Goodbye Fundraising, Hello Resource Development

The Fundraising Tree of Many Hands
The Fundraising Tree of Many Hands

We are nearing the financial year end for many nonprofit organizations, and maybe things are going to work out fine and you will make budget.  Perhaps you will even produce one of those modest nonprofit surpluses that will make everyone feel good, with being so much that it would raise any eyebrows in the community. It is unlikely to be enough to enable you to truly reinvest in your mission at the level necessary.

Maybe, though, you are going to have a deficit this year. Is it a one-off freak event or do you sense a gradual softening of your fundraising?

In the world of food banking and emergency food provision we rode a wave of recession-based fundraising from 2008 to 2012 that was based on general recognition that doubling down on core services was a necessity that had to take priority over funding the opera or saving the snowy plovers.

Line Dancing
Line Dancing Without The Stars

Those days are over. The problem is that the recovery is job-lite, and a growing number of the people who access our services are food insecure families with at least one breadwinner trying to piece together a living from a handful of part-time, low-pay, no-benefit jobs.

Nevertheless, many donors have become bored with the recession, and they want to move on. Now, they could be whistling opera arias while they feed the snowy plovers, rather than tapping their toe to a Woody Guthrie number and making sure that no American goes hungry. Many foundations have already moved on from a posture of feeling obligated to focus their resources on ‘urgent needs’ of a recession.

Gimme all your money, honey.
Snowy: Gimme all your money, honey.

I have touched on the challenges of the current fundraising environment in this column before, typically by encouraging you to ‘sell a new bill of goods’ to your donors (such as nutrition and food literacy; or food banks as preventive health institutions; or as community development engines). These newer ‘cure not band aid’ activities are designed to work symbiotically with the previous singular focus of hunger relief.

However, in this post, I want to encourage you to consider a more permanent shift in how you approach the entirety of your fundraising and development.

The Development Team (Self-Portrait)
The Development Team (Self-Portrait)

Walk down the hall to look at your fundraising person or staff or department. However many, or how wonderful they are, they are NOT going to be able to succeed in providing the level of funding truly needed for you to succeed at your stated mission.

I’m sorry to be the bearer of bad news, but they cannot do it alone.

It requires everyone on the payroll and also everyone with links to your organization to have a ‘resource acquisition’ mentality, which is something different from simple ‘fundraising,’ and I hope to make this distinction clear.

When nonprofit leaders swap notes about fundraising, we usually gravitate to chit-chat about direct mail vs. events vs. online vs. this or that. We get hung up on the tactical tools rather than focusing on the types of shift in strategic approach that will enable us to succeed.

The good news is this strategic approach requires you to focus heavily on only two things:

1. Building and maintaining diverse relationships in the community;

2. Having the technology and dynamic internal communications/culture to assemble and actively disseminate the latest information about those relationships to all staff.

That’s it, folks. Focus all your energies and staff on these two issues and your organization will be sustainable in the long term. (Assuming, of course, you are the right people doing the right thing at the right time for your community)

Today's washout is tomorrow's prospect.
Today’s washout is tomorrow’s prospect.

So how do you do what I am suggesting? Let’s take a look at a group of people who are doing them already – people who are raising money for institutions of higher education. You’ve seen them at airport hubs in shorts and a suit jacket, modern day bounty hunters, tracking down their prey. These gift officers put incredible focus on steadily building relationships and joining the dots between a complex net of interconnected people. Of course, they start with an advantage, that they have a finite group of ‘prospects’ with a common interest related to a shared past experience of their glorious alma mater. (And even if that experience was plain bad, the fundraiser knows that they can give it a decade or two and rely on the golden glow-generator of memory to make that graduate positively inclined towards the institution. Or maybe just call it Stockholm Syndrome!)

A human services nonprofit needs to build a similar kind of shared experience with its large number of potential supporters in ways both large and small. Foodbank of Santa Barbara County’s Impact Group approach to focused service provision is already generating new communities of interest (and communities of resource development) for us, around shared interest areas like nutrition or diabetes care or poverty or through targeting specific geographical areas of highest need in our service area.

