tried, he refused, end of story.

Instead he began to get letters and even phone calls asking for his support. After a year or so of that, he hopped on his jet, went to their headquarters and deposited a stack of mail and phone messages on the receptionists desk, with a not-so-polite note to take him off their mailing and call lists or face the consequences.

The problem was that the nonprofit qualified him simply because he was, well, rich and had an interest in feeding the needy.

All that did was to cost them a lot of money and time and made an enemy out of him.

The sales funnel, i.e. their parameters for qualifying major donors for further development was both overly broad and poorly maintained.

It doesn't matter if you are selling cars or a mission proposal…it behooves you to target your efforts to people who are likely to buy what you are selling.

In general, if you are sending out general appeals, monitoring your response ratio for both quality AND quantity and distilling your mailing list or media campaigns down to the essentials will serve you far better than just buying a mailing list. It also helps if your staff takes the time to really read any personal responses they get.

Cross referencing the donations against your contact or mailing lists can save you a lot of money and time, not to mention improving your response ratio from the customary 1 to 3% up to 20% or more.

Are donors and nonprofits contributing to income inequality?

A  lot has been said recently about the shrinking middle class, the stagnation or even decline in middle class wages, and the job nonparticipation rate.

Meanwhile, businesses are complaining that the skills they really need are being ignored or even denigrated by both politicians and educators.

Case in point. During one area development group's public meeting they asked existing and prospective business owners what they needed to consider relocating or expanding their businesses to the area.

They responded with answers that largely followed this vein.

                                               

They need people that are willing, able  and trained to do hands-on "blue-collar" tasks. They need mechanics, welders, manufacturing assembly line workers, and even freight handlers. As one business owner commented "It doesn't do any good to design a better mousetrap if there is no one to build, box and deliver it."

Salary.com reports that an entry-level welder with 0-2 years experience can expect a starting salary of over $ 27,000/yr. or $13.24/hr and a top salary of just under $48K, which is not exactly minimum wage. 

One area college responded by sending out a press release touting their current and future  increases in STEM classes. One of the clips played was that of someone saying that they were in business to train "the labor force of the future, and the future is not in a field or a factory."

This single incident illustrates the disconnect between the realities of day-to-day business needs and a certain intellectual naiveté about the future.

   

Nonprofits offer a funding avenue for some low-income students. Since they don't produce a revenue stream of their own, they are totally dependent on the largesse of both the government and private donors. These gifts and grants (or contracts) are the source of some truly big funding pools, such as the $20 million dollar scholarship fund established at Notre Dame.

That money tends to follow what's trending at the moment and that trend isn't money for trade or vocational schools.

While no one would argue that the future does indeed indicate a need for a well-educated workforce with different skills than those of the 20^th century,  the yardstick that we use to define "well-educated" needs to reflect an awareness of functional reality.

When education-based nonprofits set their program goals, and donors at every level write their checks or set up their trusts, it would behoove us all if they could keep that perspective in mind.

Philanthropy without relevancy is as counterproductive as no philanthropy at all. 

Are you over-connected and under-noticed?

There comes a point in every business where you simply hit a development wall. Nonprofits are no different.

In many ways, the internet connectivity we all prize (or maybe despise!) contributes to that sudden stop.

The internet of today is a cacophony of digitized noise. Try following a few Twitter feeds and see how much real thought goes into them and measure how much value you are getting from them.

   

In the rush to have the most likes, followers, retweets or comments it's easy to lose sight of the real purpose of all those connections.

In a business sense, connections are supposed to be about interactive communications that provide value for both sides.

Take a look at your own favorite sites. What keeps you clicking on them?

Is it just to kill time?  To keep score to see how many of your own comments are being commented on?  To have some sort of social life?  Because everyone else is doing it?

If your connectivity isn't producing value, why are you still doing it?

Case in point. I recently reconnected with a person I had known fairly well at one time; not a BFF exactly but we had a pretty close acquaintanceship until she moved away. This was a while ago…before Twitter even existed.

I ran into her at the grocery store, and while we were trying to do the whole catching up thing, she never took her eyes completely off her phone. Twitter was scrolling the whole time. At one point she did mention she was looking for work, but when I asked for particulars, she was busy re-tweeting something and didn't answer.

