3 Ways that NonProfit Revenue Generation is the same as Businesses
Do you work for a nonprofit? Do you serve on a committee or a board for a nonprofit, or are you connected to one in any way? Does it seem like they are always in a cash crunch? Do you wish sometimes that nonprofits worked more like a business and generated revenue in a way that was more consistent?
Here is a common story that I have experienced. We are running low on cash and we don’t know where it is going to come from. Of course, we pray for God’s provision, and I believe He can provide as long as we are good stewards and responsible. At the last minute, somehow the right amount of cash comes in. I have experienced this numerous times. But it always makes me ask the question, “How do we keep this from happening again?” At the time of writing this, half of my business comes from nonprofits, but almost all of my experience has been in the for-profit business world.
How are nonprofits the same as businesses when it comes to revenue generation? I have come up with 3 ways that nonprofit revenue generation is the same as a business.
1. Existing Customers = Existing Donor Base
Since most nonprofits get the majority of their revenue from donations, we will consider a donor like a customer. In a business setting, you would list out the clients in order of largest to smallest and forecast this client revenue based on trending. You would then look for a way to increase revenue from existing customers through upselling and providing high-quality service so they buy more.
How does this translate to the nonprofit donor base? In The Stanford Social Innovation Review, Heather Yandow writes that the largest predictor of fundraising success was that there was a formalized plan. Yandow states that devoting specific time to individual donors leads to more donations. This makes sense, but without a plan of attack, much of this communication can simply fall through the cracks.
My suggestion is to create a report of donors in rows and monthly contributions in columns. Then sort this report from largest to smallest. Come up with a proper communication plan for each donor. Think of a financial advisor. A good advisor has a plan to meet in person with each of his/her clients every year and reach out to each of them on a quarterly basis. They meet with larger clients more often. I think we should have a similar approach with donors.
2. Prospects = Potential Donors
In a business situation, we have a plan to assess prospects. I teach that everyone should have a prospecting plan that includes the annual revenue projection, probability of close (25%, 50%, 75%) and start date. See my post called “It Start with Revenue” for more about this.
There are always new opportunities to reach out and get new donors. These prospects should be listed and tracked in an organized system. If you reach out to a potential donor and discuss your organization for the first time, you might list them at 25% probable. Later you reach out and have lunch or coffee, and they start asking good questions. Then you raise this probability to 50%. Eventually, as you get to know them better, how much the donor can give will become more clear and the probability increases to 75%, then 100%. Studies show that you’re 85% of your way to get a gift if the prospect agrees to a personal visit, even with major gift fundraising. Initial contact can be through other donors, members, alumni, etc. You then schedule a phone call, next a lunch or coffee, then a proposal, and finally, close the deal. Sometimes it takes longer and more contacts and sometimes less time, but you keep the system moving.
3. Action Plan and Accountability
As with any sales organization, there is a trackable system for all customers and prospects that keep track of conversations, contacts, and followup. It could take 6-10 contact points before closing the sale. The same approach can work for tracking existing and potential donors. It is important to not only have a plan but to understand how much activity is going to happen each week and set meetings for followup. Each person responsible for development should be communicating where they are in the action plan. Not only does this increase accountability, but also ensures that current and prospective donors are communicated with regularly. More communication leads to more storytelling of your nonprofit. More storytelling increases understanding of the mission and/or cause which should lead to donations over time.
It is easy to lose focus and get distracted without a good plan of attack. The day gets busy and filled up with answering emails and being reactive. With a proactive approach to reaching out to current and prospective donors, you make progress on what matters.
Now, you might be thinking that this really doesn’t work for your organization. I agree that churches operate a little differently in that there is a captive audience of members. In a capital campaign, some of the above does apply, but it is a different plan of attack. For nonprofits that operate without a weekly captive audience, the approach of treating donors more like a customer can be an interesting and fruitful plan to ensure your nonprofit is growing and making the difference it set out to make. I know we don’t want to think of a nonprofit like a business, but it is like building relationships. With any relationship, it takes multiple contacts and effort to make the relationship develop and thrive. This is the same with existing and prospective donors.
Therefore, consider reviewing your existing and prospective donors and build an action plan to reach out to each one throughout the year. The action plan should include phone calls, letters, face-to-face meetings, group informational meetings, and eventually asking for the donation.