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Is your nonprofit recession ready?

By | Revenue Strategy
Nonprofit Recession Help Room40 Group
Is your nonprofit recession ready?
7 Steps to securing the future of your organization

Do you want to know the good news?

The economy is growing faster than it has in years. The United States GDP and equity markets are in their ninth straight year of expansion. Foundation endowments, the assets of individual donors, the investments of many nonprofits: all have been steadily growing for almost a decade. Which means that however hard you and your team are working, your current challenges are happening in a time of relative and sustained plenty. Especially for nonprofits that rely on private philanthropic funding: these are the good times.

But with two-thirds of economists in the U.S. expecting a recession to begin by the end of 2020, the good times may end sooner rather than later. If a flood is coming, it’s time to build a boat.

If you aren’t sure how your organization should respond to a downturn, now is the time to plan. Preparing for a recession takes work but trying to do it during a shrinking economy is much harder. We remember the last few recessions and what it took as Executives to steer our organizations through them. If you want to be ready for bad news when it comes, we’ve got seven steps you can take right now to help make your organization recession ready.

1. Anticipate and craft the narrative

The story you tell about your organization and the importance of its work is going to sound different in bad times than it does in good. Think through how to make the case for what you do in general – and what you will do specifically – when the weather turns. Was your fair-weather pitch all about the future glories of growth, expansion, and serving more people? That’s going to sound jarring when everyone’s investment advisor is running around like their hair is on fire and the front page is full of stories about whether western civilization is falling into the sea.

You will still need to motivate and inspire during hard times. More than ever, you will need a compelling story that fills people with inspiration and urgency to act. You need to show your donors and staff that there is plenty about your organization to be excited about. Don’t let yourself be defined by the things you can’t do or have stopped doing now that the weather has turned.

2. Run Scenarios

No one can predict the future, but you can make some pretty good guesses. Take your budget projections and start running bad news scenarios. If the stock market tanks, donors and foundations will see their own assets shrink. It’s likely fundraising revenue will take a hit. Some ways to run the numbers:

  • Let’s say people say yes to you 50% of the time that you ask them for gifts, what happens if they say yes only 25% of the time?
  • If your multi-year pledge pipeline is looking pretty good now, what would happen if 10-20% of those pledges were canceled?
  • What would happen if payment on 10-20% of those pledges were delayed by 12-months?

Some donors plan to make gifts from the sale of assets. But if the asset’s value is depressed, markets are suddenly illiquid, or buyers are running for the hills, your donors may look to postpone their giving until better times. Even donors with liquid cash may use it to weather the storm themselves or to strategically acquire things they see as undervalued.

If the past is prologue, you can expect that a good number of fair-weather friends will walk away from your organization when times get tough. But the donors and allies most invested in your work will stick around. It is likely you already have a gut sense of who is in this second group. It’s worth talking to them explicitly about what will happen when a recession hits, and how the organization will respond.

Believe it or not, some of your more loyal and invested donors will be open to increasing their giving in a recession, in part to counter-act retrenchment elsewhere. Of course, they will be more likely to do this if they’ve heard a compelling narrative and had time to get used to the idea.

3. Get back to mission-critical

If the economy contracts you may have to as well. If you don’t want to make cuts that undermine your mission, what can you do?

First, get clear on what is central to your mission. It may be a lot harder to outsource or reduce these activities because they are what makes your organization unique. It’s easier to scale back the activities that are less necessary or more experimental. In an expanding market that has people feeling optimistic experimentation is great for attracting the attention of new donors, creating innovation, and inspiring your staff. In a market where your operating budget is getting smaller and people are generally risk-averse, activities that suck up cash without bringing in revenue are activities you should consider scaling back or taking an intermission on. Be clear on what is core to your mission and alternatively what you can hit pause on until the situation improves. What does ramping down look like for your organization?

Remember, you won’t be the only ones falling back to your core. If history is any guide many foundations and grantmakers will experiment with new and innovative programs in the good times but will retreat to the tried and true during the bad times. Don’t be a fair weather friend yourself. The deeper your relationship with your foundations, the more likely you’ll be able to count on them when things get tough.

4. Make Fixed Costs Variable

In every organization, there is a chunk of costs that you can’t really change or get out of in the short term. The biggest one is your people. Layoffs are incredibly disruptive, painful, and demoralizing, even when done well. Fortunately, there are other ways to reduce your commitments as the storm hits.