It didn't take very long for me to see that our face-to-face meeting was only occupying about 10% of her attention, and I did the "well, it was nice to see you…call me sometime" thing.

That's sort of what happens when you focus on just one outreach strategy. You get so busy trying to build a broad audience, you forget that you need to develop real focused relationships.

For instance, let's say one of your grantor targets or a major donor prospect doesn't accept LOI's and you have no contacts in common. Think about something you have or can create, like a white paper or case study that has value to them. Drop them an email and offer it to them, no strings attached.

 Your email might read like this:

I noticed that you are seeking information on X.  I (we) have a case study on X that may help you.  I (we) would be happy to forward it if you are interested."

All of a sudden you are connected. Will that always result in an invitation to apply for that $100K grant or a $1 million endowment? Maybe, maybe not. The purpose is to get on their radar, but by offering something of value, there is an upside for them to notice and contact you.

It gives you a chance to present your organization, prove that you have value to add to their mission, and gives you an excuse to connect again to get feedback on the offering.

This works. One nonprofit that tried this strategy received program funding for three years as a result of this kind of outreach.

     

If you don't have any material that you can offer, it could be time and money well spent to develop a case study, white paper, manual or other outreach material that goes beyond the typical brochure, tweet or Facebook posting.

If you or someone you know would like more information on implementing this strategy, give me a shout at rightwords@ida.net.

Should you be on YouTube?

I get a lot of questions about just using YouTube for marketing, from both for-profits and nonprofits.  The general consensus seems to be "everybody's doing it."

Yeah, they are…and they shouldn't all be on there.

Some things lend themselves very well to visual media.  Some things don't.

In general, my own personal take is that if you are trying to impart  static information, like an annual report or even something like an instruction manual, you might be better off not putting it on video.

If what you are saying needs visuals, then sure, go ahead and use it

But by all means, if you aren't going to do the video well, don't do it at all.

Case in point.  I wanted to find out more about a business, but the only place they were out there was on YouTube. The video was basically just "Boy are we wonderful". I, on the other hand wanted to know if they worked on  transmissions. Nowhere in the whole darn video did it tell me what services they provided.

They weren't in any phone book on or offline, and the Google Map was out of date.

The phone number given was disconnected. They didn't have a website. Probably out of business, right?

Well, I was sitting there looking at the place, so probably not. Since it was Sunday they were closed, but definitely still there.

And of course, there was the website that had a help button, but it went directly to YouTube, where there was no help at all. Oh, there was a long six-minute convoluted video with background music that drowned out the speaker, but help…not so much.  The information I needed I got from an unrelated site, in a PDF that I could have printed off and kept, and it took me about 15 seconds to read what I needed to know.

The point of marketing is communication. Not everyone reacts to the same formula.  Some people want to read it in print, some want to see it in pictures, and yes, some will take the time to find the video, maybe download a player, and then sit through a commercial and put up with slow buffering. Think about your audience!

BTW-the shop I was trying to research?  I don't know if they do transmissions or not. I went someplace else.

Learn how happy donors make happy bank accounts

Recently Facebook was "outed" for playing mind games with its subscribers[1]. Actually, "outed" is a bit misleading.  They've been doing it for years, and it's all right there in the 9000 words of their service agreement. And guess what they proved?  Negative words create more negative words, while happy, positive words caused people to comment more positively. Not exactly newsworthy, but interesting.

Not very original either.  Every marketing person since time began knows that truism. It's called the psychology of selling. What made everyone a bit queasy is that they did more or less surreptitiously. Somehow, people missed the point that Facebook sells stuff, namely advertising.

Think about your favorite merchandise, say aftershave or lipstick. Do you buy it because the ads say "We know you think you are not really all that attractive, but our product will make you look better (or smell sexier)  than you are now!" Probably not.  That might be the real psychological reason you buy the product, but you'd rather keep that part to yourself. So, the ad reads "Add more excitement with our great new product – do you dare to be different?

It's the same thing with wooing donors to support your programs.

Of course you have to frame your message in a way that makes donors want to get on board, and you do that by being positive and upfront with them.

