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Fundraising Tuesday: Nonprofits, Emphasize Donors

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What your nonprofit organization can do depends on where it gets its money.

funding sources

How do your funders shape what you do?

So says Jon Pratt, executive director of the Minnesota Council of Nonprofits, in a classic article in the Nonprofit Quarterly.

“The way an organization handles decisions about funding sources sets in motion an ongoing chain of consequences, further decisions and compromises about what the organization will and will not agree to do.”

 

How Reliable is Your Funding?

Pratt tells us that generally you can judge how reliable your funding is by determining where it’s coming from.

Three levels of reliability:
High reliability: United Way support, rental income, advertising, small-medium sized individual contributions, endowments, memberships.

Medium reliability: Ongoing government contracts, third-party reimbursements, major individual contributions, fees for services, corporate charitable contributions.

Low reliability: Government project grants, foundation grants, corporate sponsorships.

Unfortunately, in my experience, small nonprofits depend mostly on low-to-medium reliability funders. That’s why so many of us are constantly scrambling for new grants and contracts…even if it hurts our existing programs.

How Much Freedom Does Your Funding Give You?

You can also judge how much freedom of action your funders are likely to give you.

Three levels of autonomy:
High autonomy: small-medium sized individual contributions, endowment, memberships, fees for services, foundation operating grants.

Medium autonomy: major individual contributions, corporate charitable contributions,

Low autonomy: Third party reimbursements, government project grants, ongoing government contracts, foundation project grants, United Way support.

Again, I think it’s unfortunate that even fairly large community organizations have to depend so much on  low-to-medium autonomy funding sources.  That’s why so many of us spend so much time on compliance and reporting–and when we want to start something new, it’s why we have to work extra hours to do it.  We can’t pay for new programs with restricted funds.

One Key Takeaway:

Individual contributions are highly reliable AND they provide a high degree of autonomy.  They’re the best of both worlds.

Nonprofits should be spending more time and money cultivating individual donors.  That means we need to invest more in communications with our supporters: in person, by mail, by email, and through social media.

5 Reasons You Need Great Communications Even If You Don’t Need Donors

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I want your opinionOkay, readers, I’m asking your opinion. Who’s right here?

The CEO of a large nonprofit organization recently said to me:

Our agency gets almost all its funding from government, not from donors. We get almost all our clients through referrals, not from publicity. We need good relationships with state and federal officials and with other agencies. We don’t need communications. If the person who does our website and social media were laid off tomorrow, I’d never miss her.

I think the CEO is wrong. Here’s why.

  1. Government funding for human services depends on public support. If you’re a rich industry and can buy influence, you can get government to act in ways that the public doesn’t support. Human services cannot “pay to play.” If the public doesn’t generally approve of what you do, there’s no reason for elected officials or bureaucrats to continue funding you.
  2. Public support can keep the budget axe from falling. At the federal level, the next Congress will probably try to cut whole programs–especially those that help the people who need help the most. Without public support, you’re an easy target.
  3. Public support depends on communications. Opinion leaders have to know, like, and trust your organization. It’s up to you to make sure they do.
  4. Good writing and social media strengthen face-to-face relationships. Even the people you “do business with” regularly may have a hard time explaining what you do. Giving them handouts and newsletters, and keeping your organization on their radar with email, website updates, and social media, helps them make good referrals (and speak well of you to funders).
  5. When you start something new, you need donors.  Most government money is restricted to specific purposes. Your agency may want to try something innovative, or pilot a program you’ve never run before. Getting a grant to do that might take forever. Having unrestricted donations lets you get started now.

What do you think? Are there agencies that don’t need communications, or is a great communications program a “have to have” for every nonprofit?

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