Sunday, February 24, 2008

Your Nonprofit Needs Money During This Economic Pinch? Read On...

There are two ways for the nonprofit that you work for to have more money than it had at this point last year:
1. Save the money that it currently has (spend less and hold onto the money)
2. Make the same amount of income as this time last year, and then some (raise the money your organization needs for healthy cash flow, and then some).

Commit to raise money this year. There are many methods to raise money:
1. Individual donors (note anyone who donates to your organization including their name(s), address, phone number, email address, their donations, etc.).
2. Major donors (the donor to your organization who has amassed wealth who should be developed to give larger regular donations to your group).
3. Grants (private & public foundations, municipalities, Tribes, federal, etc. and emergency grants)
4. Special events (e.g. golf tournaments, balls, galas, raffles, auctions, etc.)
5. Bequests
6. Employers' matching donations
7. United Way membership (includes support)
8. Donation envelopes in newsletters
9. Direct mailing (appeal letters)
10. Annual appeal (the one letter, a year, requesting an annual donation or membership)
11. (Ebay's charity arm)
12. Real estate rebates
13. Board members' annual required contribution (either they raise it or they donate it out of their own pocket)
14. Memberships
15. Fees (for services rendered)
16. Sales (selling a product)
17. Reverse mortgages
18. In kind (the donation of needed items, rather than cash or legal tender)
19. Sponsorships
20. Advertising
21. Naming rights (e.g. naming a wing of a building after one's family, etc.)
22. Honorariums (donations in honor of the living)
23. Owning an asset over time, and earning its increase of value
24. Endowment
25. Seed money (start up nonprofits)
26. Pledges
27. Etc.

If your organization is only raising money one way - the existence of your organization depends on the money always coming through that fundraising method. Diversify how many revenue streams your organization gets money from and you can feel confident that if one fundraising method is earning less than last year - you have other revenue streams to rely on. Diversified income is a safety net.

Get strategic about your nonprofit's life blood:
1. Diversify how many revenue streams generate donations and revenue for your organization.
2. Plan out each revenue stream. For each revenue stream your organization is doing or going to do:
a. Research which methods are already overdone in your community and what your community will support and enjoy and go with those.
b. Learn 'how to' for each method your organization is doing and is going to do, from a professional or recommended/reputable resource that is successful at that specific income method.

It takes, on average, three years to earn net revenue on a special event for most organizations, so nonprofits must expect to hold the same special event, annually, at lest three times before making money. If it's a viable special event, do not do it once or twice and ditch it. Stick with it and plan for the initial deficit to make money three years from now and more, going forward.

c. Formulate a realistic timeline, including research, self-education, planning, implementation, occurrence, after the fact analysis of results and earnings, review, planning for next year including learning from this year's mistakes.
d. Create a team who will be responsible for the implementation and management of each revenue stream and assign specific tasks for each step of the entire process to specific person/people, require regular meetings amongst the team and to the board which include progress and benchmarks reporting. This team will also review what worked, what didn't, what needs to change, etc. after; to better it for next year.
e. Track the attendance and receipts; and record attendees' names and contact information (to invite them next year and to track who donates to your organization). The list of attendees will add to list of your organization's regular individual donors, and individual donors donate 70% of most American nonprofits, annually. These folks are your organization's constituency and should be treated as partners in your organization's work and as investors, because they are. They will also give regularly and repeatedly, you'll find. Learn modern methods explaining how to develop donors.
f. Ask attendees, at the end of the program or method, what they liked, what they didn't like, why they participated, what they'd change, and what they'd like to experience, see, or have at the next event/program/project, etc. Gather this feedback, tally it, AND HAVE THE PERTINENT TEAM REVIEW, DIGEST, DISCUSS, and UTILIZE it. Your organization will gain donors' trust and investment when you ask what they think/want but especially when your organization listens. Also, your income should increase, year to year, if you listen to feedback and take it seriously.
f. Review, year to year, if it is worth your organization doing the revenue method. If it's losing money after year three, year to year, or if it is not relevant anymore; research, review, update or replace it. Want to spend less on your nonprofit's fundraising?

1. Review how much each method is raising and compare that to how long your organization's been doing that fundraising method. Is it raising more money, annually, over time?
2. Compare cost of putting the fundraising method on, to how much is being raised. Is the net profit (if the method is over three years old) making a reasonable amount of net income?
3. Review what your organizations donors give to the most often and in the most amounts. Pay attention to what they like.
4. What regular or ongoing costs to your organization could you cut by acquiring a sponsor, in kind donor, or major donor to pay for? Keep the money that you'd spend on that in the bank! Remember, a their donation is a tax deductible break for them.

In review: have more money this year than you did last year:
Commit to raise money
Get Strategic


Dave said...

I'm currently interning with Ashoka with their Citizen Base Initiative. Their thinking is that there is a third way to have more money and that is by seeing "money" in the broad sense of resources and support. For example, some of the cases highlighted on their website have extremely large volunteer bases, or effective partnerships bringing access, resources, and marketing that would be difficult to put a price tag on. Nonprofits can become more sustainable by both diversifying their fundraising mechanisms but also by diversifying their inputs across a wide base of support.

Arlene M. Spencer said...

You are 100% correct - excellent point. It sheds light on a way to view operations that positively impacts an organization's bottom line. Thank you for sharing it.

Best, Arlene