7 Keys to a Successful Major Gift Program – Key #4: Develop Offers that Donors Want
“Donors are approaching philanthropy in a completely different way. They are making decisions more thoughtfully. Their gifts are following their own intended purposes. Donors are seeking a return on their philanthropic investments. And they desire an increased level of personalization. Organizations embracing this change are climbing a mountain of success with zenith, while others, forcing their own models onto their donors, are fighting in the foothills.” (Joshua M. Birkholz, Fundraising Analytics)
It’s a fact that donors are changing. They’re expecting more in their relationships with their favorite charities. Gone are the days when a donor blindly gives without requiring accountability, and information related to that giving.
And that’s why progressive non-profits are spending more time figuring out how to Develop Offers that Donors Want, which is Key #4 of this series. Now if you don’t think you need any offers to present to the major donors on your caseload, then stop reading – you’re all set.
But if you’re like most MGOs, this area is a serious problem. You have an excellent program, and you have a group of great major donors who are eager to help. But you have nothing to talk to them about. OR if you do, it’s packaged in such a weak way that it will be difficult for you to present it.
If this describes what’s going on with you, then stay with me. We’ll walk through how to solve it.
First, let’s start at the beginning. A non-profit exists to serve humankind through a variety of programs. There are direct program costs associated with these efforts. And there are overhead costs. Nasty overhead costs – at least that’s how many of us think about them. The sum of all these costs equals a budget. For the sake of illustration, let’s say this budget is $1 million.
This budget is funded through a variety of means – some government grants, some foundation grants, some corporation gifts, some individual current gifts, and planned gifts, etc. For the sake of illustration, let’s say there are ten donor source categories that collectively give $1 million to fund the budget.
This budget is shown, for organizational purposes, with categories and labels. The broad categories are program and administration. For the sake of illustration, let’s say $1 million is spent on the sum of these categories and for the program part, let’s say there are ten major program categories where we spend $700,000.
What we have, as a result of this exercise, is $1 million coming in from ten significant sources to fund a $1 million budget, of which $700,000 is spent on program and the remaining $300,000 is spent on overhead.
Seven problems currently exist within most non-profits related to budgeting:
- The budget is organized for organizational purposes, not for donors. In this sense, the budget is not donor-driven. Even though the majority of the funds come from donors, it’s tough for a donor to see how the $1 million divides down into the ten program categories.
- The program part of the budget is understated, and therefore the fundraisers in the organization will not be focused on raising $1 million but instead $700,000. This will cause financial problems. While this dynamic does NOT occur at a conscious level, the net result is that the fundraiser uses the program target of $700,000 as the amount to raise, rather than the whole amount. This happens as a natural outcome or result of the structure that has been set up – the budget is organized this way.
- While it’s important to understand the difference between overhead and direct program costs, the danger is that overhead, over time, will be seen as a necessary evil and not as an integral part of program.
- It’s almost impossible for fundraisers to represent what the organization does and quantify it because they can’t get to the numbers. The result of this dynamic is that donors aren’t given the right information that will make them satisfied donors. And dissatisfied donors go away. This is why, in our work with major gift programs around the country, we’ve uncovered an extensive and disheartening attrition of good donors in most major gift files.
- It’s difficult for fundraisers to raise the income needed, because the budget cannot be presented in ways that the donor thinks and supports; i.e., in terms of what’s being done for people, places, or things.
- Because of this situation, fundraisers and donors tend to want to fund programs that are outside the overall budget, causing even more problems internally.
- All of this results in a financial situation that younger, more curious, and business-minded donors find troubling and sloppy, and the organization runs the risk of losing support from this significant and growing public.
These seven points may seem ominous and on the surface, overly dramatic. But the truth is that as the charity donor population becomes younger and more sophisticated – unless these situations are addressed – many non-profits will face difficult financial times.
Why? Because donors will want to see things their way, and they’ll demand more accountability for how their money was spent. Gone are the days that a donor just gives because “I trust them.” (Tweet it!) There may be trust, but they want to verify how things operate and, more importantly, they’re thinking about what your organization does in end result categories rather than in accounting terms.
It’s why Jeff and I have created a process and protocol we call the Donor Impact Portfolio (DIP). We’ve chosen these words because of the special meaning we have assigned to each word:
- Donor: this is about showing your donors what they “get” when they partner with you on a project. It’s not about the organization.
- Impact: this is strictly about what the organization CURRENTLY does for people in an integrated manner. And this view goes down to the smallest operating unit so that donors can grasp and support what’s happening at the smallest organizational level. We’ve highlighted the word currently to emphasize that the DIP is about existing budgeted programs, not new programs. The purpose of the DIP is to help fundraising and communication personnel secure funds for budgeted programs. Remember, this impact is made by the whole organization, so overhead is included proportionately to the program costs.
- Portfolio: this means that there’s a broad selection of things a donor can support in the current program. It could be children, youth, young adults, couples, seniors. Or the donor could look at it as drug rehab, single parent care, childcare, job training, spiritual work, housing, feeding, etc. – any number of ways to help. And the donor could look at it as all the above PLUS a specific PLACE that they are interested in. It also means that there are different “price points” to all categories of help. So if the donor wants a $1,000 project, she can find it. Or if it is $10,000 or $3 million, she can also find it.
We want to have a “portfolio” of current program opportunities a donor can fund. Portfolio is defined as “a group of possible investments a donor can have in an area they’re interested in.”
To be clear, each program for support in the portfolio contains four critical elements:
- Program category
- People group helped
- Price point
We must be able to offer the donor a current program to support that meets the criteria in EACH of the four areas above. Why? Because that’s the way donors think. If you can get a donor to say what their interest is, they would more often than not say, “I want to support the education (Program Category) program for children (People Group) in Newark (Location). And I’m willing to participate with you at this time at the $50,000 (Price Point) level.”
It’s why we need to have all these fields of information decided/determined in advance. So we can present our total budget ($1 million) in all the ways we can that logically fall into the four critical elements mentioned above. It will result in a genuinely donor-driven budget that will gain full support for what the organization wants to do in a specific area.
There’s a lot of detail on how to execute this with your finance and program people. But it can be done. And the result will be that you’ll have a file full of project possibilities to present to your donors – projects that will match who they are and what they’re interested in.
And that will keep your donors happy. And we all know that happy donors will stay with you.
PS — Learn more about the Donor Impact Portfolio here.
Read the whole series, 7 Keys to a Successful Major Gift Program:
Key #1: Attributes of the Ideal Major Gift Organization
Key #2: Make Sure You Have the Facts!
Key #3: Do You Have the Right Moves?
Key #4: Develop Offers that Donors Want (This post)
Key #5: Turn Planned Giving into Strategic Giving
Key #6: Treat Corporations and Foundations Just Like Individuals
Key #7: What You Get Done Matters!