This post was written by our friend, Andrew Kramer.
For most nonprofits that have $500,000 or more in revenue, funding must come from a variety of sources – government, foundations, individuals, corporations, events, etc. – and has to be managed, almost full time, by a senior person in the organization.
The trouble with a broad, diversified funding base is that each stream can – and often should – be managed by a specialist. Most large organizations have dedicated employees who focus exclusively on a single area, such as grants, major donors, receipts, etc. Smaller organizations with limited staff and funding usually don’t have the ability to excel at fundraising for each of these streams. And the problem is that there is always, always, a new way to raise money that you should be pursuing.
Good nonprofit managers will follow the 80/20 rule closely with their time – 80% of their time from the 20% of their donors who provide the most money. Unfortunately, when Dr. Pareto invented his rule, he was looking at it the way that too many managers spend their time – 80% of their time on the 20% of donors who take the most time and energy.
Unfortunately, time spent does not equate with dollars raised.
So, instead of spending the majority of their time cultivating foundations – where a nonprofit might have seen a very good return in the past – they spend all of their time on an event that only bring a fraction of the revenue. And in the end, most activities that consume a poorly organized manager’s time will not lead to the two fundamental activities that every fundraiser should pursue:
- Ask for money (see attached photo — I see this car a lot, and I love it every time); and
- Send a handwritten thank you note.
There is a possibility today, however, for a small nonprofit to maximize its efficiency by outsourcing the development function. In fact, a secret that most managers might not know is that the larger organizations outsource a substantial amount of their fundraising rather than try and do it in house.
Here are just a few of the things that can be outsourced to free up a development manager’s time to focus on cultivating their most valuable donors:
- Grant writing: most grants are fairly straight forward affairs that use some combination of the same text over and over for each foundation. Outsourcing the ROUTINE asks makes a lot of sense so that the manager can focus his or her time on the non-routine grants that can take up a lot of time (but which, when done correctly, can lead to outsized funding for new programs).
- Direct mail: plenty of nonprofits outsource their direct mail operations – and there are even some organizations that specialize in direct mail for certain kinds of organizations (food banks, museums, etc.)
- Online marketing: In the end, online marketing is no different than any other kind of sales/ask, but it is just special enough that it makes sense for people who are experts in online programming to do the work.
- Events: Throw a contract and you can hit an event planner in Dallas.
- Major Gifts: In the end, the nonprofit manager has to perform in-person asks for money and resources. But, the reality is that a lot of organizations may never even meet their largest donors – or certainly not each year when they ask for money. Which means, things like invitations to special events, handwritten thank you notes, even the (bi)annual proposal can all be handled by outside experts, freeing the manager up for the tasks where she is really needed (such as phone calls, in person meetings, etc.).
- Receipts: This critical, but sometimes overlooked, function doesn’t need to be handled in-house. In fact, sending it out might be the best way to ensure accurate, timely acknowledgments of gifts. Unfortunately, it’s too easy to put off writing fresh stories, updating the content, and customizing the letters for larger or more frequent donors.
“But what about the cost?!?”
In reality, that depends on what the nonprofit executive wants done – and more importantly, what the manager isn’t getting done effectively because of his lack of time and expertise. Consultants and service providers can, and do carry some costs. But, because they are specialists, you are getting their experience and value immediately. A good consultant will have great references and can provide a clear action plan tailored to your needs from the beginning.
And, while it is unethical for a consultant or provider to take a percentage of any funds raised, they are just as interested in helping your cause to raise the money it needs to fulfill its mission because it’s how they stay in business.
An executive director or development manager considering hiring new development staff might give serious consideration to farming out their specialized work to multiple contractors instead of hiring a single employee who might only have expertise in one or two specific areas. Instead of spending $50,000 or more on salary, benefits, and payroll taxes, you can spend (perhaps even a small portion of) that to productively hire outsourced experts – giving you access to the highest level of talent without the risk and hassle of hiring an employee.