CoronaVirus and Fundraising: Fundraising Planning and Budget Cuts

07 Jul CoronaVirus and Fundraising: Fundraising Planning and Budget Cuts

7 July 2020

By David Allen, Development for Conservation

Planning 101:

1. Take a close and honest look at where you are right now.
2. Visualize where you want to be.
3. Brainstorm the various possible ways of getting there.
4. Prioritize and choose a course of action.
5. Suggest metrics and benchmarks to determine progress.
6. Implement

That’s the basic sequence for Strategic Planning, for Conservation Planning, for Annual Planning, and even for Dinner Planning. We start by comparing where we are with some desired future state.

So why don’t we apply those steps to planning for fundraising?

Very few of us actually even think about where we need to be farther ahead than 12-18 months. Instead, we look at where we are and compare it to where we’ve been – last year, two years ago, five years ago.

Then we add 15% and call it good.

We have a map, to be sure. Membership renewals, fall appeal, Giving Tuesday, social media, the occasional project campaign. Our map is our organizational culture. And we keep using it, because it’s familiar and safe.

But we haven’t figured out where we’re going. And consequently, we can only guess (and hope!) that our map will get us there.

One way to looking at fundraising programs is as Profit Centers. We budget and spend money – on marketing and communications, on social media and video, on engagement and fundraising events, and so on – and we expect a certain “return” on that investment. Each individual component has a return, and the program as a whole has a return.

But the questions we ask are, “Will we raise more than before?” and “How can we keep our expenses down?

We should be asking a different question: “Will we raise enough to meet the needs of our organization?”

The consequence of not asking this better question is that we don’t ever really quantify what that need is or will be. We don’t budget based on what will be required. We budget based on how far our fundraising will take us. And in that environment, the money we spend ON fundraising is often seen as an impediment. Every dollar we spend on fundraising is a dollar we could have spent on saving land.

This thinking is crippling.

Most organizations are not spending enough money on fundraising. They are limiting their fundraising budgets to 7% or 10% out of some misguided sense that they are therefore being responsible custodians of donor dollars.

The fundraising world doesn’t actually work like that.

• A donor might give $100 a year for a long time, and then liquidate stock to give $300,000 to a project that caught their imagination. (The fundraising percentage that year would look really good.)
• Project funding will have an overall fluctuating effect in general.
• Some donors have been “doubling up” their giving in reaction to the new tax laws, giving more than usual one year and virtually nothing the next.
• And investments in new fundraising strategies like membership-building, capital campaigns, and engagement events can take several years for serious returns to develop.

The MUCH more important factor is whether the net return from fundraising is enough to float the program budget. Is fundraising returning a NET sufficient for the organization to accomplish its mission? And if not, what would it take to do so?

OK – so let’s make this really clear:

If your fundraising budget is less than 35% of your annual budget, you should focus on the NET return from fundraising and not on the percentage spent on fundraising.

• Is the overall NET return enough?
• Is the NET return trending such that it will get the organization where it needs to be in the next five years?
• Does the NET return from each fundraising activity justify continuing that activity?

The whole system needs to be turned on its head.

• Organizations should know what they need from fundraising and clearly communicate to the fundraisers what that is and how it might be changing.
• Fundraisers should make plans less based on what they did last year and more based on where they need to be in five years. (Will our map get us there?)
• Fundraisers should unapologetically ask for the resources (investments) they need to get there.
• And fundraisers should be held accountable for “producing” the net returns required.

I was revisiting this topic the other day because many conservation organizations are considering budget cuts this year and next.

It will be tempting, as it always is, to cut the fundraising budget, too. After all, it’s only fair, right? If the other budget managers have to trim by 10% for the good of the enterprise, fundraising should as well.

And to some extent, there are two underlying assumptions that make the situation even worse: that there’s at least 10% fat in every budget, and that fundraising is more party planning than a respectable profession. (Both of these are misguided.)

The problem comes when fundraising is cut but still expected to raise as much money. In other words, if the organizational experience is that it costs 10 cents to make a dollar and you cut the 10 cents, you should also cut the dollar.

Under such circumstances, what tends to get cut?

Anything high risk and high reward. Long-term strategies like direct mail recruitment, donor development, and planned giving. Travel.

And what do we tend to keep? Low risk, low reward. Feel good exercises like email appeals, crowd funding, and activity-based events (golf tournaments, bike rides, walk-a-thons and so on).

It might help you make ends meet this year, but it could cost you in the long-term.

When retraction is necessary, changes should be related to timing and pace (because the NET will fall somewhat) and not to levels of investment.

Several years ago, Joanne Fritz posted an article on the online publication, “The Balance”, titled, “The Nonprofit Hard Times Survival Guide: Is Your Charity Ready to Ride Out Any Economic or Political Storm?” (I looked for it and it seems to have been removed for that site.)

In it she offered the following for organizations facing economic uncertainty or even recession (paraphrased for land trusts):

• Don’t pull back on fundraising – you should not retreat, you should be even more focused in your efforts. Sharpen your case and cultivate your donors without apology.
• Let your donors know that land conservation is more important than ever – land trust opportunities increase during uncertain times.
• Find stories that will touch the hearts of your donors – stories always win over sheer data. Use testimonials.
• Stay in touch with people who have stopped giving – Keep in touch with lapsed donors. You want them to have a relationship with you when they can again afford to give.
• Find new donors by looking in un expected places – broaden your donor base. Some types of businesses are recession proof. Look where other non-profits are not looking.

And about the same time, Alexander Haas posted “10 Lessons Learned from the Great Recession.” Here are several of the nuggets:

We have also learned some lessons in the nonprofit sector, in addition to knowing, for sure, that “shut down and wait it out” is a bad survival strategy. The great recession and the lessons it taught us have changed the way that nonprofit organizations will operate and raise funds for years, perhaps decades to come. From governance, to staffing, to growth rates, and business planning, the nonprofit sector is adapting to a new normal which includes 10 major lessons learned with have long term ramifications for the nonprofit sector moving forward.

• Relationships matter more than causes
• Serving on a board in not an honor, it is a real job with real responsibilities
• If you stop fund raising, you will stop raising funds
• Endowment is not an insurance policy against declines in earned and donated revenue
• Take donors for granted and they will take their donations elsewhere

It will be organizationally difficult to cut program expenses and not cut fundraising expenses along with everything else, but it might just be the decision that makes the difference between barely surviving and thriving, between just holding it together and continuing to advance your mission work.

If you spent the time quantifying how much money it will take to accomplish your mission over the next five years, and you built a fundraising program from scratch that was designed to meet that need, how different would that program look from the one you have now?

As always, your comments, reflections, and stories are welcomed here.

Cheers, and have a great week!

-da

Photo by Erik Karits courtesy Pixabay