Why Nonprofits Struggle to Make Ends Meet and What We Can Do About it?
Welcome! Thanks for joining me for Episode 2 of the Philanthropy Revolution. I’m so glad you’re here!
Today I want to talk about why so are many nonprofits struggle to make ends meet, and what we can do about it.
I know that we got into this field to make the world a better place. Yet I’m sure I’m not the only one who was gobsmacked when I realized there were a million limitations to the kind of difference I was going to be able to make.
Why does it feel like an impossible dream to raise the kind of money we need to move the needle?
In my 35 years of experience, what I’ve seen is that nonprofits underinvest in the one thing that can ensure their future – FUNDRAISING!
The other thing I see holding us back is that as a sector, we’ve been sold a pack of lies, and have come to believe them. Here are some of the stories we’ve been told:
- 1We must do more with less. I’m calling straight up BS on this one! We need more so we can do more. There are lots of people out there who are hurting, big time. Animals who need to be saved. Cared for. An environment that’s being ravaged. They need our help. And they need it now. We need to figure out how much it’s going to cost to truly move the needle on the problem our nonprofit was born to solve and then go after that money. If you’re feeling angry about the current situation and hungry for change, you can bet your donors are, too
Talk about the reverse-engineering I do with clients.
Why are we allowing ourselves to be treated like third class citizens? Do you have any idea about the value of the nonprofit sector? Here are some handy facts:
Nonprofits employs over 12.3 million people and the sector’s payroll ($826 billion!) exceeds those of most other US industries, including construction, transportation and finance! Yes, FINANCE!
YOU – and other nonprofit staffers – pay taxes on salaries, sales taxes on purchases, and property taxes, which are other significant contributions to the US economy.
Nonprofit organizations that provide care for children and the elderly enable family members to work outside the home.
We provide job training and placement services for people who would otherwise be unemployed or underemployed.
Our organizations consume goods and services that drive the economy and create more jobs. We spend nearly $1 trillion annually for goods and services, ranging from significant expenses like medical equipment to everyday purchases such as office supplies, food, utilities, and rent.
We contribute to our quality of life and make communities more attractive places in which to live and work.
SO - Let’s stop confusing frugality with morality. You’re not going to “win” by being the most frugal organization out there. And it’s certainly NOT helping our clients!
An organization that has 11% overhead is NOT morally superior to the one that has 23% overhead. Story of Cousin Beth.
Overhead in and of itself means NOTHING – what matters is IMPACT. Are we here to hand out band-aids, or to provide transformation for those relying on us for help?
Now that you know the facts, you can stand taller and be proud! In fact, you should be wearing a superhero cape and a crown! - 2Our Organization Cannot be Profitable. First: “nonprofit” is a tax status, NOT a business model! We ARE in business – the business of feeding people. Giving people a safe place to stay. An affordable place to live. Treating illness. Caring for people from cradle to grave. Providing youth with mentors and tutoring. Creating spaces where people can be themselves, and get the support they need. Giving animals shelter and finding them forever homes. Saving the environment. And the list goes on. The bottom line: we are in the business of transforming lives. Every. Single. Day. (Pssst! Your donors want to help make that transformation possible!)
Second: we’re the only sector that defines itself by what it doesn’t do! Instead of using the term “nonprofit,” I like to talk about mission-driven organizations, which is who and what we are! (And, if you’ve ever gotten the ole eye roll when you say “nonprofit” watch how people light up and get curious when you say you’re mission-driven!)
Third: Says who?! Mission-driven organizations can make as much money as they want, as long as it’s used to support the mission. Just ask my clients, who have hundreds of thousands of dollars set aside for a rainy day. They no longer budget for break-even, because they know that if you don’t budget for a surplus, you’ll never have one!
Let me tell you the story of Jeremiah’s Inn: 2013 – deficit. By end of 2013, surplus. Since then, MILLIONS – doors, windows, roof, furniture, kitchen, dining room, painted inside and out, renovated bathrooms, HVAC system (AC for 1st time), electronic medical records (20% more case management time), new technology, better staff pay (=better retention), meditation room, BROGA, outdoor program, alumni program, SOBER HOUSE. This is what happens when you stop budgeting for break-even and can envision a different future! - 3We must focus on expenses, not results. Nothing could be further from the truth! Your supporters – who give to you from the heart – have a deep desire to make the world the better place. Your organization is the vehicle through which they are trying to accomplish that mission.
Donors and funders are paying you to create transformation for the people and causes they care about. They want to see RESULTS that have an IMPACT on the problem you exist to solve! It’s time we brag about the amazing work we’re doing every day – but be sure to credit your funders and donors in the process!
I want you to imagine life in the US without the arts, hospitals, institutions of higher education and the full array of social services we offer to people of all ages. Think about the US without a single mission-driven organization. I wouldn’t want to live here, would you?
The mission-driven sector not only ensures a certain quality of life for Americans, it is often where innovation happens. For example, Robert Goddard – the Father of Modern Rocketry – would have never gotten off the launch pad without an infusion of capital from the Guggenheims. Polio was cured because of the contributions of more than 80 million people, many of whom donated a single dime! The 1st open-heart surgery in this country was done at a hospital founded by a group of philanthropists, who believed more was possible.
More IS possible!
The #1 reason our organizations struggle is due to an under-investment in fundraising, not because there isn’t money out there to be had. In 2021, nearly $485 BILLION was given to charity, which represents a 4.0% increase over 2020. In 2020, giving increased 10.6% -- during a pandemic! Giving has risen by BILLIONS of dollars over the past 10 years, and giving in 2023 doesn’t show signs of slowing down.
Let’s remember that spending is NOT the same as investing!
Investing in fundraising isn’t just about adding to your development staff – it’s also about utilizing best practices in fundraising; engaging your board members in significant and meaningful ways; having a clear, well-articulated, exciting vision for the future you’re working to create and having mapped out a plan to get there; and communicating far and wide about the amazing work you’re doing every single day.
Together, we can move the needle on the social problems that have been plaguing society for decades and make this world a better place for those who are being left out and left behind!
You can watch the full episode on YouTube or listen to Spotify.