Diabetes Impact Group logo

We seek to involve people beyond the ‘twanging heart strings’ level of financial support, because we want to directly connect people to an area of their on-going interest:

“The Foodbank are interested in optimum nutrition and exercise? So am I!

The Foodbank is working to provide special support to those with diabetes? I’ve got an aunt with diabetes!

The Foodbank is bringing special focus to build collaboratives to address poverty in a particular part of town? That’s the part of town my family pulled themselves out of, or that’s the part of town that I could make a lot of money long-term by investing in at the ground floor!

The list goes on and on and on. Everyone who supports us is interested in ameliorating hunger, but most are interested in so much more; in things that are ‘stickier’ than solely hunger, the perception of which will ebb and flow with (skewed or otherwise) perceptions of the local situation.

If we can engage people long term in a positive change area, then this is going to garner us far more sustainable resources to help us achieve our mission of building healthy communities through good nutrition.

 

If the CRM jigsaw only had four pieces...
If the CRM jigsaw only had four pieces, life would be so peaceful…

Technology can help us achieve this, because we can source new types of information on people and compare links between large amounts of data. We can utilize a cheap (or theoretically free to nonprofits) CRM (Constituent Relationship Manager) like Salesforce or spend lots of money on Raiser’s Edge or any of the other IT solutions out there. It doesn’t really matter what you use as long as you are aggregating and linking all that data, and taking all of those relationships seriously.

This demands that we bring a high level of sophistication and focus to fundraising efforts over a wider level of dollar donation, whereas before, this was only the purview of the major gift level. I am sensing the need for us to flatten out how we treat small scale and large-scale contributors to our organizations. People want more information, more access. We have to find ways of doing it that don’t suck us dry of time and money.

Clearly, it is not cost effective to spend hour upon hour of staff time to build a relationship with a very chatty $25 donor, which is why social media and utilizing groups of community supporters acting as a conduit, becomes vitally important. You might also be pleasantly surprised to discover that the contractor who gives you $25 at Christmas is one degree of separation away from the wealthy person who favors that contractor for the job of moving the west wing of their house to the east wing or whatever the current priority is.

Meet your new Major Gifts Officer
The new Major Gifts Officer cracks a joke

Perhaps at this stage of the discussion, you might acknowledge the potential benefits of focusing on relationship building and mapping, but how do you make it happen with a staff that is already stretched tighter than Simon Cowell’s face?

It's not only your patience I'm stretching
It’s not only your patience I’m stretching

I have talked in previous posts of the potential upside of moving, however painfully, towards an employment model where everyone you hire is a leader or potential leader – whether they ride a desk or a forklift. Their job is to inspire, guide and when needed, manage the work of a shifting group of human resources that are paid ‘other than with money.’

This enables everyone in the organization to scale the impact they could achieve on their own. They work with volunteers, community leaders (super volunteers), knowledge philanthropists and interns.

For this to work, processes need to be simplified and automated, online training needs to be provided for tasks, and we need the ability to break down complex tasks into smaller discrete sub-tasks which can be taken on by those with only a modest amount of time to commit to the organization. The upside for employees of this kind of ‘outside-in’ organization is that they will be become better paid.

If this wasn’t confronting and challenging enough by itself, I am further suggesting that you need to up the ante by insisting that all staff be tasked with bringing resources into the organization as well. (And be rewarded for doing so).

However small your staff is, they have between them relationships with the people who have the relationships with the people that are waiting to be inspired and actively engaged in your mission, and which will bring it the sustainability of funding that it needs to succeed. You just need to give staff the confidence, permission and motivation to start to grow and link those relationships.

peer-to-peer-fundraising

I’m afraid this involves more of that indigestion-provoking medicine called ‘culture change’ and the kind of cross-functional teams and situations that can get people talking and sharing what and who they know.

This now brings us to considering the distinction that I drew earlier, when I said it was more a question of getting staff, board and volunteers to understand that what we are asking of them is not ‘fundraising,’ but ‘resource acquisition’ which is different. The more introverted members of your team can be reassured that ‘resource acquisition is far less scary and embarrassing than fundraising.

It is not asking your friends for money. REPEAT. It is not asking your friends for money.

Rather it is building a matrix charting the varying resource needs of the organization alongside the different interest/involvement areas that your organization provides, and then to begin to join the dots themselves about who they know who might be interested in what area.