Review fixed costs like rent and facilities. Long leases may save you money but also represent big liabilities. Three months into a recession, you may happily want to take office space at less rent, but if you are stuck into a multi-year lease, there may be little room to maneuver. Month to month leases may be more expensive in the short term but easier to get out of.

Another option for reducing your commitments is to review ways to outsource activities. Consider this for less mission-critical work where outsourcing would be less expensive and won’t compromise your short-term ability to have impact. Examples relevant to your organization might include human resources, design, website hosting, technology, marketing, or bookkeeping. By outsourcing, you can create more flexibility to scale your level of investment up or down as appropriate.

5. Build Cash

Build a healthy cash reserve in the good times. Once things go south, it’s too late. Did we mention? These are the good times.

For most organizations we know predicting how much revenue they’ll raise next year is an inexact science. We’ve seen many organizations make reasonable projections that later looked wildly optimistic when the stock market crashed three months into their fiscal year. In general, if you’re conservative about the money you project to raise next year, you’ll be in a better spot if the economy turns. Of course, if things go well you can save some or all of that surplus as a cash reserve.

It’s not easy to say ‘no’ to worthwhile projects in order to put cash in the bank. But remember: once the recession hits you can’t help people outside the organization if you can’t make payroll.

How Room40 Can Help

Did one of these steps made you say ‘uh-oh’? Not sure how your organization’s current strategy makes sense in the context of a howling recession? Don’t panic!
Room40 Group can help you with any and all the above. Our founders and principals helped navigate nonprofits through the worst of past recessions and out the other side. We can help you figure out the best way for your organization to face any number of challenges and make plans that will help you feel much better about the future. Get in touch!

6. Take advantage of someone else’s money

Another way to build a cash reserve is to borrow it, especially while circumstances are good. The best time to set up a line of credit is when you don’t need one. Banks need people to borrow and are far more likely to agree to favorable terms when demand for these services is low. In good times banks offer all kinds of incentives to borrow. These incentives disappear with lightning speed once the bad times arrive. If you don’t have a line of credit, now is the time to talk with your financial advisor about finding a loan that’s a good fit. If you do have a line of credit, consider negotiating for a larger limit.

In addition, pre-recessions are a good time to renegotiate your payment terms with your vendors. If you have a vendor that you pay every 15-30 days, see if you can arrange to pay every 60 days. If you ever find yourself in a tough cash position, then having flexibility here means you can hold onto cash longer and have more time to get gifts in before the bill is due. People are more likely to give you favorable terms in a good market. Once things go south your vendors are going to start looking to speed up their own collections.

7. Take Care of Yourself

Stress and isolation for nonprofit leaders are already very real and difficult parts of the job. Fair warning: they don’t get better when the future of your organization is in question.

We’ve talked so far about things you can do to prepare your nonprofit for recession. Equally important is your plan for how you are going to take care of yourself. Those of you who were leading organizations in 2002 or 2008 likely remember the stress and trauma of keeping things going when the American financial system went up in flames. It’s taxing to be the one providing stability and a way forward for others in moments of chaos. So, finding ways to manage your stress and take care of yourself is just as important as anything else you could do for your organization. If how you talk about your organization to your staff and donors is reflective of your stress and fear, then it’ll be that much harder for your message to inspire and motivate.

Do you have a mentor you can turn to? Can you identify healthy ways to manage stress that work for you? How can you make time for those activities or people even when you are completely slammed? Build the supportive network and the practices in the good times that can bolster you in the hard times.

Behind The Room 40 Name

By | Uncategorized | No Comments

What’s in a name?

A frequent question we get is about our name – it’s a little unusual. We’re actually named after an organization who came together during World War I in Room 40 of the British Admiralty Building. They brought together brilliant minds from various disciplines to understand how to use intelligence to make better decisions, faster.

One of the successes of Room 40 was identifying that a diversity of skills and ideas makes teams more successful, not less. It was this group of naval experts, linguists, mathematicians, scientists, and professors that managed to crack the enemy code.

Their mission was kept so secret that there still aren’t a lot of details about all the volunteers who came together to gather and process information crucial to winning WWI. Fortunately, our Room40 is much easier to find!

We’re thankful to them not just for their name. Without the Room 40’s code-breaking, we would not be able to celebrate today’s 100th year anniversary of the end of the Great War.

The Room40 Group is a consulting and advisory group that works with the leadership of nonprofits to help organizations improve, grow, and change. Like its namesake, Room40 is a place where smart people come together to analyze data, uncover meaning, and progress toward a greater good.

