By Sarah B Lange under Uncategorized on May 29, 2023

"Overhead" is not a dirty word.

You can watch the full episode on YouTube or listen to Spotify.

Hey everyone, I'm Sarah Lange and I'm here to spark the philanthropy revolution. The word philanthropy means love of mankind. My show is all about the ways we can open our doors and hearts, so we can do more good.  

Hey everyone, happy Thursday. Welcome to episode four of the philanthropy revolution. Feels good to be getting these episodes under my belt and I'm hopefully getting better with each one. I invested in a second ring light so, the lighting's a little better. So, I'm getting there, what can I say? It's work in progress.

My name is Sarah Lange. I am a professional fundraiser. I've raised over 90 million dollars. I am the author of the field guide to fundraising for nonprofits, which is really a how-to book on how to do various aspects of fundraising. I'm penning my new book, which is called the philanthropy revolution. Shocking, I know. And I just, I love what I do. I believe that the nonprofit sector is really where the rubber meets the road in this country and that nonprofits don't get their due in terms of the contribution they're making. I'm here to highlight you, celebrate you, and show you how to do your work in such a way that you get more money so you can do more good.

I want to tell you a story today about how I got into this. I know I've told you the Arrowhead story, but there's another story that brought me into the nonprofit sector and fuels my passion for the work that I do. And my mother was an active alcoholic until I was 12 years old. At the time that she was suffering from addiction, people didn't really know what addiction was. They just thought an alcoholic was a bum in the gutter. And my mother came from a prominent Southern family. And so, of course, well-bred women weren't alcoholics. And there really wasn't even a support system or a treatment system in place until Betty Ford came out as an alcoholic in the mid-seventies.

And all of a sudden, like, well, geez, if the first lady could be an alcoholic, then other women are now allowed to be alcoholics. So, the thing about that is that my family suffered for a long time. Obviously, my mother suffered. She was struggling with addiction for a long time without getting any help or support, but the rest of us were al So, suffering. And part of it was the time, but there really just wasn't a social service system in place for people like my family who needed help, particularly around addiction. Because like I said, it really wasn't, there was no awareness about it.

So, having grown up in a very painful way and watching my mother struggle with alcohol just really gave me this deep-seated commitment to making sure that when people need help, they can get it. So, that's why I'm so passionate about fundraising, because I want to help you raise more money So, that when people come to your door for whatever it is you do, whether, even if you're just, you know, doing art, which a lot of people think is frivolous, but art is really important to fueling the soul and uplifting us and creativity is really important to us as humans as well.

So, you know, don't ever think that you're not important and the work you're doing isn't critical because it is. For the people who are showing up saying, I need what you have, it can change their lives. So, that's a little bit more about me and why I'm doing what I'm doing. And today, what I want to talk about is this idea of overhead being a dirty word. So, you know, a lot of times I'll be talking to executive directors about their struggle to make ends meet and their desire to raise more money. But ultimately, they'll say, you know, well, we don't have money to invest in fundraising. And that's just like soul crushing to me because they basically say, oh, we have to keep our overhead low, you know, and I'm like, ugh.

So, it's one of my pet peeves. It makes me want to scream because this is one of the key myths that keeps the nonprofit sector stuck on this hamster wheel of scrambling to make ends meet year after year. It's just like, you're just in the churn and you can never really get your head up above water. And so, what that ends up meaning is that we can't really move the needle on the issues that we're here to address. And it means we end up handing out Band-Aids instead of solving the problem.

So, overhead is not a dirty word. Overhead tells the world absolutely nothing about who you are and what you're accomplishing. It's a weird administrative number for which there is no formula. So, there's that. That we've somehow allowed to convey the value of the work we do. No. So, whether you're Apple, Google, Nike, or a nonprofit, every single business needs infrastructure to operate. So, I actually don't use the word overhead. I use the word infrastructure. So, this is the funding we need for our infrastructure. And that helps people understand that you guys are not taking vacations to the Bahamas.

I mean, I wish we could, but that's not where our board retreat's being held this year. It's probably at the best Western down the road. It's infrastructure. And one of the reasons we struggle to make ends meet is because we cave into the pressure to keep our overhead ridiculously low. This in turn undermines our ability to build the infrastructure, to scale our organizations to the size we need to have a significant impact. And that's like basically attaching a ball and a chain to an Olympic sprinter's ankle. If you're so worried about your overhead that you're worried about every single penny you spend, and we're not saying we shouldn't be mindful, but I feel like we spend all this time and energy worrying about our overhead. And we're basically creating this ball and chain situation for ourselves.