The whole organization pitched in to bring home the bacon (and the wooly mammoth)
The whole organization pitched in to bring home the bacon (and the wooly mammoth, and the hippo and the python) Where’s Russell Crowe when you need him?

This kind of culture change also involves tasking staff who come to you with great idea for a new initiative with getting involved in generating the resources to put that initiative into action.

To which they reply: Wait, isn’t it the development department’s job to come up with the money to make my initiative a reality? I mean I can work up a budget or something, but the development director needs to schmooze some people and write some begging letters, because that’s their expertise, right?

Development Departmental Mascot
Development Departmental Mascot

It is their job, however it is also the job of the employee with the lightbulb over their head. Again it is a question of breaking down the elements of this initiative into chunks of people, things and money. We can’t afford to pay for everything ourselves, because that would be hogging all the fun, right? So where are new resources for each of these chunks out there in the community, which are laying in the hands of people who are waiting for the opportunities that their social investment in you will bring them, their employers, families and groups.

I would argue that the required resources for many new initiatives are out there, they just need to be tapped, and who better to do it than the person who within your organization who is excited by what that new initiative can achieve? Of course they are working in tandem with the accepted development team, so that you minimize toe-stepping and mixed messaging, but they can play a key role in helping to drive the process. They can get involved in meeting with people who may be able to play and working their own set of relationships and forging new relationships built on common interest and shared vision.

I don’t know about you, but when I walk into an all-staff meeting, I don’t see a bunch of job titles sitting around, I see everyone as a walking ‘Kickstarter’ campaign ready to inspire the community to deliver on an amazing idea.

Get out there and bring back the resources
Get out there and bring back the resources

This doesn’t mean that the development department is getting off the hook, oh no. They have to utilize the same approach. If they come up with great new fundraising ideas, they also need to come up with the people (who are not paid staff) who want to execute the idea. They also need a logical framework for how this activity is going to get some oversight and accountability from within our organization. This requires us to work with trusted volunteers who can engage with other volunteers or community organizations. We also need to rely on a sharing technology and culture to enable us to mitigate the risk of a crazy or self-serving person doing damage to our good name/brand.

Sherlock-Holmes-sherlock-33741381-500-600

These days, we are all Sherlock Holmes, looking for the clues and connections that are going to close the case or close the campaign, and build an organization that is sustained by the community for generations to come. Your mission deserves nothing less, right?

Are Non-Profits afraid of Competition? How can we tackle the root causes of hunger in America? Tough Questions from a Community Grantmaker – A dialogue with Mari Ellen R. Loijens, CFRE.

Mari Ellen Loijens

Is there a life after food banking? Apparently so. Mari Ellen Loijens worked in development for Second Harvest Foodbank in Santa Clara and San Mateo County from 2000 to 2004, and is now the Chief Philanthropic Development and Information Officer for the Silicon Valley Foundation.

Of course it is every fundraising professional’s secret fantasy to then go on to work at a foundation and give it away rather than have beg for it. (Without appreciating the challenges that go with such a responsibility). So what’s the difference between your time in the food bank looking out, and outside the food bank looking in?

When I was at the food bank, the needs were constantly growing. There was no single year where we had to feed less people than the year before, and I had a strong sense of urgency about the growing need. Now that I’m outside, it seems like it’s endless and I’m more anxious for real solutions to the issue.  It’s sort of like being an emergency room doctor, and your concern is how to bandage all the wounds for those who need immediate assistance. Then when you walk outside the emergency room, you think, “How can we avoid the people going there in the first place?”

That’s a question a lot of food bankers are asking themselves. Like me, they’ve seen the capacity of food banks grow with their success at fund raising and their ability to bring more food in to their service area. This has created more ongoing demand, so it’s kind of a spiral.  How do you think that food banks could get out of this demand spiral and move towards a long-term solution?

We really need to look at some policy changes.  We are a very wealthy nation and the notion that we have so many people who turn to others for such a basic need is troubling.  Clearly there is something wrong with a system in which many children go to school hungry.