 

Meet Our New Team

By | Room40 Hiring, Room40 News | No Comments

]No summer holidays for us, we’ve been busy searching and finding 3 new recruits for The Room40 Group Team. We’re so glad to welcome these new folks to our team! We’ve gotten bigger which means we can support you better and develop new exciting insights.

Introducing our new lineup:

Associate Consultant Staff Team PhotoLiz Keeffe, Associate Consultant
Liz recently graduated with her MBA in Nonprofit Management and a Masters in Sustainable International Development from Brandeis University. She brings experience in education and community development to the Room40 Group. The Team hopes that her farming experience and love of gardening will save the office plant.

Favorite Place in Boston: Liz enjoys walking along the Charles River with her dog, Tonia.

 
 

Analytics Product Manager Staff Team Photo

Karla Sordia, Analytics Product Manager
Karla brings a unique combination of public and nonprofit experience to Room40. She loves hiking across New England and programming macros in Excel. She has a degree in Economics from the University of Rochester and is originally from Monterrey, Mexico.

Favorite place in Boston: The Minuteman trail, especially along Spy pond, where she walks her dog.
 
 

Marketing and Sales Associate Staff Team Photo
Karena Viehbacher, Marketing and Sales Associate

Karena recently graduated with a Masters in Management from Babson College. She grew up between France and the United States before settling in Boston. Many of her sentences start with “So I was listening to this podcast…”

Favorite Place in Boston: People (and dog) watching from the South End Buttery with a latte and newspaper.

We’re growing – and hiring – and need your help!

By | Room40 Hiring, Room40 News

Hello from Room40!

Things are going great over here. In fact, we’re creating four new positions that will be the perfect fit for someone you just might know. Help us and that perfect someone find each other and we’ll thank you ‘til the end of time. Seriously. Free paperclips every time you come by our office.

We’ve all met those people that make us think, “Wow, I wish I had the right position for you.”  You know who they are— bright, driven, fun to work with. In short, they’re exceptional. You’ve probably met a few of them in your career, but not more than 3 or 4.  Well, that’s who we’re after.

At Room40 we’re known for consulting work that blends the strategy tool-kit honed at top firms with the experience gained as executives at nonprofits ranging in size from $5M to $150M. A growing number of organizations also know us for our revenue and impact analysis— a proprietary, data-rich set of insights that help nonprofits grow, change and improve.

Our team is growing in both areas of our work. We’re looking for

  • an Analytics Product Manager who will dive deep into messy, complicated data sets about nonprofits and their work and later emerge (to wild applause!) with beautiful data visualizations;
  • a Consultant (more senior) and Associate (more junior) to take these insights and help our nonprofit clients use them to change the world for the better; and
  • the perfect Marketing & Sales Associate who can tell these stories far and wide, so that an increasing number of nonprofits learn and improve from our work.

How can you help? We’re so glad you asked! Share the news and help us find those exceptional folks we’d be lucky to work with.  Drop us a note and tell us about them. You won’t be sorry you did. We promise. Paperclips are just the beginning.

All the best,

Ben, George and Anna

The Room40 Group

Turns out you agree: Revenue strategy does matter

By | Cool Analysis, Revenue Strategy, Strategic growth

A stunning 88% of nonprofit leaders* say developing and implementing a revenue strategy would make a significant difference or a tremendous difference for their organization’s long-term success, but only 22% have one.

You’ve heard us say it before: revenue strategy is important.  Like your program strategy, it aligns your organization around a goal, the path to achieve it, and resources it will take to get there.  It sets you up to make the best use of scarce resources as you raise money to support your mission.  (If you’re wondering how program strategy and revenue strategy are different, check out this post.)

Creating a revenue strategy takes time and money – both of which are often in short supply.  So perhaps it’s not surprising so few organizations have one.  But if it’s so valuable, you would expect that organizations would take steps consistent with a revenue strategy, even if they don’t have the resources to develop a full strategy.  There are two metrics that can help organizations allocate their fundraising resources more effectively:

  • $ raised per fundraising FTE, a metric that sheds light on whether raising more money will require more people or more/better support and systems for the people you have
  • Return on investment of fundraising activities, a metric that helps allocate scarce resources among the many possible ways you could raise money

(If you want a refresher on what these are, check our webinar here.)