So, we're told that a nonprofit with an 11% overhead is superior to one with 28%. And I know I've told you the story about my cousin, Beth, but the work we do, you can't put a price on it. And so, if you need a higher staffing ratio, because you're serving people who are either young, and so, there's often ratios that are required by law or in need of more support, like my cousin, Beth, with Down syndrome, she could not function in a regular school and she needed a special school.

In order for her to become a fully functioning adult, she needed a lot of support. And guess what? She's a few years younger than me and she has her own apartment, has her own job, was married, unfortunately her husband passed away, has cats, has plants, pays her bills, does her laundry, right? And so, if she hadn't had that nurturing and support growing up, she probably wouldn't be functioning at that level. And so, her quality of life would be lower than it has been, as well as my aunt and my uncle, they would have spent a lot of their time and energy taking care of Beth. And this way, everyone gets to have a life. And I think we can all agree that that's what we want for our fellow humans is to live the life that the best life they can.

Like I said, there's no standard formula for calculating overhead. So, how do you even know you're comparing apples to apples? Like this is one of the things that drives me bonkers about Charity Navigator is like, they don't look at the whole picture. And then they presume that you're in 2021, Apple increased its operating expenses by 23.36% in one year, right? But do you hear anyone throwing a hissy fit about that? Nope. But can you imagine if we increased our operating expenses by that percentage in a year? Oh my gosh, I can't even imagine the hue and cry that would go up.

So, you know, we've kind of gotten stuck with this model where we equate frugality with morality. And why is this? Well, I don't know if you know this, but philanthropy started out as penance. Yep, penance. So, the Calvinists, aka the Puritans, came to the United States in the 1600s, not only to pursue religious freedom, but they also, wanted to pursue economic opportunity. They saw a lot of options here and they wanted to come and exploit them. And they were super aggressive capitalists compared to the other colonists. And they had a reputation as being greedy, but they're Calvinists, right? So, they're taught to hate themselves. And that self-interest is the path straight to hell, right? So, they were in this dilemma. And so, they created charity as an economic sanctuary where they could do penance for making money, right? And they did this at five cents to the dollar.

So, if you stop and think about this, you've got charity as your penance and you're trying to alleviate your guilt about being a greedy capitalist, then of course, you're going to make sure that charitable organizations don't make money, right? So, you can see now we're like all churned up about overhead and where it comes from.

So, they exiled financial incentives and profit from the realm of helping others, right? So, when I learned about this, I felt like a lot of things became clear to me about some of the weird wonky things that happen in the nonprofit sector. I was like, oh, now I get it. So, the good news is at least we know where it comes from. The bad news is 400 years later, nothing's changed.

So, we are still subscribing to this ideology to keep our overhead low because somehow that makes us pious and we're frugal and that's moral, but it's not. I mean, there's so many problems with this. And today I'm going to discuss just two of them because I could probably talk for three days about this. Because as usual, I have a lot to say about everything all the time. So, the first thing I want to say is overhead is part of the cause. Every single business, whether it's a for-profit or a nonprofit, needs to pay for things like rent, staff, utilities, insurance, office supplies, the internet, subscriptions, all those things, right? And not a single one of these generates a return.

They obviously allow you to do business and hopefully your business generates a return. And even in the nonprofit sector, that's what we want in form of donations. But would we ever think about not paying these expenses or eliminating them? No, of course not. They are the cost of doing business. And we need these things to fulfill our mission. But so, is fundraising. Fundraising is an integral part of your mission. And so, many nonprofits are under-investing in fundraising. In fact, over the 35 years of my career, I see that as the number one problem that nonprofits have in terms of really fulfilling their mission and going to the next level and helping more people is that they're not going to invest in fundraising because we're all adhering to this myth that we have to keep overhead low.

So, you know, you can't there's no such thing as the fundraising fairy, right? So, as lovely as it would be for a fairy to come to our office and drop a million dollars on our executive director's desk in the middle of the night, it ain't going to happen. So, the only way we can raise more money is by investing more in fundraising. But this overhead myth really keeps us locked in this hamster wheel of just chasing the next dollar. The other thing is that overhead is essential for growth.

So, when we keep our overhead low, it forces us to go without the infrastructure that we need to grow and sove problems. And I'm including staff in infrastructure because in so, many of our nonprofits, if we didn't have staff, we wouldn't be able to do anything, right? A lot of times our staff are the ones who are delivering the services and the support that the folks we need to help. It's all part of the mix. So, the issues we're here to address are often ginormous. And yet our ability to meet them is limited because we're trying to keep our overhead low. So, it's like David and Goliath, right? You've got a small nonprofit trying to, you know, address a huge problem, whether that's homelessness or uplifting people with the arts or healthcare or social services or an afterschool program, you name it, the need and the issue is always going to be bigger than most of the nonprofits out there.