Tell donors exactly what their money will accomplish.  If $5.00 will really provide three meals for a family of four, be prepared to back that up.  Everyone frames things within their personal experience, and normally, three meals for a family of four costs more than $5.00 a day. Your donors don't know that you are giving donated food a value based on your cost to collect and distribute it, rather than going to the local big box food store and buying it.  Tell them.  Once they understand, they may feel more like a part of the team, not just another debit transaction.

It isn't enough to whine about your eroding bank balance. It isn't even enough to tell wonderfully sad stories about the people or things that need help.

Keep it positive and involve your donors on a personal level.  It may seem strange, but on some level, your donors want to know what you can do for them. Can you make them feel useful, powerful and needed?

Yes, you have to define the problem and that may involve some unpleasant facts, but you want donors to feel that there is a light at the end of the tunnel. Make your actual appeal reflect that.

Try it. You may find out that it's a lot more fun than writing doom and gloom appeals and way more productive.

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[1] http://online.wsj.com/articles/furor-erupts-over-facebook-experiment-on-users-1404085840

Do you understand donor retention?

It's funny how blogs work. You post something, people read it that day, and you think OK, that's nice, a bunch of people apparently got something useful from this.

Then out of the blue several weeks or months later you get a comment or email about a post that you had sort of forgotten about.

 So it is with my blog post of April 28, "Marketing Your Mission".

Apparently "Tom" took issue with it. "This is the most stupid thing I've ever read" would tend to indicate that Tom doesn't find the use of the word "marketing" to be congruent with "nonprofit mission".

According to Tom, mission is all about emotional engagement. All that other stuff about being a good "investment" for the donor doesn't matter. People just "know" that you will use their money well, because after all, you're a charity.

In Tom's defense, the emotional characteristic is what drives donors to investigate your charity further. It is the thing that defines the need to give that they want to fill. At some level, they have an interest in helping something or someone. Maybe they Google "animal rescues" or "battered women's shelters" or whatever.

At that point they get thousands, if not millions of returns. So then they add their state or county or town to the search terms, and they get a few to a few dozen more specific returns.

That's still a lot, and it's unlikely they are going to send a check or donate online to all of them. There has to be some way to decide which one to support.

At that point they are probably going to be looking for a website or social media page. Who are you, and what are you all about? What real impact or change are you accomplishing?

That process is exactly the same as it is for someone looking for a product. You want to buy a used car so you search "used cars". At that point you may not know if you want a Chevrolet, or Ford or Toyota or whatever. You get a list of used car dealers that are within your search zone, and then you check to see if they have a website and look at what's for sale. There are dozens of bright, shiny cars that fit your basic criteria to pick from on each site. You don't want to visit, much less drive all of them, so you start looking for a way to zero in on just a few.

What happens next?  Well, I don't know about you, but I start looking for the dealer that is going to give me the best value for my dollar. Is their price lower, do they give you a free gas card if you test drive their car, or do they offer a free oil change for a year? I also look at the general premises if they have a picture of their lot or showroom. Does it look clean, organized and at least somewhat permanent?  Have they been in town for a while? Do they have good online reviews?

In short, why should I  pick one car lot over all the rest?

Why would a donor be any different?  There are lots of charities that all focus on the same problem. Their "bright shiny cars" are the stories they tell about who or what they have helped, and 90% of them are going to have good stories, because they really try to do good work.

At that point, two things happen. Maybe one story connects emotionally with the donor more than others, and they just hit the donate button. Those are the "impulse donors". They drop a few bucks and promptly forget about it. Those are "Tom's" donors.

Other visitors do some digging to see how many people have been helped in total and investigate  how much money it takes to help them in a significant way. These can be your long-term supporters.

The latter are probably the people with more money to donate. Nobody misses a single $5 donation even if it is misspent or the charity goes out of business, but if they want to spend $1000 or $10,000 dollars or more, they are going to look under the hood of that bright shiny car. Or maybe they can't afford that much, but they want to send a small donation every payday. They are looking for a connection, not a moment of satisfaction.