Food banks and other nonprofits are always very reluctant about stepping into these waters, because they worry about offending donors whose political slant may lead them to believe that we are just ‘enabling’ people.  How can we navigate these waters?

Want to dip your toe in…

I think that the problem is that we focus too narrowly on just food.  If you only think, “I need to feed people,” and you think, “That’s my only issue,” then we’re back to the doctor in the emergency room who would be saying: “I’m trying to get people to stop bleeding, and it’s so expensive to keep using up all these wound dressings. So the solution is that we need more money for more wound dressings.”  It’s a symptom he’s dealing with, not the cause. In the same way, hunger is the not cause, it is the symptom of a greater problem in our system. This comes down to something like minimum wage.  Do we have a living wage?  Are people able to earn enough where they live in order to take care of something as basic as food and shelter? We have got to move beyond pushing for increased SNAP (food stamp) benefits and into the bigger issues like: How do we make sure people, who are able, can earn enough money to feed themselves and their families?

So, are you saying that hunger is a symptom of the condition of poverty, or of something else?

I think poverty itself is also a symptom. I’m not a socialist or a communist. I don’t believe that everyone should make the same money, but I do believe that Americans, if asked, would say it’s wrong to have a system which forces people to constantly be in abject  poverty and unable to get out of it, even if they are working hard, perhaps at multiple jobs.  At some point, we are going to have to make decisions about how we pay for our beliefs and values. In the same way we are asked to make tough decisions now about taxes and how we want to pay for the things that we believe our country needs, such as roads or to provide the fire and police services that we want. In the same way, we have to ask ourselves the question: if we think it’s wrong for a child in a developing country to make a dollar a day sewing t-shirts, how are we going to provide an adequate minimum wage so that people in America who work a whole day can feed themselves and provide at the most basic level for their families?

And so how do you see the situation in America now?

I think we have an unspoken social contract in this country which prevents people from moving up out of poverty, and much of that is as a result of not have a living wage in most places.  We also do not have systems in place that update the minimum wage as the cost of living modifies in an area.  The systems that we do have reward the wealthy and do not help the poor.  This means we have to really look at our whole social contract as a country and our value system and say, “Have we set in place laws that support the values that we claim are American?”

Bumper sticker seen outside Santa Barbara’s swankest hotel.

This is the point in the conversation where people begin to squabble about the meaning of the ‘American Dream.’ I see an unspoken fear in many donors I talk to. I would preface my comments by pointing out that these donors are caring and generous people who sincerely want to ‘pay it back’ and provide some level of support for those in need within their communities. However, they may have a voice deep within them, that reminds them how hard they had to struggle and sacrifice to get where they are, so why should they make it easy for someone else? They often don’t see the incredible daily sacrifices and struggles of those in poverty who can find no success story on the back of their struggle.

Whatever the sentiment, Uncle Sam gets pressed into service to wag that finger.

This is why food banks have been so successful, because there is a lot of interest in ameliorating the symptoms but a deep fear of taking the plunge to actually deal with the causes. Either donors are concerned that they will be heavily taxed and lose what they worked for, or they fear that the fabric of American society will change and everyone will expect things to be provided for them without working for them. Consequently they see America losing its ‘can do’ spirit of entrepreneurship and resourcefulness. The type of change that is required to actually deal with a problem is too scary. The same thing is true for issues of immigration, health care and the rest of the sad litany. This means we have to stand around with our hands tied or else harken back to some previous time in our country’s history where these problems were better hidden.

I think a new consensus for action needs to arise that returns the much-loved but threadbare teddy bears of left and right political philosophy to the nursery shelf, and for us to admit that we have grown out of them. They’ll always have a fond place in our heart they were both great in key moments at getting us to the point we are now at as a nation, but now they are getting in the way as our nation enters maturity. These security blankets are getting under foot and gridlocking our ability to do what we do best as Americans – which is to fix something in a no-nonsense straight-forward way.

“I’ve been manhandled so much, I don’t remember whether I’m Republican or Democrat.”

I know from over a decade of working to assist either the homeless or the struggling, that the amount of people sitting on their gluteus maximus and freeloading their way from society (amongst poor people, anyway) is absolutely tiny, just as the amount of people defrauding SNAP benefits is a minuscule amount in relation to the total. Are we going to allow an obsession with preventing the enabling of a few who don’t want to help themselves hold us back from making huge achievements as a country for the vast majority of Americans who work so incredibly hard?

