Editor's Note: we are excited to bring you a guest post this week by Nell Edgington, President of Social Velocity (we've been a long-time fan of Nell's Social Velocity blog)! In this post, Nell presents a case for financing, not fundraising, for the nonprofit sector:
I think 2013 is going to be a big year for the nonprofit sector. I think (hope) it’ll be the year when more nonprofit leaders realize that fundraising is broken and there has to be a better way. Well, there is. In this new year, I’d like to outline a new approach to how nonprofits can finance, instead of fundraise for, their organizations. And in so doing they will emerge stronger, more effective and more able to create lasting social change.
Nonprofits need a financing strategy, not a fundraising strategy. Fundraising doesn’t work anymore. It holds the sector back by keeping nonprofits in the starvation cycle of trying to do more and more with less and less. Nonprofits have to break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all their activities. Instead, nonprofits must work to create a broader approach to securing the overall FINANCING necessary to create social change.
What does this new approach to financing a nonprofit look like?
- Create a Money Strategy. Nonprofits must understand funding programs and general operating expenses is not enough to survive and thrive. All activities that bring money in the door (individual donors, foundation grants, earned income, government contracts, loans, etc.) have to be integrated and part of a larger financing strategy that supports the short AND long term goals, as well as the programs AND infrastructure of the organization.
- Integrate Mission & Money. Nonprofits must no longer segregate fundraising from their other activities (programming, administration). All elements of a nonprofit’s operations, including the moneymaking ones, have to be fully integrated and moving forward together.
- Message Impact. The messaging nonprofits use to bring money in the door must move from an emphasis on the tin-cup mentality and donor benefit to an emphasis on the social impact a nonprofit is creating.
- Build The Organization. Money needs to be raised to support not only the direct services a nonprofit provides, but also the infrastructure (staff, technology, systems, evaluation, training) of the organization. Nonprofits have to understand they will only get better at delivering impact if they have an effective organization behind their work.
- Diversify Money. Earned-income opportunities should be evaluated and if appropriate, launched. Earned income is not right for every nonprofit, but it is worth exploring and analyzing opportunities as they come and understanding and embracing the revenue-generation possibilities. And other types of capital vehicles, like loans and equity, should be explored and added to a nonprofit’s financing mix.
- Calculate Costs. The net revenue of every moneymaking activity a nonprofit engages in (events, individual fundraising appeals, corporate sponsorships, earned income, etc.) should be calculated and evaluated. Low net revenue activities must be replaced with higher net endeavors.
- Pull in Supporters. Nonprofits should move away from “push” fundraising and marketing efforts that force their message on innocent bystanders (e.g., direct mail appeals) and toward “pull” fundraising and marketing efforts that bring interested donors/prospects to the organization (e.g., blogs, Twitter, Facebook, friend-raising events, etc.).
There really is a better way. Nonprofits don’t have to wear out their fundraisers, their donors, their staff and their message. By working toward financing their efforts, as opposed to fundraising for them, they can get much closer to social impact and financial sustainability.
Nell Edgington, President, Social Velocity
Nell has over 17 years of experience innovating in the nonprofit sector. In her work at Social Velocity she has helped nonprofits grow their programs, find firmer financial footing, create a pitch for money to strengthen or grow their organizations, create strategic plans and much more.
In addition to leading Social Velocity’s efforts to accelerate social innovation, she writes and speaks extensively on innovating in the nonprofit sector. Beyond writing the popular Social Velocity blog, she co-authored The Strategic Management of Charter Schools: Frameworks and Tools for Educational Entrepreneurs recently published by Harvard Education Press. She has also contributed to Change.org’s Social Entrepreneurship blog, Fundraising Success Magazine, the Tactical Philanthropy blog, the Philanthropy 2173 blog, the About.com Nonprofit blog, and the Chronicle of Philanthropy’s Mission:Innovation blog. She speaks to nonprofit boards, staff, donors, groups, associations and events, including the leading social innovation gathering, the Social Capital Markets Conference in San Francisco.