Do you want to raise more money in 2020 than you did in 2019 for your nonprofit agency’s mission? Do you want to have money left over after all the bills are paid? Do you want your nonprofit to make the most money it can? Then you need three things: 1) strict adherence to mission; 2) revenue-generating activities that make more than they cost; and 3) a lens that will help choose among the numerous fundraising options available.
Creating a Profitable Nonprofit Fundraising Budget and Calendar: Step 1
I am going to go back to my very first blog, Successful Nonprofit Fundraising: It’s Not About the Money, and reiterate that fundraising is not about the money. It is not financial need that motivates. It is mission that motivates. Individuals are looking for mission fulfillment. Foundations are looking for mission fulfillment. Businesses are looking for a strong sense of corporate identity, which, for a nonprofit, is it’s mission. Always, always, always mission first.
Make sure the fundraising activities you choose help you fulfill your mission. Don’t chase after the money. As we saw in Evaluating the Success of Your Nonprofit Fundraising Events: Income, Impact, Costs and Benefits, chasing after the money can lead to mission drift. Mission drift occurs when a nonprofit agency uses its resources for things other than its mission. If your organization experiences mission drift, eventually you will lose your community support. Individual donors won’t know what you stand for, you will not meet foundation requirements for mission fulfillment and businesses will pick up on your weak corporate identity. Sticking to your mission means asking and thanking your individual donors for how they impact community needs, not financial needs, as we discussed in Building Donor Relationships: Individuals. It means researching grants with similar missions as opposed to big payouts. It means choosing special events that are designed to fulfill mission just as much as raise money. Does that run or golf tournament or casino night have anything to do with your mission? Always stay true to your mission. Always.
In addition to your nonprofit’s mission, stay true to your nonprofit’s organizational values. Is whatever activity you are engaging in in line with those values? Do you know what your nonprofit’s values are? No? Then go to the strategic plan and find out. Not got an organizational values statement? Then work with your board and get one. A values statement will help further define your nonprofit’s identity. Which is a very good thing.
A precise identity leads to increased donations. By making your values known and using them as a guide to fundraising, your individual donors will connect with you at a deeper level and, when they are asked to give at a sacrificial level, they are more likely to. Your agency’s values can help you determine which foundations to apply to as well. Are your organizational values compatible with their missions? If they are, the foundation may be worth exploring as a source for funding. If they are not, move on the next prospect. What about your corporate givers? Does your organization share values with them? If you do and you have a strong sense of who you are and what you stand for, your nonprofit is going to be an attractive potential partner to them. Corporations spend millions of dollars defining who they are and what they stand for. It’s called branding. It is good for business to establish a strong brand. Strong branding, as we discussed in Building Donor Relationships: Corporations, increases corporate profits. Same is true of nonprofits.
Creating a Profitable Nonprofit Fundraising Budget and Calendar: Step 2
Without mission there is no money and without money there is no mission. So, after making sure your fundraising activities are mission-related, the next step is to evaluate them in terms of profitability. Yes, profitability. You CAN make a profit as a nonprofit. You just need to invest that profit into the mission as opposed to stockholders. In fact, you need to make an overall profit so your agency has emergency reserves and seed money for new projects. Setting aside a portion of profits is how these things get funded.
So, after looking at mission, the next step is to look at the previous year’s fundraising activities and their respective financial performance. What are your revenues and expenses for each activity? Not just your direct expenses, your indirect ones too. Like fundraising staff salaries and database costs and professional memberships and trade publications and professional development costs. And executive management and accounting and human resource and IT allocations. And rent and utility and office supply allocations. Analyze each fundraising activity – writing grants, making direct appeals, asking for major gifts, bidding on government contracts, executing fundraising events – as if it is a separate business center. Treat each one as a stand-alone activity. Which ones made you money? You might want to repeat them. Which ones cost you money? Unless you have another reason for doing them, you might want to not do them anymore. Even if it is the favorite activity of the board or staff. The purpose of fundraising is, after all, to raise funds. You need to make money to thrive.
Creating a Profitable Nonprofit Fundraising Budget and Calendar: Step 3
So, after looking at their mission and financial performance, some of your fundraising endeavors may not quite be working for you in the way you want them to. Maybe they are very mission-oriented but you’re losing money. Or, maybe they’re making a ton of money and aren’t related to your mission at all. Well, there’s a third lens you need to look at your fundraising activities through – the impact lens. What kind of impact does the activity make?
For example, how much mission does that grant or government contract fulfill? Probably a lot. It might be worth it to you to subsidize any losses with other fundraising activities that are making you money. Or how much community awareness does that gala or walk generate? You might want to keep them and fill them with even more mission orientation. And also look at ways you can increase revenues or reduce expenses.
What are your other organizational impact goals? Do you want to create organizational awareness? Do you want to recruit new donors? Do you want to mobilize your community? Do you want to provide for high-powered networking between government officials and your major donors? Do you want your corporate donors to get to know your clients? Exactly what are your goals in terms the impact you want to make through that particular fundraising activity? You might choose to give up more tangible high profits for less tangible high impact.
By the way, there is no right or wrong answer. It all depends on the goals and annual objectives stated in your agency’s strategic plan.