And that's where the marketing mindset comes in. The sooner you step out in front and say "We helped change the lives of 100 people for a day at a cost per person of just $10.00/day" the easier it is for the donor to see that $1000 will help one person for more than three months, or all 100 for a day.

Contrast that with the group that says, "You can help more people like Jane. Please give generously". How many more people? What do they really need to help another Jane?  Exactly what is a generous donation? They don't say.

Yes, it does reduce the giving to a dollars-and-cents equation. And yes, the emotional appeal was the catalyst between the donors desire to give and solving your money problem. But the donation was assured by the concrete statement showing the value delivered for the donation. It gives the donor a reason to select your charity to support at a much higher level than just an impulse donation.

Of course, you have to continue to connect with that donor to retain their interest. Maybe through a website, a blog, a newsletter or just by keeping fresh stories on your social media page. But first you have to cultivate the desire for an ongoing relationship.

In the retail world, they call that building brand loyalty. In the nonprofit world, it's donor retention. Whatever you call it, it is all a form of marketing. With all due respect to "Tom" I think you ignore that at your peril.

Need help with your messaging?  Check out my website at http://www.cloudlancerwriting.com

Donor Development and the Entrepreneurial Mindset

The word entrepreneur conjures up a vision of a person who plans to start and run a for-profit business. Actually, the definition in Webster’s is “one who organizes, manages and assumes the risk of a business or enterprise”. (italics added)

The skills and vision needed to start and manage a successful nonprofit are not very different from those needed to start any business.

You need a goal (mission and vision), a market niche (statement of need), product or service (program), a business plan (strategic plan) and  investors (donors)  for you to stay around long enough to succeed.

So why is it that most fledgling nonprofits can’t accept the idea that they have to have good planning and sound structure to succeed? Why do they approach donors with a vision but no way to make it happen?

There seems to be a sort of “build it and they( the donors) will come” mentality among nonprofit start-ups. Sometimes that works in business…the first personal computer was conceived of and  built long before the investors arrived. More often though, new nonprofits are more like some of the ill-conceived niche carmakers. The DeLorean was a good marketing  concept but it was a lousy car mechanically, and it didn’t capture the market share needed to survive.

Taking your nonprofit from concept to functioning entity requires so much more than just a passion to help someone or something.

Chickens don’t come out of the egg fully feathered and ready to lay eggs, small businesses don’t begin as multi-million dollar corporations and nonprofits don’t attract millions in donations in the first few years, if ever.

In “Climbing the Ladder to Nonprofit Success” I try to prepare new nonprofits for the realities of becoming the next successful  local,  national or global nonprofit. I get a lot of nice feedback from people, but I also get a lot of “you don’t understand the mentality of a nonprofit founder”.

Oh yes, Virginia, I do. That’s why I wrote the darn thing. Every person that strikes out on their own has a dream, but not all of them realize it. The difference is that at some point,  the successful ones learn to borrow from or assimilate existing knowledge to succeed.

There is a “reality” show on TV about prospective small businesses competing to win backing from a group of investors. Yeah, it’s dramatized, but in many ways it is very much like the donor development environment. There has to be value in it for both sides.

For instance, both donors and investors (including social impact investors)  look hard at your team. For nonprofits, that’s your board, your CEO, your CFO, and your program administrators. Let’s face it, there are tens of thousands of nonprofits all targeting exactly the same problems. Donors are going to pick the organization with the best chance to have an impact and the quality of the team is what determines that, not how much money you have.

Telling or showing  donors  that you are the only working and involved member of the team is the kiss of death for your grant application or donor recruitment.

Donors want to know that you have a solid path to success. They want to be a part of that success, but they don’t want to own your nonprofit. On your side, you need to be able to use donations to build your organization’s impact, not just keep the lights on.

Thinking like an entrepreneur isn’t counter-intuitive to achieving mission success. The skills needed to succeed can be learned and developed. Marketing, publicity, planning, results reporting, program design and financial controls translate very well from the for-profit to the nonprofit world.

Want your new nonprofit to succeed?  Start thinking like an entrepreneur.

Need more information on planning to succeed? Drop me a line at granthelp@ida.net.  Let’s talk! 

