A March 8, 2014 New York Times article highlighted the rapid growth of the nonprofit sector, citing an Urban League study that determined that during the 10-year period between 2001 – 2011, the number of nonprofits in the US grew 25%, far out-pacing the growth of for-profit organizations, which grew at just 0.5%. While overall there are still four times as many for-profits as nonprofits, the rapid growth of organizations in the nonprofit sector means there are more nonprofits than ever in “startup” mode, inviting us to consider the challenges facing organizations at this stage.
Nonprofit startups have similar challenges and decisions as for-profit startups, including where and how to secure funding and then how to invest that limited funding to generate the most value. Is it better to invest in product or infrastructure? When is the right time to expand capacity? As these new nonprofits seek to execute their visions, they must first work through basic business decisions around formation and growth and they must do it without the same funding options as for-profit ventures.
Traditional startups can secure funding from investors based on future opportunity for return and can earn revenue from sales once the company is operational. While some nonprofits and social enterprises have identified earned-revenue opportunities, and may even be able to provide a return to an investor, most rely on grants and donors to fund their work. Realistically, however, many new nonprofits aren’t ready, or even eligible, for grant money, and their ability to secure donor funding is also a challenge because most donors want to see a record of success before donating.
Further, while the number of nonprofit organizations is growing rapidly, the amount of funding flowing to them has remained relatively flat over the years at 2% of GDP. This means competition for funding is fierce and startup nonprofits are at a disadvantage compared to their well-established peers because they lack a history of success as proof of concept.
So, in the face of these challenges, what can young nonprofits do to stand a chance at securing funding? I offer three pieces of advice for a strong start to building a fundraising operation.
1. Take the time to be thoughtful and strategic:
When you have a small staff with each person wearing many hats, efficiency is key. To avoid wasting time in the long-run, take time up-front to think through, and write out, a plan for how to approach your fundraising.
This will help avoid the spinning wheels of chasing weak leads while potentially missing stronger opportunities. Create a plan that details your fundraising activities for a full year. Each activity and communication should build on the last so you are cultivating your prospects over time and ensuring no prior efforts fall through the cracks, becoming wasted time.
Having a plan also makes it possible to track success and evaluate efforts. Be sure to set aside time to periodically review the plan and track progress to the activities. This will help you identify what works best for your unique community of supporters so you can become more strategic and targeted as you grow.
2. Focus on building relationships:
Fundraising is all about relationships and there are no shortcuts to building them authentically.
Start with the people already in your circle of influence and spend time truly getting to know them. Why does your mission matter to them? How do they most enjoy being involved? What kind of resources and skills can they bring to help you grow? Get to know your donors as individuals and they will become valuable beyond the dollars they contribute.
Your circle of influence will expand as donors add their circle to yours. They may help access resources that allow you to cut costs. You gain the benefit of free marketing through their natural inclination to talk about their involvement. And they are far more likely to become long-term donors who increase their support over time.
One of the biggest mistakes we see organizations make is forgetting to grow relationships after a donation – which usually results in a lost donor. Don’t let all the time you put into connecting with someone go to waste! Stewardship of your donors is no harder than simply building authentic relationships.
3. Invest in the right tools and systems:
Strategy, cultivation, stewardship… simple pieces of advice that come with many moving pieces to track. I strongly recommend investing in systems and tools from the start that will help you be successful in these efforts.
A database is a must, even for young organizations, as you’ll need a place to properly track everything so no efforts go to waste due to forgetting important details. There are a variety of database and CRM programs on the market today – something for every size and type of organization. Having one from the onset, and instituting a culture within the organization of using it, creates a solid foundation on which to build a strong fundraising program.
I also recommend investing early in technology for email communication and online fundraising, elements that have become standard. Donors have come to expect a certain level of professionalism and ease in the process of working with a nonprofit and these tools will help you make a strong first impression to donors, better positioning you to compete for their dollars. Many of these programs offer free subscriptions for smaller organizations, which is a great place to get started.