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. 

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.

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.

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. 

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!).

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.

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!