Sounds great, we should import that stuff to America! (Cheaply, of course)

Can you imagine what greatness we could achieve as a nation if we weren’t all so consumed with fear about being able to get affordable medical help, or that we will be living in abject poverty as senior citizens? Modern free market economies are driven by so much advertising and marketing, that are showing people all the things they need to have in their lives to be happy. These forces provide a huge encouragement for people to produce more and earn more. If we can provide a counter-balancing support safety net for all Americans, it won’t extinguish this desire for more – which is equally part of the American temperament. The two can complement each other perfectly well. It’s not exactly a shining city on a hill, but it’s a workable system where we can all move forward at our own pace and to our own ability.

Forgive me for that. As a food banker, if you see a pile of pallets, then your natural inclination is to climb on top of them and start spouting off…

That’s quite all right, Erik. Keep breathing. Seriously, though, I think food banks need to get get braver about legislation. You need to move past the daily problem of feeding people, and start to collaborate with others that can focus on solutions and really start to ask the difficult questions of, “What’s the issue?”  Yet for reasons that you mentioned, like when you referred to SNAP fraud, I think food banks are very afraid sometimes of moving in that area, because if you did a survey of people you feed and even one person said, “Well because I don’t feel like working.”  That’s a terrible, terrible fear of food banks. Suddenly, no one might want to fund their food bank, because there is one person whose is working the system. So essentially, we are ready to punish and live in fear of that one person.  Well, there is always going to be someone working the system.  There are people who go to emergency rooms, because they don’t feel like paying for a doctor. We absolutely can’t set up systems to deal with that one person. We look at the big issues in our country like educations reform and how healthcare reform and you hear about those things all the time. I would love to hear our country talk about poverty reform.  How we are going to help make a sweep of changes that would impact the base line of our country and help bring people who are essentially stuck because it’s impossible to move on or move out.

So, who do you think are the right people to lead this movement or does it need to come from a ground swell at a local level?  

I think both. That is how the civil rights movement happened.  You start with that real grass roots movement from people who are experiencing the issues and people who support those people.  Then at some point you get the attention of people in a power position with legislation to be able to move those issues forward.

You mentioned that food banks are timid on the public policy front.  What else do you think food banks could do to make this happen? 

Well, I really like the ideas espoused in your blog about how your food bank is working on regarding entering the preventative healthcare arena. I do think that when you start to see yourself as part of a wider system rather than just an individual issue, then you are able to address bigger issues that have bigger impact. Poverty is not the root cause.  People became poor for a reason. The fact that they are poor is not the issue.  The fact that they became poor and can’t get out of being poor is the issue.

This requires food banks to build broad coalitions with other social service agencies in their service areas, some who may be member agencies and some who may not.

That is a challenge, because there is often reluctance for everyone to sit down and have a substantive dialogue about how do we move things forward?  The subtext from non profit leaders can often be: “I don’t really want to be in a room with them.  I don’t want to compete with them.”

Hey, you’ve been in some of the same rooms as me!

That’s the truth about a lot of nonprofits is they’re just completely uncomfortable with the idea of competition, and if I had the answer to this issue, I’d probably be able to save the world.

Nothing wrong with a little friendly competition.

Well, we’re non profits. Competition is way too business-like and vulgar for us, right?

Yes, you’re very sensitive souls. But, it has to start with non profits admitting it is an issue. Then I think, speaking as a funder, that there is a clear role for funders in facilitating this issue. I think it’s all power dynamics. The one with the power has the obligation. Foundations really have the obligation to reach out to the nonprofits and say, “I really want to know and I really want to understand what’s going on.  Why is this collaboration and conversation not working for you? Where they don’t have to sit in front of their competitor and say what their fears are. We can ask who would you want to collaborate with and how, on what terms?”  I think having an honest dialogue is what moves things forward. This sort of thing needs to occur one on one or in small groups. Large gatherings can neutralize everyone’s desire to make anything happen.

