When nonprofit executives come to me, they are often a bit stuck. Their organizations are raising the same amount of money every year and it feels like they can’t get traction and simply don’t have enough hours in the day to try one more fundraising idea!
As I’ve researched where funding tends to plateau, I find that there’s typically one important first step.
You must look at the problem from a different angle.
Really. What if your fundraising problems are caused by your overarching approach to funding your organization each year? I’m talking about creating a real and true financing plan that HELPS you reach your budgeted need, including overhead.
If the problem is the whole funding model, rearranging the individual pieces will never work.
As I’ve worked with organizations large and small, I’ve found that when fundraising plateaus, it’s most often for three specific reasons, all of which point to issues with the traditional fundraising model and activities:
- You’re Not Spending Enough on Overhead
- You’re Basing Your Fundraising Plan on Pledges or Commitments, Not Your True Need
- You’re Sticking With What’s Comfortable, Instead of What Works
Let’s get into each reason, and what to do instead to grow your fundraising to meet your mission.
1. You’re not spending enough on overhead and fundraising 💰
Let’s lead off with the most controversial thing I have to say: If your fundraising has plateaued, it’s most often because you’re not spending enough on overhead and fundraising.
That’s right, I said not spending enough.
If nonprofits are supposed to change the world or solve huge crises, you cannot be expected to do it on shoestring budgets. You wouldn’t expect to get very far in a car you never put gas into, right? That’s overhead, the fuel that moves the car so you can get where you need to go.
This expectation that you should be able to make a cross-country trip on a tablespoon of gasoline is one of the weirdest things about the nonprofit sector. If like me, you came from a corporate background, it probably didn’t make sense to you either.
You knew you had to spend money to make money. But, faced with the prevailing wisdom that funders, charity-ranking websites, and the general public all “hate overhead,” perhaps you concluded that things were just different in the nonprofit sector.
While nonprofits are certainly different from for-profit enterprises in many ways, the fundamental truths of how financing works remains the same—you can’t do more with less. Life-changing missions require a significant investment in resources, tools, and people.
All those “truths” about overhead? When you have a real financing model and cultivate relationships with investment-level donors, you find they don’t hold true at all. When your donors understand what your organization needs to change the world in ways they care about, they consequently understand why you need to invest in your people and processes, as well as programs.
Your big vision is possible, but you may need to shift your perspective to get there and change your fundraising model.
2. You’re basing your fundraising plan on what’s committed or pledged, not what you need 📄
Does your organization need more unrestricted cash? Most nonprofit CEOs say, “Yes!” to this question.
Here’s my question: Right now, in your budget, does your total Income number exceed or at least equal your total expense line (budget + growth + reserve)?
Here’s why I’m asking: I have multi-million dollar organizations coming to me because they aren’t raising the amount of money they want to each year. And frankly, they need more unrestricted dollars to invest in the growth of the organization.
When this happens, I go straight to the budget.
Why? I see so many nonprofit budgets set every year in a very reactive approach, rooted in “Here’s what we have committed or pledged” versus the true financial need of the organization.
This is letting other people set your budget, and it’s no way to grow.
In 2020, here’s what I heard:
“We base our budget on the current or expected Government contracts we get every year. But, cash flow kills us and the funds are simply not enough.”
“We base our budget on committed funds from Foundations and averages from past events. But, the time it takes to secure those funds each year keeps us from individual giving.”
This approach KEEPS you from raising more money and unrestricted funds. Full stop.
This is the year, you should design a need-based budget.
Too often our budgets are rooted in every cent we’ll spend or what we have committed, with no attention paid to figure out every single dollar we need to raise. When you don’t do that, you’ll never have the unrestricted cash coming in you need, so you’ll keep allocating time and resources to your existing fundraising activities, which don’t attract larger donations.
Successful nonprofits take their true need (expense) and create a true financing plan (income) that then reaches that need. Then they make sure their team knows how to do this. And just because they can write grants or plan events successfully, they may not know how to find, lead, and secure large amounts of unrestricted funds. It’s science + art.
3. You’re sticking with what’s comfortable, instead of what works 😌
If at this point, you’re feeling a little unsettled and hesitant about changing your fundraising model, I understand. These are big, systemic changes. Making a change like this at your organization isn’t always comfortable. As all my clients could tell you, “Get comfortable being uncomfortable!” is standard advice from me.
Being comfortable isn’t the same thing as being secure. Take even one of my smaller clients, who have grown their programs and services over the years. They’re serving more people, doing more good, and expanding their reach.
So what’s the issue?
Slowly they’ve grown to nearly an $800K organization, mostly from government contracts. But, they have huge cash flow problems, are short-staffed, and have a very little reserve in the bank. One day I said to them, “So, you truly have a ONE MILLION dollar need next year?”
That made them uncomfortable. It felt scary. It felt really big. Like such a stretch.
And the thing is, with their existing funding model, it was an incredible stretch. They’d done as much as they could do with that model. They were awarded the contracts they were going to get, there wasn’t a way to do “more of the same” to raise more money.
What to do instead?
Break free from traditional Income Models that limit growth and never secure the unrestricted cash you need to truly grow.
The good thing is that these big changes can be accomplished in small, dedicated steps. The first step is identifying your true need, then really owning that number. It’s hard to grow to a number you’re embarrassed to talk about.
Second, put that plan and budget on paper. Then, you can put a true Financing Plan in place to grow and see the exact steps to take each month.
Lastly, you lead your donors on a journey every year to their best gift. Honestly, when you have the right financing plan in place, can explain your need, and have a few core solicitation tools at the ready, “the dreaded ask” is easier.
Get past your plateau 🚀
Whether you’re a grassroots organization trying to reach the $1M mark, or a large multi-million dollar nonprofit that struggles to get ahead, despite working constantly, you’ve got to find a way past your funding plateau. There’s too much good that needs to be done, too much mission left to pursue. I know nonprofit leaders, and none of you have “do a tiny bit more than last year” as your driving vision. You want to do big things, and the world needs you to.
This year you can go beyond using outdated metrics and models, and start working from another angle that puts forward your true need and makes fully-funding your mission possible. We’ve just scratched the surface here. If you’re not sure where to start, I’ve outlined more about this methodology in a White Paper. Grab it here. https://www.quamtaylor.com/whitepaper
Givebutter made a $100 donation to Sherry's campaign of choice, The Bridge Builder Campaign, for this guest blog.
Sherry Quam Taylor teaches nonprofit CEOs and their teams how to break free from traditional fundraising models and activities that limit growth and never secure enough money to fulfill their organization’s vision.