Posts Tagged ‘The End of Fundraising’

Uncover new donors by creating economic value

“To be market driven, you have to determine who your customer is. And interestingly enough, it may not be the people your organization is dedicated to serve–your clients. Your customer is the one group from among all your stakeholders who, more than anyone else, determines your survival and your success.”

Steve Rothschild’s seven principles of success in his book The NON Nonprofit are rooted in his revelation of consistent methods he has implemented as an accomplished business leader in a Fortune 100 company and as a CEO of a thriving nonprofit that succeeded in creating economic value from social benefit.

If phrases like “Be market driven” (principle #3) and “Create economic value from social benefit” (principle #6) have you thinking you’re reading from a business book, think again. After creating the seven principles in the corporate world, Rothschild tested them in his own nonprofit, Twin Cities RISE!, and observed them in many other sector examples he discusses in The NON Nonprofit.

I asked Rothschild to explain his view of creating economic value in his own nonprofit:

CausePlanet: Principle #6 (Create economic value from social benefit) addresses the notion that “we are accustomed to thinking about social good in terms of moral imperative rather than economic benefit. But every improvement in social good does in fact have monetary value—to the participant, the state, or some other stakeholder.” Jason Saul, who authored The End of Fundraising, would wholeheartedly agree with you on this point. What did you determine was your “marketable” social benefit at Twin Cities RISE!?

Rothschild: Twin Cities RISE! trains underemployed and unemployed adults, primarily black men, with multiple barriers to employment, including low academic skills, criminal and addiction backgrounds, and poor work histories for living wage jobs. Over the last 15 years, it has been successful in boosting graduates’ pre- to post-training incomes from an average of @$5,000 to @$25,000. As its graduates’ incomes have increased, they pay more sales and income taxes and use less low-income health care, childcare and housing. They also save corrections costs. These cash benefits to the state of Minnesota and also the federal government derive directly from the social value that was created by lifting individuals and their families out of poverty.

What is your marketable value are you creating in your organization? If you can identify your marketable value, Jason Saul argues that you can pursue an entirely new set of stakeholders. He calls this new set of stakeholders “impact buyers,” who are willing to pay for social outcomes. Saul identifies the three highest value outcomes these funders want to buy and we highlight them in the Page to Practice™ summary.

See also:

Forces for Good: The Six Practices of High-Impact Nonprofits

Do More Than Give: The Six Practices of Donors Who Change the World

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

Image credit: EducationNews.org

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Supplement fundraising by exchanging value

It’s no coincidence our sector is looking at redefining its business models when 88% of nonprofits in 2012 were faced with increases in the demand for their services despite 57% barely having enough cash on hand to last them three months. (1)

In “Pride & Prejudice: (What) Can Nonprofits Learn From the For-Profit World?” by Richard Dare last May in the Huffington Post, I was intrigued by his challenge to fellow nonprofits to reexamine their business models and consider several ideas he’s observed and read about over the years:

1) side-ventures to supplement traditional fundraising (gift shops, space rental, cafeterias),
2) innovative partnerships that exchange value (see www.MissionMeasurement.com by Jason Saul),
3) new money from your core operations (create a model that serves other party’s interests beyond your own).

Don’t wait to consider new options. Increased demand for services and the diminishing ability to maintain three months of cash reserves is a chronic scenario we diagnose when we’re in the field working with Execute Now! clients. Financial strain in the midst of high service demand has no bias—both large and small, as well as seasoned and start-up nonprofits, struggle with this challenge. We also see increasing competition for individual donors and grantmakers within the sector and within specific causes. “There are over 1.4 million nonprofits in the U.S., more than 500,000 of which have been created in the last ten years! Yet according to the Urban Institute, there are only 1,100 different ‘types’ of nonprofit programs. Simple math tells us that, on average, there are over one thousand nonprofits for each type of problem,” states Jason Saul in The End of Fundraising.

Diversify your revenue stream. All three of Richard Dare’s suggestions have a common theme that involves depending less on donated income and more on the exchange of value, either directly with your constituency or with peers who share an interest in your constituency. We spend a fair amount of time helping our clients forecast cash flow so they can accommodate lengthy grant cycles and cultivate large donors. Imagine how those projections might be boosted by alternative revenue arrangements.

Look at fulfilling your mission in new ways. Above all, our most successful clients are those who look for new ways to implement their mission in every strategy they explore. Each new venture enhances their business model and is scrutinized for relevancy and financial sustainability. Additionally, these nonprofit leaders constantly look at the value they provide not only to their clients, but also to their stakeholders. Who are your stakeholders? Jason Saul says they have a vested interest in the social outcomes you produce. Look at your nonprofit community and reexamine who your stakeholders might be.

Learn more about our nonprofit services or download an assessment form to determine your nonprofit’s financial assistance needs.

1: Nonprofit Finance Fund 2012 Survey Results

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Who really cares? Find out by mapping your stakeholders

The most important piece of advice in Jason Saul’s The End of Fundraising is that we must raise money from people who truly value what we have to offer. As a result, we must all go through the important exercise of identifying the stakeholders who will realistically be interested.
The author defines stakeholder as “any person or entity who has a bona fide expectation of results from your work. By bona fide, I mean legitimate: based on either a contractual, an ethical or a fiduciary obligation.”
Begin by mapping your stakeholders you have identified through these questions: Who cares most if we succeed or fail? Who has a vested interest in our success? Who influences our strategy or agenda? To whom must we report our results?
Next, conduct one-on-one interviews and sometimes focus groups to help identify what stakeholders’ expected outcomes are. These questions will help tease out what they value:

What outcomes do you value most about our work?

How would you define success for the work we do?

Do you think we were successful last year? If so, why? If not, why not?

What’s the ultimate impact you value from our work?

What do you think the project needs to accomplish in one to three years to achieve this longer-term impact?

What data or evidence would you need to see that would convince you our work has been successful?

What type of information do you need from us to demonstrate the value of our relationship?

Is there anything we haven’t discussed that you would like to add?

Now you can define your outcomes, which will be the foundation for value in the social capital market. Again, be careful not to define your activities. Instead, prioritize outcomes from your various stakeholder interviews, focus on those within your grasp and draft each one using active verbs to convey change over time (e.g., grow, improve, reduce, etc.).
Next, you can develop measures that demonstrate your organization’s contribution to these outcomes or ask how much of this outcome you can deliver. Effective measurement in the social capital market involves knowing the difference between:

Activities versus outcomes: Activities describe your program efforts while outcomes are the changes that result from those activities—awareness, behavior, condition or status.

Evaluation versus measurement: Although most evaluations are meant to answer, “Does the program work?” on an absolute basis, performance measurement is designed to ask “How well is it working?” In short, measure relative contribution to an outcome.

Good measures and bad measures: Good measures are credible (believable and accurate), practical (reasonably available, not abstract) and relevant (pass the “so what?” test and are useful in explaining outcomes).

Do you know who your stakeholders are? If not, try Jason Saul’s exercise and find out. For more information about selling your impact, purchase this book at JosseyBass.com, visit Jason Saul’s website at www.MissionMeasurement.com or visit our Page to Practice library for a complete summary including our interview with the author.

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