We asked if organizations are using these metrics and we were surprised by the results:

  • 12% calculate the dollars raised per fundraising FTE
  • 17% calculate the return on investment (ROI) of their fundraising activities

So, what’s going on here?  There’s an approach to organizing our efforts around fundraising that we believe will result in better long-term results, but most organizations aren’t doing it.  There are simple metrics that would move us a step closer to a revenue strategy (and a step closer to best use of resources) but we’re not using them, either.

As data-geeks, that’s a head-scratcher for us.  But we’re astute enough to know that we’re oddballs.  So, it leads us to ask: what conditions need to change for revenue strategy to get the time and attention it deserves?  What can we do as a sector to address this?  A few things:

  1. Awareness.  Like program strategy 20 years ago, revenue strategy isn’t commonly talked about, used, or understood.  It’s hard to find the time, money, and support for something that isn’t common.
  2. Evidence.  With so few organizations using them, there aren’t many stories to tell – yet.  And if you’re looking for irrefutable evidence, that’s even harder to find.  Our instincts and experience tell us its important, but we’re short on evidence and success stories.
  3. Support.  Until Foundations and Boards understand the value of revenue strategy and are willing to support an organization’s pursuit of one, nonprofits will be hard-pressed to find the time or dollars to do it themselves.  It’s just the harsh truth of nonprofits’ access to resources, and the power of the gatekeepers of those resources.
  4. Availability of expertise.  Throw a nickel and you’ll hit a dozen nonprofit consultants (including us!).  How many of those do revenue strategy?  Not many.  And what they mean by “revenue strategy” is different from one to the next.  So, even if you have the support of your Board and the funding to do it, it takes some effort to find someone to help with this, and your options may be limited.  (We’d be happy to help!)

We are thrilled to see agreement on the importance of revenue strategy.  We are saddened to see how few organizations are taking steps in that direction.  But where there is a gap, there is opportunity.  We’re committing ourselves to addressing these barriers to revenue strategies so that organizations make the most of their fundraising resources, enabling them to do more good in our world, sooner.

If we’ve piqued your interest, but you’re wondering “what is revenue strategy, anyway”, stay tuned.  That’s our next post.

Yours in pursuit of more revenue,

Anna, Ben, George and Harleen, aka The Room40 Group

* We hosted a webinar a couple weeks ago all about the importance of Revenue Strategy, what it is, and a couple of steps you can take to get started.  GuideStar was kind enough to host it for us.  We had over 250 attendees.  The stats in this post are from questions we asked during that webinar and in a follow-up survey.

ICYMI: Our webinar “Too little revenue, all the time?”, hosted by GuideStar

By | Revenue Strategy | No Comments

It was a busy Monday, so we don’t blame you if you missed it!  We put on a great webinar on the importance of Revenue Strategy, what it is, and a couple of steps you can take to get started.  GuideStar was kind enough to host it for us.  We had over 200 attendees.  Not bad!

We know your day doesn’t stop just because we are hosting  a webinar.  So, here it is for your watching and listening pleasure.  Enjoy!

Yours in pursuit of revenue,

The Room40 Group

Want a great strategic plan? Pay attention to the process.

By | Uncategorized

Greetings from Room40,

The other day, I was asked what makes a great strategic plan.  I had a one-word answer, “Process”.  Not process for the sake of process – we don’t have patience for that.  Process that engages stakeholders, creates space for data and analysis, allows for iteration and sets up for testing and refining.  It’s a slightly odd answer from a bunch of self-professed data-junkies who like better decisions faster.  Not a lot of room for “process” if you’re oriented that way.  And that’s exactly why it’s important and is central to our approach.

“So, data-junkies who value process, what is this approach you’re talking about?”  We’re so glad you asked.  Here it is.  As always, if we can help you and your organization improve, grow, and change, drop us a line.

 

Seven Habits of Highly Successful Strategic Planning Processes
(I hope Steven Covey doesn’t get mad at us for that.  We’re just trying
to be funny.  How bout we just use SHHSSPP for short?)

Here goes…

SHHSSPP

1. Engage people.  There are no great strategies, just strategies well implemented.  One of the most critical steps in maximizing impact is getting your team on board by involving them in the process.  We balance input and perspectives from national and local leadership at the staff and board levels, front line to executive, program to back office.  We build this in from the beginning to get important input, educate and empower those involved, and create support for the plan as it is developed.

