Monday, 30 April 2012

Financing not Fundraising

Financing not Fundraising

As we approach the end of a pretty difficult year for nonprofit fundraisers, and look towards the start of what could be an equally difficult one, I’d like to outline a new vision for how the nonprofit sector gets funded.  Fundraising in its current form just doesn’t work anymore.  Indeed, traditional fundraising is holding the sector back by keeping nonprofits in the starvation cycle of trying to do more and more with less and less.
Really, what the sector needs is a financing strategy, not a fundraising strategy.  By that I mean that nonprofits have to break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities.  Instead, nonprofits must work to create a broader approach to securing the overall FINANCING necessary to create social change.
What does this new approach to financing the nonprofit sector look like?  It looks like this:
  1. Nonprofits understand that funding programs and general operating expenses is not enough to survive and thrive.  All activities that bring money in the door (individual donors, foundation grants, earned income, government contracts, loans etc) are integrated and part of a larger financing strategy that supports the short AND long term goals, as well as the programs AND infrastructure of the organization.
  2. Nonprofits no longer segregate fundraising from their other activities (programming, administration).  All elements of a nonprofit’s operations, including the money-making ones, are fully integrated and moving forward together.
  3. Individuals, who make up 80%+ of the private money entering the sector, become a greater focus of fundraising efforts, rather than corporate or foundation philanthropy (which make up 5% and 12%, respectively, of the private money entering the sector).
  4. Fundraising messaging moves from an emphasis on the tin-cup mentality and donor benefit, to an emphasis on the social impact a  nonprofit is creating.
  5. Money is raised to support not only the direct services that a nonprofit provides, but also the infrastructure (staff, technology, systems, evaluation, training) of the organization.  Nonprofits understand that they will only get better at delivering impact if they have an effective organization behind their work.
  6. Other types of capital vehicles (like loans, equity) are added into a nonprofit’s financing mix.
  7. Earned-income opportunities are evaluated and, if appropriate, launched.  Earned income is not right for every nonprofit, but it is worth exploring and analyzing opportunities as they come and understanding and being open to the revenue-generation possibilities.
  8. The net revenue of every money-making activity a nonprofit engages in (events, individual fundraising appeals, corporate sponsorships, earned income, etc.) is calculated and evaluated.  Low net revenue activities are replaced with higher net endeavors.
  9. Nonprofits move away from “push” fundraising and marketing efforts that force their message on innocent bystanders (like direct mail appeals) and towards “pull” fundraising and marketing efforts that bring interested donors/prospects to the organization (like blogs, Twitter, Facebook, friend-raising events, etc.)
There really is a better way.  Nonprofits don’t have to wear out their fundraisers, their donors, their staff and their message.  By working towards financing their efforts as opposed to fundraising for them, they can get a lot closer to social impact.
If you want to learn more about how to apply the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series.
To download the 27-page Financing Not Fundraising e-book, click here.

Related posts:
  1. Financing Not Fundraising: The Plan
  2. Financing Not Fundraising E-Book
  3. Financing Not Fundraising: Calculating the Cost of Fundraising
  4. Financing Not Fundraising Webinar Series
  5. Financing Not Fundraising: Aligning Money and Mission
About the Author: Nell Edgington is President of Social Velocity (, a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.
Monday, December 14th, 2009 Capacity Building, Financing, Fundraising, Nonprofits, Planning

21 Comments to Financing not Fundraising

Melinda Lewis
December 15, 2009
Absolutely–maybe this necessity will be the mother of some needed invention! I’d just add that we also need to be strategic and courageous with our advocacy, so that nonprofit organizations are getting what we deserve from public sources, as well, which have largely retreated from their former investments and, in many cases, are at least implicitly responsible for some of the challenges/needs that many nonprofits–at least those in the human services/community development/maybe environmental realms– are trying to fill. Less ‘demand’, in this case, would be a welcome thing!
Nell Edgington
December 15, 2009
I completely agree with you. Just as we need to rethink how nonprofits are funded, we need to rethink how government supports social impact. There needs to be much change there as well.
Teofilo Tijerina
December 15, 2009
I love the article Nell. I’m happy to report that we have adopted some and are modifying our approach to align with your recommendations.
I am however struggling to find Philanthropists that think beyond geography. It seems most folks I know are very focused on their hometowns or cities, and not interested in new ideas, approaches, or projects unless they impact their local community. And since we focus in impoverished areas, the existence of philanthropic capital in those communities is low, and often comes with strings attached or favors in return.
Nell Edgington
December 16, 2009
I think the key to raising philanthropic capital in impoverished areas is to find philanthropist who you can convince in a compelling way that the impact you are creating is important to them. As a simple example look at the tremendous amount of philanthropic aid that is going to the poorest areas of Africa right now. The philanthropists who are investing there see no benefit to the communities from which they personally come, however they are very committed to the impact they are seeing in those African communities. You have to figure out how to “sell” the impact you are creating in a way that is compelling to investors.

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