Where will it all come from?Posted on January 17, 2013
Most organizations are formed because of a cause or work to be done in the community. That mission provides the passion and drive for the work of the organization. When the customer, however, is not the key source of revenues it is necessary to examine how it will all be financed! How much do we need? Where will it all come from?
When a for-profit business is figuring out how to finance itself, it finds a way to create value for a customer and it has generally found its source of revenue—the customer pays for the value. When a nonprofit finds a way to create value for a beneficiary, it usually has not yet identified its economic engine. That is a separate, critical step and nonprofits are complicated—they have two sets of beneficiaries: the clients that receive services, and the sources that finance the organization.
When fundraising is seen strictly as a way of raising money it is transactional, and based on a consumer model designed around the buyer (the donor) and the seller (the organization), in lieu of mutual interest, collaboration, and accountability. The relationship is based on expectations and often the donor is left discouraged by a lack of genuine relationship or partnership. The organization becomes discouraged with trying to raise funds and develops scarcity mentality. The circle is complete and goes round and round.
An example of scarcity mentality in fundraising is when one believes that there is a limited amount of donors and only a certain amount of money to go around– that we are all in competition for the same pool or resources. While that may be true of some specific granting sources, nothing could be further from the truth when engaging an interested public.
Fund raising can be an activity in which the mission is central and a vehicle that transforms the people and the organizations who are involved with them. Resources (money, time, networks, creativity, passion, commitment) become abundant when people are invited to look inside and discover how their resources are not only needed but also create exponential returns. Key to the success of sustainable relationships is a commitment to the examination of mutual interest, collaboration, and accountability required to support the relationship.
So how does one plan to finance a nonprofit? Social Velocity writes about The 7 Mistakes in Your Fundraising Plan and also describes how a financing plan is different than a fundraising plan:
- A fundraising plan asks “How much can we accomplish with the money we can raise?” but a financing plan asks “How much should we raise to accomplish our goals?”
- A fundraising plan sets goals only for private revenue streams (foundation grants, individual gifts), but a financing plan includes goals for ALL money flowing to the organization (government grants, earned income, etc).
- A fundraising plan is for one year, whereas a financing plan is a strategy for attracting money for multiple years into the future.
- A fundraising plan may have little to do with a non-profit’s strategic plan, but a financing plan is based on what the nonprofit needs in order to meet the goals of their strategic plan.
- A fundraising plan is created only by the fundraising staff with no input or knowledge from the rest of the organization, but a financing plan is created with the whole organization’s input (board and staff).
- A fundraising plan only includes activities that raise money for programs, but a financing plan includes strategies for raising infrastructure dollars as well.
Want to learn more? Check out Social Velocity’s website and this webinar.
So if a financing plan includes all sources of revenues, how does one decide what fundraising model to use? The Stanford Social Innovation Review published this article in 2009 on Ten Nonprofit Funding Models and then in 2011 they published a guide on Finding your Funding Model.
A review of this information can make a difference in the future of your organization. You can be providing the best services ever to the community, but if you cannot finance them, the organization cannot continue its work and the community loses out.
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