Studies have shown that nonprofits struggle to, at a minimum, recover their full operational and overhead costs, let alone invest in essential capacity strengthening — what is commonly referred to as the nonprofit "starvation cycle."
How many of our funders really understand the costs of running a successful nonprofit organization? How many of our donors believe that nonprofits should be “less than”?
Staff paid less than the market rate.
Equipment be less than up to date?
Training be less than adequate?
Most nonprofit leaders want to meet the expectations of their funders. They either spend too little or under report spending on basic business needs such as rent, utilities, furnishings, computers, and sometimes, even salaries. The Nonprofit Starvation Cycle, a seminal report issued in 2009 by the Stanford Social Innovation Review brought this to the public’s attention.
Unfortunately, many nonprofit leaders still struggle with the balance between taking care of the present and investing in the future.
To break the starvation cycle leadership must have a plan for sustainable funding; a strategy that focuses on the big picture. This includes setting reasonable goals that will help you measure your progress through the year.
Development Plan
First thing is a plan. To build that plan you need to understand your budget. This will tell you want you need and when you need it. For example, expenses may be higher in the summer because of your summer camp. This means your donations need to come in at the at the end of the previous calendar year and/or in the spring. Project revenue and expenses for each fiscal quarter.
Diversified Funding
There are three types of donors: individuals, foundations, and corporations. Giving USA reports each year that individuals give more than foundations and corporations combined. You need all three and maybe even some earned revenue from fees or merchandise sales. Know when your donors give. This information will help you plan when to ask. Do not be overly dependent on any one type of donor.
Building Relationships
Building and sustaining relationships does not just apply to your individual donors. Relationships with foundation program officers and corporate community relations managers are just as important to cultivate and steward.
Strong Stewardship
Stewardship comes after a donor has given. This phase is when you let the donor know the significance of their donation. Sharing client stories in your quarterly newsletter, preparing an impact or annual report that illustrates the value of donations compared to the costs and impact of programs is what many donors want to know. They want to know that their dollars made a difference. Consistent stewardship keeps donors close and engaged and ready to give their next gift.
Breaking the starvation cycle takes commitment to provide the best service to the community and commitment to the people who provide the services. This can be done with an engaged board, strong and knowledgeable leadership, and people who will not settle for “less than.”
Michelle Crim, CFRE
Dynamic Development Strategies can help. We offer coaching, grant writing, and fundraising services for our nonprofit clients. We specialize in small to mid-size organizations because we understand your challenges. Please contact us for more information.