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Fundraising Tuesday: Do You Know Your Donor’s Business?

July 23, 2019 by Dennis Fischman Leave a Comment

frustrated donorYour donors expect you to know a lot of things about them, including what they like to be called and whether or not they are a loyal, consistent giver.

Here’s one other thing you should know: when they make a donation to your nonprofit, why? What business are they in when they are giving?

Let me explain what that means with a story I know personally.

An Offer She Could Easily Refuse

My wife, Rona Fischman, owns a company and leads a team of exclusive buyers’ agents. They don’t list any property, and they don’t have any allegiance to the seller. When you buy with them, you know they are on your side, from first meeting through closing.

A big company wanted to buy out Rona’s company. They didn’t succeed, because they didn’t understand the business she was in.

First, they tried to hire her top agent out from under her. Rona had trained him and supported him through his lean years. Last year was his best year ever. He liked the relationship he had with his clients. He had no reason to join them, and instead, he  reported the offer to her.

Then, they tried to get Rona to bring her company under their wing. They showed her how successful their agents were at listing properties: precisely what Rona’s office doesn’t do!

Finally, they tried to convince her that her business model was dying. But they showed her data from other markets in other parts of the country–and they had nothing to refute her own track record. Rona was not enticed.

Knowing Your Donor’s Business

We may congratulate ourselves that we would never treat a donor the way Rona was treated. But do we really know the donor’s “business”?

What made that person give to us the first time?

If they have already made a second gift, what convinced them to renew?

Which of our causes, programs, services, or events is what really matters to that donor?

Are we the #1 organization on the donor’s list, or #21?

How does giving to our organization make the donor feel about themselves?

Your Offer to Your Donor

The vast majority of first-time donors in the U.S. never give to that same nonprofit organization again. Why? Because we don’t know our donors, we make them the wrong offer.

We call them by the wrong name.

We ask them to support the program we’re interested in–not the one that they’re interested in.

And we don’t take the time to find out what they really care about.

Nick Ellinger recently wrote on The Agitator:

What happens after the typical online donation? We thank the person. Yay! And we select as the next activity: share about your donation on social media. Boooooo…

What should you do first: ask someone to share their experience or find out if they had a good experience? Or, put another way, if someone nearly threw their computer out the window because of something on your donation form, do you want them to share this experience with their friends?…

To grow and upgrade and get that mid/major/monthly/legacy donor you seek, you must upgrade your knowledge of the donor.  You must learn why they give and give more of that to them.  You must fit yourself into the place they have for you in their heart.  What order does that happen in?

Learn first, then act.

 

 

 

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Why You Should NOT Run a Nonprofit Like a Business

August 13, 2018 by Dennis Fischman Leave a Comment

Do your Board members think you should run your nonprofit like a business? Do your donors think so? Maybe even your Executive Director?

Don’t believe the hype.

A nonprofit is a fundamentally different kind of organization than a for-profit enterprise.

The Looking-Glass World of Nonprofits

other side of mirrorTake it from Clara Miller, head of the Nonprofit Finance Fund. In a classic article, “The Looking-Glass World of Nonprofit Money: Managing in For-Profits’ Shadow Universe,” she gave a true-false quiz about how nonprofit finance really works. Take the quiz yourself:

  1. Rule #1:  The consumer buys the product. True or false?
  2. Rule #2: Price covers cost and eventually produces profits, or else the business folds. True or false?
  3. Rule #3: Cash is liquid. True or false?
  4. Rule #4: Price is determined by producers’ supply and consumers’ ability and willingness to pay. True or false?
  5. Rule #5: Any profits will drop to the bottom line and are then available for enlarging or improving the business. True or false?
  6. Rule #6: Investment in infrastructure during growth is necessary for efficiency and profitability. True or false?
  7. Rule #7: Overhead is a regular cost of doing business, and varies with business type and stage of development. True or false?

The answer to every single one of these questions is: in the for-profit world, true. In the nonprofit world, false. (Read the article to understand how and why.)