You know, I've got a client that's a $12 million organization. And you would think, oh, they have it easy, they're in good shape. And they don't have it easy. They are in decent shape. But, you know, we just cranked out $1.5 million worth of grant proposals for them because they're unable to meet the need in the geographic territory that they serve, because they have to keep overhead low, and they don't want to invest in fundraising. So, you know, obviously, they've kind of moved away from that by hiring us. And, you know, they're already staying like they just got a $90,000 grant last week.

So, all this investment is starting to pay off. And it's going to make a real difference in the lives of the people who can't get the services they need. But it's also, going to improve the lives people can't get the services they need. So, you can see where until we stop believing this 400-year-old myth, that we meet must keep money out of the realm of helping others, that we're just going to be stuck in the same churn, we're going to be on the treadmill forever. We're never going to make any progress if we don't dispel this myth. So, you know, we act as if money in the form of overhead can't possibly benefit the people we serve. But this is the very opposite of the truth. And let's not forget about the funders and donors who support us.

At the end of the day, donors have philanthropic mission, they have a desire, but they can't fulfill it on their own. You know, for tons of reasons, you know, if I care about homelessness, I certainly can't turn my home into a homeless shelter. And even if I could, I could maybe put three people here, unless we put one on the couch downstairs, then we're up to four. But, you know, So, if that's my, that's what's breaking my heart, I'm going to give money to homeless organizations. And saying, you know, here, I can't do this, but I trust you to help these people for me.

So, you know, they're coming to you with their own desires to be helpful. And foundations really see themselves as agents of change. But even they can't do it by themselves, right? So, they're giving away X number of dollars. And whether they're doing that monthly, quarterly, annually, they even feel limited in their ability to make change. So, all of these folks are aching for transformation. They have a deep and profound yearning to change the world. And because they can't do it on their own, they're handing you their money and trusting you to help the people that they can.

So, again, when we keep our overhead low, we're also, doing a disservice to those people who care about the cause, those people who are supporting the cause. They want to see these issues get addressed. I'm not saying that we're going to solve the homelessness problem by, you know, putting a billion dollars into it because it's complex, right? So, what I am saying is when we can grow and we can scale without so much worry about, you know, overhead, overhead, overhead, which again tells you nothing, then we're going to start to be able to invest in our growth and our infrastructure, so, that we can help move the needle, right? And that's really the point is to see some transformation.

I'm not saying that we don't already see transformation, but I know all of us got into this sector because we want to make the world a better place. We want to make a difference and we are, but I'm sure like you, like I got into the nonprofit sector and it wasn't too long until I started running into these brick walls and started to feel demoralized and kind of frustrated. And so, it wouldn't it be great to have the money you need to do the work that you know you're here to do. Like, so this is one of the reasons that we are being held back is because we buy into this myth of overhead. So, you know, we're operating from this 400-year-old rule book and we're only able to help so much. And again, this is demoralizing. It's kind of defeating the purpose and it's the wrong thing to focus on. We need to focus on outcomes, impact, transformation.

You know, you guys perform miracles every freaking day, right? And that's inspiring. Like that's why I'm doing what I'm doing because you guys inspire me so much. And so, that's where we need to place our focus. This is the stuff we need to brag about. No offense, who gives a crap about your overhead? You know, like I keep telling you the story about my cousin Beth, because I'm sure that if somebody looked at their overhead, it would be ridiculous, you know, but even the impact that they had on my cousin Beth is unbelievable.

It was a miracle, right? When we were kids, Beth would get overexcited and her response to that would be like to throw her clothes off, you know? So, we'd be like outside at my aunt and uncle's house playing tag at the family reunion and Beth would get all excited. Next thing we know, we're like, Beth, put your clothes on, you know? And I'm not saying she didn't outgrow that on her own, but being in a school where people understood her response to things and helping her develop coping skills and just skills in general that maybe she wouldn't have other, it's like gave her her life. It gave my aunt and my uncle their life, right? So, you can't put a number on that and put a value on that. It's priceless.

