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Built to Last - Creating Sustainable Nonprofits
1. Built to Last: Developing a
Sustainable Funding Base for
Nonprofit Organizations
Presented by Barb Greene, Principal,
CommonGood Consulting, Inc.
TUESDAY, FEBRUARY 20, 2018, 10-11:30 A.M
HUDSON LIBRARY & HISTORICAL SOCIETY
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2. Workshop Outcomes
1. Understanding of the evolution and life cycle of a typical nonprofit
2. Understanding of the various sources of potential revenue for a
nonprofit, and their pros/cons
3. Understanding of the organizational capacities needed to achieve
financial sustainability
a. Culture of philanthropy
b. Board, staff and systems capacities
c. Quality and impact of services
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3. Why is sustainability important?
1. IRS requirements- 1/3 of public charity’s income must come
from general public and/or governmental source
2. Government and funder policies change
3. Family wealth is transferred to next generation
4. Organizations experience crises
5. Economic downturns/recessions
6. Moral obligation to deliver ROI to investors/public
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8. 8
Nonprofit Revenue Sources
Government contracts/grants
Earned income (e.g. facility rental, sale of related products, fees for services)
Federated gifts/grants (e.g. United Way)
Individual contributions (<$5,000)
Major gifts/individual contributions (>$5,000)
Telemarketing
Direct mail
Membership dues
Endowment income
Foundation grants
Corporate gifts/grants/sponsorships
Planned gifts/bequests
Special events (individuals, corporations)
Capital/endowment campaigns (all sources)
9. Government contracts/grants
Pros Cons
Larger sums of money Unpredictable and usually
unsustainable
Garners credibility from other funders Requires larger investment of labor
and money to write, submit, manage
and report grant outcomes
Influenced by policymakers
Temporarily inflates organizational
capacity
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10. Earned income (revenue generating services)
Pros Cons
Offers relational opportunities Contract management and reporting
obligations
Builds organizational capacity in gap
areas
Requires internal capacity
Usually predictable May get push-back from for-profits
Within control of organization Targeted clients may not have capacity
to pay for services
Builds self-sufficiency
Appealing to donors/investors
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11. Federated gifts (United Way, Urban League)
Pros Cons
Relationally based Restrictions on how funds can be used
Often capacity-based Subject to changing rules and priorities
Predictable Low control
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12. Individual Contributions (<$5,000)
Pros Cons
Relationally based Requires base level of fund
development operational capacity
Potential for increased frequency and
amount of gifts
Often unrestricted
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13. Individual Contributions (>$5,000)
Pros Cons
Relationally based More investment of time for gift
cultivation
Higher ROI Requires different level of donor
recognition
Often unrestricted Requires fund development
operational capacity
Opportunity to engage board in
individual gift solicitation
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14. Telemarketing
Pros Cons
Relational to a degree Expensive – requires professional
telemarketers (usually)
Higher gift amounts Highly competitive
Hard-to-reach donor prospects
Higher pledge default rate – up to 20%
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15. Direct Mail/Annual Appeal
Pros Cons
Broadens your donor base Requires expertise
Direct mail firms/mailing lists can
match demographics of donor profile
Intense proliferation of direct mail
requests
Can go small or big Diminishing returns on investment
over time – postal rates increasing
Skewed to older demographics/donors Staff time for cleansing and accuracy of
lists
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16. Social Media
Pros Cons
Reaches younger/more diverse
demographics
Increasing competition
Good venues available – e.g. Crowdrise Older adults
uncomfortable/insecure with
online giving
Good for securing many smaller gifts—base
of fundraising pyramid
Processing fees are associated
with many venues—need to
carefully research
Offers visual and engaging messages
Great for relational/affinity fundraising
Excellent for short term OTO fundraising
Instant donor confirmation, data & analytics
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17. Membership Dues (e.g. PBS, Stan Hywet)
Pros Cons
Affinity or relationally-based Higher level of
maintenance/cost
Opportunity for increased giving frequency
and/or gift amount
Requires fund development
operational capacity
Opportunity to expand earned income
through membership affinity goods/services
(e.g. PBS pledge drives)
Opportunity for tiered levels of membership
and income
Immediate and usually unrestricted income
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18. Endowment Income
Pros Cons
Predictable and sustainable May or may not have control over
principal investment
Naming opportunity for lead donor(s)
Can be used for restricted or
unrestricted purposes
Protects organizations from undue
influence or policy changes over time
Can be managed by external source
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19. Foundation Grants
Pros Cons
Good source of
temporary funding for
project start up or
program needs
Unpredictable and unsustainable
Relatively easy to access Harder to secure grants for operational expenses and
endowment – often come with restrictions
Relational Relational – staff and boards change
Reporting obligations
Usually conservative/middle-of-the road with funding priorities
Funding priorities change
Local foundations: average of $5,000 - $10,000 per grant
Requires internal or contractual grant writer
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20. Corporate Gifts/Grants/Sponsorships
Pros Cons
Good source of temporary funding Unpredictable and unsustainable
Relational Lots of competition for corporate $
Options for in-kind goods/services Relational – staff leadership changes
Reporting obligations
Giving is aligned with corporate
interests/expectations
Funding priorities change
Local corporate
gifts/grants/sponsorships: average of
$2,500 - $5,000
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21. Planned Gifts/Bequests
Pros Cons
Usually major gifts Risk of change in donor’s plans
Opportunity for large impact Requires professional expertise (e.g.