2. Write your narrative. We start the project by defining the narrative for the organization: Where are we today? Where do we want to be tomorrow? What is our vision of the future? This simple, short story will align your leadership on the front end and ground future conversations with staff and stakeholders on the important values and vision underpinning the organization’s next chapter.

3. Develop a hypothesis. Next, we help you develop a strong and testable hypothesis for how you will move from today to tomorrow. This will help us identify and prioritize the most critical decisions you need to make, and the specific data we collectively need to validate (or improve) the hypothesis.

4. Conduct analysis.  With the narrative and hypothesis to guide our efforts, we overlay quantitative and qualitative data, judgement and opinions to inform, validate and revise our thinking.  We conduct both internal analysis (programs, operations, financials) and external analysis (competitors, partners, geographic fit, funding options). Our Internal work builds on what you already know about your organization, supplemented with interviews and additional analysis. Our external work brings to the table new research, data and analysis about different the different opportunities and challenges that shape the context for your work.

5. Create scenarios.  The narrative, hypothesis and analysis come together to inform your organization’s decisions about its future.  To facilitate the decision-making, we believe in the power of developing several scenarios that offer distinct and competing views of what the organization will be doing in the future.  These scenarios will be intentionally provocative.  They elicit reactions that help us identify what will be embraced and challenging among the options. They open up a conversation about why.  It’s not unusual to like the reach of one scenario, the depth of another and the funding model of the third.  Some things are incompatible. Others can be integrated. In the end we can’t do everything and so we’ll have to choose.

6. Put together the plan. With the future vision decided, we develop a plan for how to get there informed by all we have learned about the organization and its external context.  This becomes the document that guides you internally and rallies your supporters externally.

7. Get ready for Implementation and change management.  Finding the “what”, or answer, is only the beginning. Arguably, the harder work begins with the “how”, or changes in behavior, staff, systems, and process… and that requires a clear articulation of the “why.” We can’t do that for you, but we draw on our executive experience leading similar efforts, our wins and our failures, to help you do it better.

Tah-dah!  Just like that.  Drop us a line if you have questions or stories to share.  We’d love to hear from you.

Yours in pursuit of HSSPP,

Anna, Ben, George and Harleen
aka Room40

Know before you grow

By | Growth strategy

Whether you’re growing a local program or expanding to a new state, there is so much to know before you grow.  What program will you offer?  Where?  To whom?  How much staff do you need?  How much will it cost?  Do you have support of your Board, your partners, your funders, your volunteers, your staff?  Some questions are easier to answer than others.*

One question you rarely hear:  how much money is there to support my growth?  Sure, you might hear “will funders fund me?”, but never: “how much money is out there?”  Why don’t we ever ask how big the pie is?  Well, because no one knew!

Until now.  We mapped all the philanthropy in the U.S.  We know that 60% comes from the top 50 metro service areas (we call them “markets”); 90% comes from all 381 markets in the U.S.  And we can give you the detail on it.  What’s amazing is not the data (though it is pretty cool!), it’s what you can do with it.

“So, how do I use The Map?”  Here’s a typical story of an organization using the data to make better decisions, faster:

Our Favorite Educational Nonprofit (OFEN) was in three cities and growing.  They had an ambitious plan to expand in Boston, investing in physical space, staff and outreach.  Ultimately, they had visions of serving the whole region – the need is everywhere, and OFEN’s program is proven to help.  The Board and staff were itching to grow faster than their plan.  An opportunity presented itself in western Massachusetts, just an hour outside of Boston.  It was consistent with their mission and program.  The overwhelming urge was to go for it.

The ED knew what he needed to raise to fund his Boston expansion.  It was an aggressive target, increasing OFEN’s fundraising by a significant percentage year over year to fund a capital campaign and significantly higher annual operating expenses.  With some quick back-of-the-envelope calculations, he estimated it would take $500K annually to run the program in western MA.

Then he asked the critical question:  How much philanthropy is in western MA?  Looking at The Map, Boston is the 10th largest philanthropic market in the country at $6.9B.  No other cities or towns in Massachusetts show up in the top 50.  The smallest, #50 Providence, RI, is $1.1B, or 16% of Boston.  All the dots west of Boston are far smaller than Providence – so small, they are hard to see.  Think of the dots as dollar signs… and there aren’t many.  (Go ahead, click on the map to get a good look.)

 

 

He took a quick look at what peers were raising on an annual basis and the answer was clear.  Funding the start-up in western MA would require support from the Boston philanthropic community.  That means staff time, potential prospects and dollars diverted from the big push in Boston.  And, likely, it would require on-going support as well.