Because the most fundamental axioms of business don’t apply to nonprofit finance, if you try to run your nonprofit like a business, you will go broke. Or go to jail. Or both.

Nonprofits, Businesses, and #MeToo

Businesses are not a good model for nonprofits in a different way. They are notoriously bad at preventing, detecting, and responding to sexual harassment.

A case in point is what happened when a corporate PR executive took over as the head of Save the Children UK. How did he respond to complaints of sexual harassment and bullying at the nonprofit? Ruth McCambridge at Nonprofit Quarterly quotes the BBC:

Current and former employees say the charity, under the leadership of Mr. Parker, created an adrenalized culture more suited to a battle-ready business than a charity. They describe a place gripped by a desire to win, with victory defined as raising more money and then spending it on splashier projects than other charities did…

A corporate creature to his core, Mr. Parker reacted to the harassment complaints like a chief executive from a bygone era, current and former Save the Children employees say. One of his priorities seemed to be protecting the jobs and reputation of the men responsible for the harassment….

In the end, Parker left Save the Children UK with serious damage to its reputation and its finances (donations are already down) “that will shadow the charity for a long time.”

Nonprofits, please run your organization in a way that fits your own mission. Trying to be like a business is a recipe for disaster.

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Fundraising Tuesday: Why a Nonprofit Can’t Run Like a Business

March 7, 2017 by Dennis Fischman Leave a Comment

Business and nonprofitAre you tired of being asked, “Why can’t you run your nonprofit like a business?”

I’ve written about how nonprofits can use advice written for businesses (with just a little translation).  When it comes to nonprofit finance, however, some business wisdom is just wrong.

Clara Miller, the former director of the Nonprofit Finance Fund, explains why.  In her wonderful article, “The Looking-Glass World of Nonprofit Money,” she lists seven assumptions that businesspeople make that–in the nonprofit world–are just not true.

A Nonprofit Differs from a Business Because…

    1. “The consumer buys the product.” False. Donors and funders buy the “product” (which may be a service, a program, or a campaign), and clients benefit from it.
    2. “Price covers cost and eventually produces profits, or the business folds.”  False.  Nonprofits are devoted to their missions and will keep on pursuing the mission as long as they  can.  They have a sideline in fundraising to support their “business”–but it may also sap energy away from the reason they exist.
    3. “Cash is liquid.”  False.  Government and foundation grants are often restricted to specific purposes and can’t be used to pay for anything else.  A nonprofit can get more grants and have less money to pay its day-to-day costs of doing business!
    4. “Price is determined by producers’ supply and consumers’ ability and willingness to pay.”  False.  Since the consumers don’t pay (see #1), they don’t have the say.  Government or foundation funders decide what they’re willing to pay AND how many clients the nonprofit must serve in return for the money.  If it’s not enough, the nonprofit has to make up the difference with fundraising, or the quality of service suffers.
    5. “Any profits will drop to the bottom line and are then available for enlarging or improving the business.”  False.  Many nonprofits have spent less than budgeted only to see their budget reduced for the next year, on the theory that they must not really have needed the money.
    6. “Investment in infrastructure during growth is necessary for efficiency and profitability.”  False.  Well, actually, true, but not recognized by funders!  Many funders want to pay for program, but only a far-sighted few will invest in building capacity for the future.
    7. “Overhead is a regular cost of doing business, and varies with business type and stage of development.”  False.  As Miller says, “Overhead is seen as a distraction—an indication that an organization is not putting enough of its attention and resources into program.”  (Thankfully, this is beginning to change, but only beginning.)

The Donor Solution

When Miller talks about “funders,” basically she means government and foundations. The great hope for nonprofits is the individual donor.

When we persuade people who care about a cause to express their values by donating to our organization, we get out of the looking-glass world and back into the real world. People who pull out their credit card or their checkbook to make a gift care about the impact their gift is making.

They don’t care whether you have money left at the end of the year. They don’t care about whether an expenditure is “program,” “fundraising,” or “overhead” (within reason). What matters to donors is whether your organization is a good way for them to make a difference. Communicating with your donors? That’s your business.

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