Creating a Profitable Nonprofit Fundraising Budget and Calendar: Step 4
Now that you’ve looked at each fundraising activity in terms of mission, profit and impact, you need to compare the performance of the activities to one another. Comparing the activities to one another will help you determine how much time investment to make in each. And you have many activities to choose from. You can write grants. You can bid for an upcoming government contract. Yoou can implement another fundraising event. You can help board members cultivate major donors. You can educate a politician about the needs of my clients and the impact legislative polices have on them. You can initiate an email campaign. You can prepare a direct mailing. There are an infinite number of things you can do to raise money.
Are you just starting out and trying to choose which activities will perform best for you? Does your board want to try and do everything but realizes you can’t? Or do need want to make a change to your mix of activities but are not quite sure where to focus most of your efforts?
Face it. You and your team, be it staff or volunteers, have limited time. Especially if you are an executive director, part-time fundraiser or a one-person shop. Time is your most precious commodity. The question is not, “How much can I do?” The question is, “What activities can I do more of that will bring me the most return on my investment? How can I shape my mix of fundraising activities so that they are the most profitable they can be?” Don’t only look at straight net income when you are comparing different fundraising activities. Look at net income in terms of the costs of the resources you invest in them. Divide net income by expenses for each fundraising activity. What are your results? Where is your highest return on investment? What activities do you do that bring in the most amount of money using the least amount of resources?
Maybe writing that extra grant delivers a higher return on investment than implementing that small fundraiser. Maybe you find that soliciting major gifts is your highest return on investment, higher even than writing that grant. Maybe you find your Facebook campaign delivers your highest return on investment. Whatever it is, that’s where you focus your resources when you have a choice to make.
Creating a Profitable Nonprofit Fundraising Budget and Calendar: Step 5
Your activities are mission oriented. You make money on them. You’ve evaluated their impact in terms of other organizational goals. And you are directing your resources where they will be most efficient. Now look at your calendar and start mapping out your activities.
Look at what fundraising activities are so central to mission and impact they must be done and schedule them first. In some organizations that may be a special event that brings together the community. In other agencies, it may be a direct appeal centered around a community recognized theme, like suicide prevention month or earth day. Whatever it is, make sure your costs are covered. You need money to implement mission.
Since 30 percent of charitable giving takes place in the last quarter of the year, it makes sense to schedule a year-end appeal sometime during the last quarter of the year. The second highest giving season is in the spring, around tax time. If you want to be different or you want to have two individual appeals during the year because appeals bring you the highest return on your investment, a spring appeal may be a good option for you.
Now look at activities that have hard deadlines, usually your grant submissions and government contracts. Put the deadlines on your calendar and then work backwards, scheduling in adequate time to complete the endeavor between beginning to tackle it and the deadline.
And don’t forget about your major gifts. You must schedule time to cultivate, ask and steward major gifts if you want to realize maximum bang for your buck. As we saw in Developing a Nonprofit Fundraising Strategy that Optimizes Fundraising Performance, the cost to raise a dollar through individual giving is much, much lower than through a fundraising event and the donation is more likely to be repeated for a longer period of time than a grant and can be more stable than government contracts, which are subject to the political whims of budget allocations. And an undesignated major gift means you can use the money wherever it is most needed, including general operating expenses or infrastructure, which you often can’t with grants or government contracts.
Figure out how and when your organization is going to solicit major gift prospects and what you need to do to facilitate the process. How many people do you want in your major gifts pipeline? As many as possible is not an acceptable answer, especially if you are a busy executive director, part-time fundraiser or one-person shop. How many prospective major gift prospects can you realistically help shepherd board members to cultivate and still do everything else? Are you going to set aside a quarter to do a major gifts campaign or are you going to have ongoing asks? Schedule the time and set the benchmarks or it won’t get done. What gets measured gets done.
Creating a Profitable Nonprofit Fundraising Budget and Calendar: Step 6
Finally, go to your organizational budget, plug in your development budget and make sure you can maintain positive cash flow without going into debt. Direct mail appeals and special events, in particular, usually cost more than other types of fundraising. Make sure you have enough money to purchase the needed supplies or secure the needed venues up front. Fundraising performance is never guaranteed. A serve snowstorm. A hurricane. A city-wide blackout. A fire. You never know what may affect your fundraising performance. Manage your financial risks. Make sure you have enough cash on hand that you can absorb the financial risks you are taking.
You need to be able to pay the bills. If you don’t pay your bills, you will eventually go out of business. And you need to pay your bills without going into debt. You don’t want to be financially desperate. Because when agencies start getting desperate about money, they start chasing the dollar as opposed to the mission. Mission drift starts. Community support declines. Employee morale declines. And the downward cycle has begun.
Long story short: Schedule and implement profitable, mission-oriented fundraising activities that make an impact and focus your resources on fundraising activities that will bring you the greatest financial return.
Creating a Profitable Nonprofit Fundraising Budget and Calendar: Wrapping It All Up
- Put mission first.
- Ensure profitability.
- Make an impact.
- Implement activities where you get the best return on investment.
- Determine your schedule with community observances, fundraising cycles and grant deadlines in mind.
- Make sure you maintain positive cash flow.
What are your thoughts? What does your development plan look like? Let me know.