So, let's focus on that kind of stuff. What are the miracles that you're doing every single day? I would love to hear some of the things that excite you about the work you're doing and the differences you've seen. Throw them in the chat. That would be great. The other thing is, you know, not everybody has a great cost allocation plan and that's when you take your admin costs, like your executive director, your director of fundraising, anybody that's doing support, like office manager, and you figure out how much of their time is spent on each program and then you allocate their salary across that. And so, that helps reduce the appearance of your overhead, but the real issue is that we need to educate everybody that we come into contact with about this overhead myth and why it's handcuffing us from fulfilling our mission in ways that are profound.

So, we need to claim and know our worth because without the 501c3 sector, life in the United States would suck. Think about it. Think if there weren't any non-profits in the sector. But if you look at how much we contribute to the economy, how many lives we change, what the quality of life in the country would be like without us. We are basically the ones with our fingers in the dike, right? We are like Atlas. We are holding up the world. We are doing the work that saves people's lives, that changes people's lives, that uplifts people's lives.

We need to stand tall and proud and talk about the difference that we are making and stop focusing on overhead. If people chip their teeth about our overhead, we can tell them this story. Well, let me tell you where this whole idea about keeping our overhead low comes from. If you help them understand that overhead just doesn't tell you anything, then they are pretty willing to let go of focusing on that little number, which is just completely out of context and tells you nothing. So, you know, obviously we are doing good work.

Obviously, we are changing people's lives. But we don't brag about it. So, let's get out there and brag about it and share the testimonials and the quotes and the stories and do the before and after. It is just really important to help people understand where we need to keep our focus. So, I want to close today by reminding you that fundraising is actually the only way in which you can invest money that will give you a significant return. So, for us with our grant writing clients, for every dollar they invest on average they get six back. So, that's not a bad ROI. But, you know, yes, you have to learn the approaches, you have to learn the tactics and the strategies to land the money you need. But let’s remember there’s hundreds of billions of dollars out there to be won.

There is money out there, and if you ask any of our clients, we’re just making it rain, like $90,000 in one client last week. I forget how much we’ve brought in during Q1 but it was pretty significant. I think it was like $900,000 and probably that was because we got two big fat arpa grants but again, this is money that’s changing people’s lives, so, think about, you know, fundraising and how you can incorporate that and do more of it. So, I want to thank you for joining me today, I love having these conversations, and I want to invite you to join my online group coaching program, which is now open for enrolment.

So, the thing that’s unique about my program is that your entire organization is a member. You know, if you have a different person writing the grants and is working with the board, all of them can get involved, the entire organization. Even the volunteers in your board can get access to the program if you choose that, So, there’s just one login, you decide who gets access and you get access from my fundamental 5 curriculum. The fundamental 5 is the way that I raised $90 Million, So, there’s 5 modules; grants, individual donors, strategic planning, social media and communications and boards, especially where on boards in fundraising.

There’re different modules, 5 modules, I’ve broken each module down into short units on a specific topic, so, it’s like take a bite and then go to implementation. Then I have two one-hour coaching calls a month So, you never have to worry about being stuck. You know, say you’re about to send out your next appeal and you’re not really sure about how to approach it, well then, you just jump in the call and ask me and I’ll give you on of my coaching. So, right now, you can get all these juicy goodness for $397 a month, which is an outrageously ridiculous amount of price, and if you want more information, Chris could drop the link in the chat and you can go to my website and learn more.

And then the other thing I want to invite you to is follow me in social media because sometimes I’ll do popups at the last minute, I think we’re doing a popup next month, and these are just people jump on the phone with me, on a zoom with me and I just take people as they come and we answer fundraising questions, so, to those usually wants a quarter probably do one next month. So, follow me on social media, you can find out when those are gonna be and how to get to be a part of them.

I have a book coming out, not the philanthropy revolution but I was a contributing author to a book called Limitless, I mean, we’re giving a couple of those away during our book launch week, which is June 4th, so, we'll announce that on social media. There’re things that you’re gonna find out about by following me on social media that you would otherwise find out about, so, I really invite you to jump on to some of my social media platforms and thanks for joining me today, if you’ve got questions get in touch, I’m here to help you. I’ll be back on June 1st at 1:15 pm and a couple of weeks from now, I’m gonna start bringing in some guests, so, you can hear from other people and their perspectives.

So, thanks for joining me and I’ll see you in a couple of weeks. Bye. Thanks for tuning in, I’ll be back in two weeks for another episode. Got topics that you want me to cover? Organizations you want me to showcase? Let me know. Also, I’m here to help you revolutionize philanthropy in your nonprofit. If you want to talk about what that looks like, drop me an email.

You can watch the full episode on YouTube or listen to Spotify.


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