Avoiding self-made financial disasters

A three-year old human services nonprofit was dealing with serious discord between board members and the executive director. The board felt that overhead costs at 20% of revenue were too high and that the perceived imbalance was taking too much money away from programs. The ED countered that the reduced effectiveness was due to not having enough qualified staff. The board issued an ultimatum. Reduce staff costs by 20%, or the ED would be replaced.

The ED responded by cutting hours, wages and benefits, whereupon 4 of 14 staff members quit. Citing failure to deliver client services, the board fired the ED anyway. The ED then filed a wrongful termination lawsuit, since the board mandate to reduce costs by 20% was achieved due to having fewer employees, and having fewer employees impacted client services. The ED eventually won the case.

On the face of it, this seems like a classic case of a power struggle between the board and the executive director, with the staff and clients caught in the middle.

Upon further examination, the actual cause of the imbalance between overhead and program budgets proves to be more complicated.

The board had previously voted to expand a program by 50%, as outlined in the five-year plan. They mandated that the counseling center be open two more hours daily, and four hours on Saturday. This increased payroll and other overhead costs such as utilities and office supplies by about 12%. In addition, a change in state regulations required that there had to be an upper-level professional physically on duty whenever the client services center was open. Heretofore, the master's level staff only had to be available on call during evening and weekend hours. Shortly after the expanded program started, state and county funding for the program was abruptly scaled back by 15% due to decreased tax revenue.

The immediate problem was that the board failed to re-assess the challenges to the program and when the problems became obvious, they responded by trying to cover funding shortfalls by cost reduction alone. In the long term, their desire to hold administrative and other overhead costs at 10% of revenues was simply unrealistic, given their need for highly qualified professional staff.

The problem seems very simple. In their zeal to help more people, the fundraising part of the equation had been overlooked. Instead of diversifying and expanding sources of non-governmental funding, the nonprofit was relying solely on  government fee-for-service revenue to pay for the expansion.

The real problem was a failure by the board to adequately develop contingency planning and funding. As many organizations often do, they neglected the unpleasant parts of strategic planning. They developed the strengths and opportunities section well, but failed to acknowledge the threats and weaknesses portions, taking the rose-colored glasses approach.

You cannot plan adequately without considering worst-case scenarios. This organization was relying solely on one source of funding and that source had historically been very sensitive to outside influences, in this case a substantial drop in state tax revenues coupled with increased regulatory costs. In addition the board was highly resistant to developing an emergency fund. All revenue had to be spent on the mission annually, and even the idea of having excess funds (called profit outside of the nonprofit sector) at the end of the year was abhorrent to the board.

The board had made half-hearted attempts at fundraising, but felt that it was unnecessary due to their fee-for-service model. Donor development or grant research wasn't even mentioned in their financial plan.

The obvious answer was to postpone the planned expansion and start developing a more diversified funding stream. The NPO's mission was still being fulfilled in regard to their existing client base, and a 15% fee-based income reduction was realistic to try to cover with income from fundraisers and grants.

Instead, this nonprofit came very close to shutting down. Client services had to be curtailed by a full 75%. The staff eventually settled at just four paid professionals. In press releases, the nonprofit blamed the recession and the resulting loss in government funding. In reality, the reason was poor planning.

Bad things do happen to good people and organizations. Some things truly are beyond one's immediate control. Recognizing and planning for that can make the difference between success and failure.

Small nonprofits and charity rating organizations

Recently, the so-called "Big Three" charity rating or reporting organizations  (GuideStar, Charity Navigator, and the BBB Wise Giving Alliance) have been in the news because they have publicly acknowledged that using a percentage ranking, i.e. a ratio of dollars raised to administrative costs may not be the best way to determine the worthiness of a charity. That prompted emails in my inbox that usually started out  with some variation of " I need help getting good ratings from (insert group here)".

There is no doubt that being rated could improve your visibility, and the number one complaint of small NPO's is that they feel invisible to, or passed over by, possible donors. That's understandable, given the sheer volume of nonprofits. On its website "About" page, GuideStar.org states that they " …gather and disseminate information about every single IRS-registered nonprofit  organization", and they put that figure at 1.8 million.   And that doesn't even count the tens of thousands of organizations that are only state-registered.