I think what you say about the competition angle is very interesting, because it’s kind of taboo to talk about nonprofits competing. To be a good non profit citizen, you can only talk in the language of shared impact and collaboration. It might be very liberating for people to also have a conversation about competition and to say it is absolutely all right. I presume there is fear that we would be acknowledging duplication of service if we acknowledged competition. Certainly something for people to consider starting a discussion about in their service area.

How do you think food banks and other human services and nonprofit should be thinking about evolving their funding streams over the next few years?

I think if you are looking for systems change, at some point that goes against the grain for sustainability, right?  You want to be working towards your services not being needed anymore. The ideal is that you want to be able to talk about what system changes are you creating, so that you should have to provide fewer and fewer services every year?  That should be the big boast.  “Last year we fed 200,000 people, but this year, thanks to our hard work, we only have to feed 150,000.”

But every nonprofit organization in the world is afraid to do that, because then they assume that the funders will come back and say, “Oh, you need less money this year.”  And so the organization declines.

I think that there is a new generation of funders that have a very different way of thinking, and that what people really want to see are problems solved.  People are tired of the same problems staying around for generations and generations.  You’re right, though. Every nonprofit I know like to boast about how they did even more; served even more. It is a treadmill. But this new generation of funders comes from a very different way of thinking that would say: “No, no, no. The metric I care about is not how many people you serve, but that you made systemic changes so you will have to feed fewer people moving forward.“ It is a way for your organization to evolve to be truer to its mission.

Mari Ellen, thanks so much for your ideas and for your work supporting non profits.

Earned Income for Nonprofits: Four Dirty Little Words?

What happens to fundraising if we follow the preventative healthcare model that has been expounded on this blog? What if, in a few short years, our programs are demonstrating wonderful health impacts? How is that going to play with our existing donor base?

Would it mean that our direct mail might have to stop looking like this:

Our operators are standing by for your calls.
And start looking like this…
Now we all know that the Ghost of Food Banking Past  (yes, I’m exaggerating to make a point) helps keep those donations flowing in, so that we can get food out to people who can truly benefit from it. Yet once we begin to focus on that same food leading to health outcomes, are we going to be able to pull on the hunger heart strings in the same way?
I don’t think so.
We asked our direct mail company why some recent mailers had brought soft returns, and their response was that our mailers were too positive. The kids looked too happy.
Tricks of the Photographic Model Industry # 234: Hop em up on Mountain Dew and then switch out the Hot Cheetos for fresh fruits and vegetables right before the cameras start clicking.

We all know it.

In the hunger business, negative sells.

Positive is understood by a different type of donor or  foundation, looking beyond immediate the immediate need, towards a long-term solution.

Nevertheless, I guarantee that whatever organization you represent, in the next 3 years you are going to have to come face to face with the need for an increase in …EARNED INCOME.

Much as you want to wear the garlic around your neck and make crosses out of two rolled-up annual reports, you are still going to have find more money from non-charitable sources – there is simply no way around it in the world we find ourselves in.

I attended a workshop with noted nonprofit consultant Andy Robinson last week, that focused on this very area. Andy is the author of Selling Social Change (Without Selling Out) – and the title suggests that he understands a little of the ambivalence in nonprofit organizations around this subject. I’d like to share some of the things that came up in the session.

Nonprofits need to decide what is the best mix of resources that is going to make them sustainable. We all agree that the old borders between non-profit, business and government are eroding. Businesses acting like nonprofits, nonprofits acting like businesses and the government…well that situation has always been fluid.

Let’s consider the pros and cons of generating earned income, starting with the positive:

• Diversified funding base – a key to sustainability

• An expanded prospect pool for individual gifts – doing business can be a great way of meeting people who can be inspired by your mission and give.

• It reduces reliance on grant income and also provides unrestricted funds.

• It provides new publicity and advocacy opportunities.

• It builds new skills and leadership with the organization.

That sounds great, but what about the downside:

• Most obvious is risk – sometimes you are going lose money. Research by the U.S. Bureau of Labor Statistics shows that nearly six in ten businesses shut down within the first four years of operation. You could bring your nonprofit down with your business if your comb-over is not as impressive as Donald Trump’s.

• The up front costs – it takes money to earn money, so the lower the start-up costs the better.

