Find out what’s missing in your funder conversations

Words can inform our mind, thrill our spirit or destroy our self confidence. Some call language a “tool of transformation.” No matter the intent behind your words, leading nonprofit thinkers agree the power of language is evident in every aspect of the sector. The influence of language couldn’t be more obvious than in the article introduced by Foster, Kim and Christiansen, coauthors of “Ten Nonprofit Funding Models.”

Foster, Kim and Christiansen argue nonprofit leaders face greater financial challenges due to the lack of nomenclature surrounding recognized nonprofit business models. In their Stanford Social Innovation Review article, the coauthors researched and identified the 10 most common funding models because they felt this framework was necessary to facilitate increased understanding between the nonprofit leader and funder.  As a result, CEOs and boards would have an easier time explaining their model and instilling more immediate confidence in a recognized model to potential donors.

The nonprofit equivalent to “corporate speak”

The corporate world has long benefited from this common language in that securing investors is made easier due to the fact that a shared awareness of successful strategies such as “low-cost provider” or “fast follower” already exists. Foster, Kim and Christiansen created the nonprofit equivalent to the corporate business models by grouping these funding models according to the dominant type of funder. I’ve synthesized their taxonomy in the following list:

Heartfelt connectors resonate with existing concerns of a large donor audience. Examples are Make-A-Wish Foundation and the Komen Foundation.

Beneficiary builders rely on donors and funders who have benefited in the past from services. Examples of this model are universities and hospitals.

Member motivators compel donors to give to the issues that are integral to their lives. Churches and associations are good examples of this model.

Big bettors have a primary donor who’s often the founder and tackles a deeply personal issue. This model is evident in many nonprofit types.

Public providers offer service delivery or outsourcing for the government funder. Examples are Success for All Foundation, Head Start, and Texas Migrant Council.

Policy innovators address social issues that are not clearly compatible with government programs. Youth Villages and HELP USA are nonprofits that use this model.

Beneficiary brokers compete to deliver government-funded services to beneficiaries who pay for them. The Iowa Student Loan Liquidity Corporation and the Metropolitan Boston Housing Partnership are examples of this model.

Resource recyclers collect in-kind donations and distribute goods to needy recipients. Goodwill, food banks, and product recyclers are all examples of this funding model.

Market makers generate fees or donations directly linked to their activities. Nonprofits that facilitate organ donations are an example of this funding model.

Local nationalizers have grown large by creating a national network of locally based operations. Big Brothers Big Sisters is a local nationalizer.

Nonprofit leaders considering one of these funding models should be sure to visit this article and look at the questions you can ask yourselves under each type to determine if the financial framework is a fit.

One tax status, multiple strategies

Nonprofits that model corporations’ use of shared language when discussing business models has distinct advantages. Though nonprofits file under one tax status, nonprofit leaders have the multi-faceted challenge of addressing the nonprofit’s diversified funding model as well as its business model (cost structure and value proposition). The leader’s focus is twofold-one is on the funders while the other is on the beneficiaries of the charity’s services. Creating an overall plan that acknowledges these focal points while furthering the mission captures nonprofit executives’ constant attention. What’s more, ruminating over programs and services is a comfort zone for most boards and CEOs while looking at these elements in relation to funding, cost structure and value proposition is less so.

The authors of this article assure nonprofit leaders that if they learn to adopt this shared language and an understanding of how peer organizations leverage the same model, conversations about financial matters may come easier at board meetings, with stakeholders and fundraising prospects. As the CEO of a finance and accounting firm, I’m an advocate of any measure that makes talking about the financials easier, and I applaud the effort to give each model a name. Let the power of language work for us.

See also:

The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

Relationship Fundraising: A Donor-Based Approach to the Business of Raising Money, 2nd Ed.

image credits: sheezaredhead.wordpress.com, www.lawfunder.com

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