- “Look, donors know what we do. Just tell them we need their support, and they will give.”
- “Donors have a general interest in what we do. There is no need to provide more detailed information.”
- “Our financial management is our business – donors do not need to know all the details on how we use or manage the funds they give.”
- “If we give donors the details on what they can support, then they will want to restrict their giving to those specific uses. That is why we cannot give them the details – we do not want restricted giving.”
These are some of the comments we regularly receive from non-profit leaders and managers when we try to help them understand that donors need to be presented with offers or asks that relate to what they are interested in.
Before I continue with this line of thinking, I want to spell out what a donor offer is and the role or function of a non-profit budget.
A donor offer is much like a product in a commercial or retail setting. You buy a product because it will satisfy a need you have. Doesn’t matter what the need is. You part with money in order to satisfy a need. That is what a donor offer is. It is something that the donor wants to do on the planet that motivates them to give you their financial support.
A non-profit budget is nothing more than the functional categorization of revenue and expenses that reflects the mission of the organization. Here is what the non-profit is organized to do. Here are the main categories of effort to get that work done. And, here are the related financial categories that track each activity.
What our team at Veritus has observed over the years is a lack of understanding, on the part of non-profit leaders and managers, regarding the need to marry real financial information to the donor offer. In other words, they don’t understand the need for reframing the entire non-profit budget into donor offers – metaphorically, stocking the retail store with product. Every non-profit should have their own “retail store” packed full of all the donor offers that the entire budget (overhead included) funds. But they don’t, because they do not think it is necessary nor have they made the connection between the functionality and relationship of the budget to the donor offer process.
The result is that donors are not “buying” the “product” because there isn’t any “product” to buy. All they have are general descriptions of what the non-profit does and requests for donors to support them.
This reality explains why donors do not give to their potential, or stop giving altogether. The fact is that they are not interested in “buying” what the organization is offering.
This is why we here at Veritus created the Donor Impact Portfolio (DIP), a process that takes the entire budget of a non-profit – and I mean the entire budget, including overhead – and packages the entire thing into donor offers that fundraisers can then present to their donors.
Here, in a nutshell, is how it works:
- The entire budget is put into all the categories and subcategories of the non-profit’s execution of their mission.
- Any overhead that is not attributable to a category is allocated to each category.
- Known committed revenue to a category is attributed to each category.
The result is a document that gives front-line fundraisers the information they need to confidently tell the donor the cost to fund their category of interest, as well as what has been committed to funding it so far. This presents a credible case to the donor on what, precisely, is needed to “get this work done.”
Organizations that have faithfully gone through this process and codified their budget in this way have seen an increase in fundraising, an improvement in donor satisfaction, and a greater retention of donors and their value.
Seems good and logical, doesn’t it? Yes, it does. But why don’t most organizations get this important work done? Here is what we think:
- Leaders, managers, and even some development professionals do not understand how fundraising works. Leaders sometimes fail to recognize that the essential transaction between a donor and a non-profit is one where the donor’s interests and passions find a perfect match with the organizational need.
- Finance professionals don’t understand the relationship of their work to the donor, the source of the very revenue they manage. Instead, they think that the finance bit is only about accounting and categorization (which it is, to some degree) vs. the financing of a category of work that the donor is interested in supporting.
- Most insiders have not thought of the non-profit program efforts as being the same thing as a product in the commercial realm. They do not see that all the program categories and subcategories are the preeminent activity the non-profit is organized to execute – it is THE product that needs and wants to be sold. And, therefore, all the other functions in the organization need to support that activity. Fundraising is like sales – it secures the revenue. Finance categorizes the “product” efforts and supports the execution of program. All operations rally around how best to get the “product/program” funded and executed.
- Leaders and managers have an unfounded fear of restricted giving. This is because overhead has not been managed properly so the non-profit insiders have to go through all of these gymnastics to get the non-restricted money to fund the overhead which “no one will support.” What we recommend is to allocate overhead to every program category, which then eliminates the problem of restricted donations.
There may be other reasons non-profits don’t take the time to do a DIP or its equivalent, but these are the main ones we have observed over the years. If any of this sounds familiar to your situation, purpose to DO something about it. It is so important to the health of your donor relationships and to the financial health of your organization.
Donors want to support your organization and all the good it is committed to doing on the planet. Make it easier for them to align their passions and interests to what you do.