• Mission creep. If your commercial empire takes off, you may find the tail wagging the dog.

• You already have enough work to do, so this will need dedicated staff time. Otherwise it’s a hobby and hobbies don’t make money.

• One other concern is the potential tax liability. if you are a charitable organization and are charging for services that are directly connected to mission, you don’t have to pay tax on that income. However, if you set up an unrelated business, you may have to pay UBIT (Unrelated Business Income Tax). Finding that connection can be important. The YMCA used to regularly get sued in different states by other for-profit health clubs saying their charitably subsidized clubs presented unfair competition. However, the Y won every one of those cases because they could clearly point to their actions as a way of delivering on their mission statement. Girl Scout cookies get away with the same thing, because they teach leadership – girls track product, log payments, use merciless sales techniques…

Now get out there and sell, and don’t think about the nutrition issues! Whaddya mean ‘mint thins’ is an oxymoron?

• One key area of concern that I voiced to Andy at the workshop, was the need to educate contributors so they realize that you as a charitable organization still need donations.

It is clear that market research and feasibility studies, no matter how simple, are a vital first stage. As a nonprofit you need to consider what services could you sell? What publications? What cause-related marketing? What goods (wholesale preferably).

There was naturally some pushback from workshop attendees about the notion of charging for services, many of which in one form or another would have been offered free by the organization. Andy referenced a study that looked at vocational training courses that were either free or charged a modest fee. Far better outcomes were identified amongst those who paid something for the service. They valued it more. Whether this is a sad reflection of our society or not, it is a reflection. People value what they pay for and do not value so much what they get free.

This is a stimulating challenge for us in non-profits. Sliding scales, scholarships, are both possible. Andy suggest we do some testing with any charge for services and track the results. From my perspective the difference between a business and a nonprofit charging for services is that the non-profit is not afraid to potentially put itself out of business, by providing a product which can help the recipient move beyond the need for those services, or into a place of new possibility where they can generate more for themselves and their families. That ‘more’ might be money or community or advocacy for improvement in their neighborhood. In contrast, a for-profit wants to keep you endlessly coming back to buy ‘newer, better’ versions of the same thing.

Don’t try this at home, folks.

As a food bank, we are looking very carefully at earned income. We have always been in the earned income business, in that we charge a very modest shared maintenance fee on some food items that we provide (which prevents agencies from just taking more food than they can effectively use, and which goes some small way to defray the costs of running the warehouses). This is a clear case of putting a value on something that would be valued less if it was free. We also do our own attempt at social engineering by spending hundreds of thousands of dollars on purchasing fresh produce and making that available with no shared maintenance fee, because we want to drive agencies to provide more fresh produce to their clients.

We are already expanding our resale food selections (where we buy food and resell to agencies), charging a modest 10% mark up, with the stipulation that we will only charge this if we are able to provide the food cheaper than they could source it via a local wholesaler or superstore. We want to expand this to make more food and non-food (cleaning products, paper goods etc) available to the full range of local non-profit organizations. (Member and non-member alike).

This approach is already happening successfully with Second Harvest Food Bank of Central Florida’s Power Purchase program. The CEO, Dave Krepcho, affirmed this morning that their purchase program has the dual role of providing lower prices to agencies and netting surplus revenue. “If they can get it cheaper somewhere else, we suggest they do so…This year the net revenue number will be approximately $250,000 on close to $3 million in sales. We are designing a Community Kitchen program now so that it will be economically self-sufficient in three years. I affirm your looking into entrepreneurial programs, it’s the direction we must go.” 

I also recently looked at a study done by another urban food bank that examined at the feasibility of undertaking such a resale program and decided it would not be successful for them. There were a concentration of Catholic agencies in their area who were mandated to purchase from a central purchasing agent (no jokes about the Pope getting his cut, please) and that there was a possibility of a similar arrangement being in place with local YMCAs. This negative report, which highlights all of the challenges (many of which would not necessarily apply to us in Santa Barbara) is extremely useful to us. If we move into a business area with a clear understanding of the challenges we would face, as opposed to clutching starry-eyed dreams of flowing streams of golden sustained income, then we will be far more likely to be successful.