estate planning, legal)
Engagement by donor and family –
opportunity to create a legacy
Requires time investment for
cultivation
Various types of planned gifts (e.g.
charitable gift annuities) offer giving
and receiving flexibility and benefits
Requires promotional support –
investment in communication
Tax incentives for donors
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22. Special Events
Pros Cons
Strong venue for volunteer cultivation &
board engagement
Labor and time intensive
Increase organization’s visibility Can lose momentum over time
“Fun” way to raise money Lots of special event competition
from other nonprofits
Event can introduce prospective donors to
nonprofit – attract new supporters
Usually takes time (2-3 years) to
generate a profit
Timing of events can help with cash flow Unpredictable – outcomes depend
on many variables
Opportunity to collect participant data
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23. Capital/Endowment Campaigns
Pros Cons
Raise the visibility of the organization Labor and time intensive
Cultivate scores of new donors Competitive with other campaigns
Opportunity to deepen board engagement Competes with operational
fundraising
Opportunity to recruit new leadership Hard to maintain momentum over
time
Raise large sums of money Can burn out staff and volunteers
Broaden the funding base of the nonprofit Requires professional expertise
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25. 25
0%
6%
3%
24%
7%
50%
9%
1%
2016
Source of Income Corporate sponsorships Rider scholarships
Foundation grants Rider fees Special events
Fees for Services Individual Contributions Earned Interest
Grants: decreased from
31% of total budget in
2003 to 24% of total
budget in 2016
Special events increased
from 30% of total budget
in 2003 to 50% in 2016.
Major gifts are
responsible for the
increase
26. $2.1 million capital campaign in 2010-2011 to:
1. Move to a renovated facility that doubled the organizational
capacity to build homes
2. Provide greater community visibility and access
3. Establish a ReStore to provide sustainable income
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28. What IS a philanthropic culture?
Donors feel compelled to give, not pressured to give
Donors’ interests match the organization’s needs
The organization is a place where people (staff, board, donors,
partners) want to be
Focus is on impact of mission versus “need” for funding
Everyone plays a role in supporting philanthropy—they are
ambassadors, champions, cheerleaders, connectors, cultivators,
solicitors, facilitators, catalyzers, stewards, donors, chief story tellers,
chief thank you officers
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30. Why do we want a philanthropic culture?
People who give:
◦ believe their gift can make a difference.
◦ get personal satisfaction from giving.
◦ like to support the same cause annually.
◦ like to give back to the community.
◦ are more likely to serve on a nonprofit board or volunteer for a nonprofit--
wealthy donors who volunteered in 2013 gave 73% more on average than
those who did not volunteer.
◦ are often preparing their children to be volunteers and philanthropists.
(Source: Indiana University Lily Family School of Philanthropy: www.ustrust.com/philanthropy) 30
31. Major &
Planned
Gift Donors
Loyal & Larger
Givers
Small or Occasional
Donors
New Supporters &
Prospects
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Identification
• Special Events
• Direct Mail
• Social Media
Qualification
• Special Events
• Annual Giving
• Telemarketing
• Membership
• Program Experiences
Solicitation & Cultivation
• Special Events
• Face-to-Face
• Affinity Groups
• Program Experiences
Stewardship
• Face-to-Face
The Donor Giving Cycle (source: Blackbaud)
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Strategic Plan
3-5 year-fund development plan with supporting budget
Donor management software
“Case for support” materials, including impact of services information
Fundraising policies and procedures
Templates: cover letters, acknowledgement letters, and proposals
Website with secure (e.g. PayPal) giving portal and donor recognition
Development staff
Development committee to guide strategy, donor cultivation and gift acquisition
Board leadership expectations for engagement with fund development
Culture of philanthropy throughout the organization
Board, Staff and Volunteer Capacity
33. Resources
Society for Nonprofits - www.snpo.org
Association of Fundraising Professionals – www.afpneo.org
The Foundation Center – www.foundationcenter.org
Guidestar – www.guidestar.org
W.K. Kellogg Foundation – www.wkkf.org
Ohio Arts Council – www.oac.ohio.gov
Chronicle of Philanthropy – www.philanthropy.com
Urban Institute Center of Nonprofits and Philanthropy– www.urban.org
Business Volunteers Unlimited/The Center for Nonprofit Excellence– www.bvuvolunteers.org
Ohio Association of Nonprofit Organizations – www.oano.org
Independent Sector – www.independentsector.org
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