 

In actual fact, many nonprofits can't receive a rating from these or many other reviewing groups. They are simply too small or too new to be rated.

These rating organizations came into being to attempt to give donors some sort of benchmark to assure that their dollars weren't going to be misused by a charity. Some, such as Charity Watch actually assign a letter grade to nonprofits. Some, such as GuideStar, simply provide a central location to access basic information about a charity you may be interested in and leave the evaluation up to you.

   

Typically, the reporting organization has a criteria that they follow when listing a charity on their website or in their database, and they usually require you to have at least one long form 990 form on file with the IRS. That's because they arrive at their rankings by applying simple math to your financial reporting in that form.

Some state up front that you must receive a certain total amount of public support. Charity Watch  (http://www.charitywatch.org/criteria.html) states that they don't review nonprofits with less than one million dollars in donations,  and they don't report on report on churches, synagogues, mosques, political action committees (PAC's), fraternal clubs, colleges, or local institutions such as hospitals and museums.

 Other sites, such as GuideStar may simply allow you to update and/or complete your information on their website and rank you according to the completeness of  that information. However, since the 990 is typically the most common way that donors can view your reported income and expenses, not having that long form 990 is going to hurt you.

If you haven't reached the magic $50,000 mark in donations yet, you don't have to file the long form, and most small or new NPOs use the e-postcard or 990-N, which has no financial information whatsoever. Therefore, there is nothing for anyone to review. Any organization is allowed to file the longer 990 forms, but few small organizations can afford the accounting costs so they seldom do so.

My advice to any nonprofit that has received less than $50,000 in public support and has limited assets is to focus on your local reputation. Note:  income unrelated to your charitable purposes is another category. We are talking only talking about public support income directly related to your charitable mission here.

In the case of simple listing organizations such as GuideStar, you can review the posted information and update it if you think it will help your credibility. Just be aware that not having some of the information may result in your "star" rating being low, and that could be worse than not being listed at all.

To improve your visibility, you might want to join local business groups or the local BBB. Have financial statements available to produce on request, and keep the community informed by having a visible presence, such as events or at least through press releases to your local area media when something noteworthy happens. And of course, if you want to and can afford it, you can always file the applicable long form.

How to turn off your donors

Recently I tried to reach a semi-local nonprofit to donate something to a silent auction. I went to their website, but there was no specific contact information, just a web form that went probably went to a generic address. I never got an email back, so I don't know if the form even works. I found an email address for their executive director online that said it went to their dot org mailbox, but it had apparently been closed, because my email bounced back. On top of that, before I could even send the email form from the website, I had to go through the whole captcha thing, twice. There was a phone number, but it was an answering machine and no one ever called back. There wasn't even a street address so I could just send the item with information and my contact information. Even their donate button required a captcha process.

The organization is 50 miles away, so driving to it wasn't an option. This isn't a small organization. Their budget is well into the millions. They've been around twenty years. They have a staff.

I finally just said the heck with it, and put my item back in the closet. That's a shame because it probably would have generated some good money for their cause.

I see this all the time. Why would any publicly supported nonprofit do this?   Don't make it difficult for people to reach you. Have someone's organizational email on the website. If you use a web form, at least allow it to send an acknowledgement of receipt. Don't make your newsletters private-list only. I get the reasoning behind captcha, but it makes you look as though you don't really want to connect with anyone.

Update - today, three days after the silent auction, and three weeks after my initial attempts to connect with them, someone from the organization, who identified herself as the donor relations manager, did call me but of course by then they had no need for my item, and the person's suggestion that I could just send in a donation instead simply rubbed me the wrong way. When I complained about the process, she said, "well, you  know, if our email was public, people would just bombard us with junk email". They might also bombard them with money or at least interest. What if I wanted to volunteer? What if I was with a foundation that wanted to know more about them? This is donor relations?

As a consultant I find this unprofessional. As a prospective donor, being this impersonal makes me subconsciously wonder what they are trying to hide, and makes me think they don't need my support.  This charity is off my support list. Permanently.

Don't be this nonprofit. Make it easy, painless and efficient for people to connect with you. The friends you make will be worth the junk email.