The number one challenge identified was the issue of pricing. Most ventures fail by not knowing how to price services effecively. We don’t know how long it will take us to do something, and often the cost of a unit of service remains opaque to us. Andy believed that nonprofits almost  always underprice the value of the services they provide.

When looking at your business proposition, you need to consider whether it represents a ‘market push’ whereby you need to convince the market of the need for your service (like the electric toothbrush vs. the old school manual) or ‘market pull’ whereby there is enough existing demand, that if you provide enough services, you can meet currently existing needs.

The other painful reality is that being a nonprofit is not going to get you any free pass on the customer service side. If you don’t get things right the first time, they won’t be back again, no matter how compelling your mission is.

It is helpful to consider case studies, so we can consider a range of approaches nonprofits are taking to make earned income work. At one end, you can take an organization like Minnnesota Public radio which after 25 years was spun off as a for-profit subsidiary for $175 million dollars, most of which went to their endowment. Another interesting organization is the Okanogan Highlands bottling company, which you can find at www.purewater.org.

It is a fascinating case study, because they had a specific ‘ill’ that they were fighting against, which was a gold mine. It would bring pollution and they provided studies which showed that the value of the water they could bring out of the same site in the form of bottled mineral water would actually be more valuable than if it operated as a gold mine. They did this by commissioning studies that demonstrated how much water was used to extract the gold. You should check out the video they have at their website, because they show how the empty bottles can be repurposed as advocacy tools to send to our representatives at the congressional and senatorial level, to convince them of the efficacy of their course. Perhaps there is a way your agency could incorporate the same approach to get the message across.

Nativeseeds.org is a great website to look for the kind of  nonprofit that recoups 30 to 40 percent of their income through sales of food, crafts and products.

As organizations, we often have fabulous ideas at the programmatic level. How can this be monetized? Check out www.swop.net to look at how they developed their ‘products’ to move from a text book on Chicano studies (which had resulted from a ‘market opportunity’ they identified, because this area was being ignored in traditional history programing). So they created a text book, which then became a DVD, a coloring book, a mural magnet series, a t-shirt etc. This is a pretty politically-minded right-on organization and they’re selling refrigerator magnets? Maybe it’s time we questioned the stereotypes! If the content is solid, the expression of that content can play out across a number of media.

Another example organization is www.globalexchange.org. They are a human rights organization that focuses on tourism. Their proposition – both a value proposition and an advocacy proposition is “What would happen if we brought the people who were interested in an international social cause to the place in the world where that cause is actually playing out. A week in the jungle with the Sandinistas? Not quite. Nevertheless it has resulted in an organization that has 3 million dollars a year in tourist income. Is there a way we can  involve people in the excitement of our day-to-day mission? And then charge them for the pleasure?

A food bank was also considered in our discussion, the Food Bank of Western Massachusetts. www.foodbankwma.org. They used a CSA model for a farm they purchased. The plan involves CSA shareholders paying the full cost of $200k per year but only taking half of the food that is generated. The rest goes to the food bank.

One final example was www.pedalpower.org, which was a community bike organization that had a fascinating  business proposition. Rather than upset the existing marketplace, which you could argue something like the CSA proposal might do, they presented themselves to existing business organizations an entity that would build the market. They would focus on the low-end of the market and offer people sliding scales of rates. They could either fix their own bikes with supervision or with Pedalpower stepping in with physical help. They sold this to the other businesses in the market with the explanation that they were drawing people in at the bottom end of the market. Once people entered the market and wanted to find more sophisticated bikes, they would seek out the other businesses in the market. It worked and the other businesses began to offer them free spare parts and other help.

The final example we considered was www.farestart.org in Seattle. Like Catalyst Kitchens and other organizations, they focus on teaching culinary skills and how to hold a job. They also help with job placement. This was an organization that acutually switched from being a for-profit to a nonprofit organization.

We have all been victims of workshops with consultants who want to draw you in with the promise of education, which is really a promotion for their services or their books. I have no reservation in letting you know that Andy’s book is simply essential for any nonprofit hoping to focus energy on new sources of earned income. It will make you think long and hard about how earned income could work for your organization.

Good luck, and let’s start shaking up the old nonprofit/business divide even further. We have much to learn from each other.