With this answer, the ED went back to his board: “If we do this, we slow down Boston.  Let’s focus on Boston and revisit in a year.”  It was an unpopular decision – until he shared the data. 

The data and approach OFEN used to come to a better decision, faster is captured in The Map of Opportunity: A Practical Guide to Philanthropy in the U.S.  It’s available on our website.

Let’s be honest, sometimes you have a chance to really plan ahead; other times, not so much.  Either way, take the time to know before you grow – use The Map to answer that all-important question “Where is the money?”.

Need help along the way?  Just holler.

Yours in pursuit of better decisions, faster,

Anna, Ben, George and Harleen, aka The Room40 Group

*With experience as nonprofit executives and strategy consultants, we specialize in answering these sorts of questions.  Want some help? Let us know.

We found a partner in crime!

By | Room40 News

We found a partner in crime!  A soulmate!  Our better half!*

We’d like to introduce our new BFF:  GuideStar. We share a love of data and analysis, travel, sunsets, long walks on the beach…  oops.  I mean, commitment to data innovation and data distribution resulting in nonprofits making high-quality, data-informed decisions.

GuideStar is the world’s largest source of information for nonprofit organizations.  Working together, we will create valuable tools, informed by data, for the nonprofit sector.

The first result of our collaboration is The Map of Opportunity, showing the distribution and concentration of philanthropy across the U.S. – and how to use the information to raise more money.  If you haven’t seen it yet, check it out.  It will change the way you think about how much you can raise for your organization.

“We strive to provide data and analysis to help nonprofits make better decisions,” said Adrian Bordone, vice president for strategic partnerships at GuideStar. “Our collaboration with The Room40 Group is a sensible step in this direction by strengthening fundraising strategy and execution.”

Partnering with GuideStar will raise the awareness of our work and help us build a community of nonprofit leaders who value data and learning from each other – which only makes our work better (and more fun).  So, yes, we’re a bit smitten.

We look forward to sharing the results of our collaboration with you.  Stay tuned!

Yours in pursuit of better decisions, faster,

Anna, Ben, George and Harleen
aka The Room40 Group

 

*Yes, that’s hyperbole.  We don’t actually commit crimes.  And we’re not leaving our spouses to run off with GuideStar.  We’re working with GuideStar to promote great tools for nonprofits, informed by GuideStar’s data and our analysis.  It’s a working relationship we all believe will improve the sector.

 

Had enough revenue Russian Roulette?

By | Cool Analysis, Philanthropy

A New Perspective on Philanthropy and Fundraising
Post #4: Had Enough Revenue Russian Roulette?
Setting Revenue Targets in a Complex World

Oh boy, it’s that time of year: You’re working with your staff to set revenue targets. A third of your folks are setting targets that feel too high, a third too low, and the rest are in the middle… but no one agrees on which third is which! You do your best by looking at past history (10% higher make sense?), current pipeline (80% of target ok?), and team (they look burnt out, reduce by 5%?) but it can feel like voodoo and chicken entrails.

I may be exaggerating a little, but I think only a little. First, let’s acknowledge that setting revenue targets is hard. You often have a mix of public and private dollars from different sources and dynamics; even when we focus on philanthropy we’ve seen local markets are not equal in terms of size, there are lots of local idiosyncrasies and nuances; and your teams likely vary in tenure, ability, and capacity.

This means you are constantly trying to triangulate philanthropic potential (what’s possible), fundraising competency (how strong is the team), and capacity (how big is the team), all of which can swing performance significantly. As a result, making decisions on how much you can raise, and where feels at best like expensive trial and error, and at worst like Russian Roulette: spin the chamber, pull the trigger, pray.

So let’s talk about how we can start to reduce that uncertainty and danger, starting with philanthropic potential. We will continue with our fictional “Nonprofit A” to explore how we might put this data to work… though purely for my entertainment we shall redesignate said fictional example “The George Chu Center for Folks Who Can’t Decide Good and Wanna Get Better Data Too”*, or GCC for short.

GCC operates in and raises money from five metropolitan areas including New York, Chicago, San Francisco, Boston, and Durham. The five sites range in age from one year old (Chicago) to ten years old (Boston). We are in the midst of our planning for next year, and also revising our five year plans. Here’s how we did it.

Understanding market size is a really helpful start — it explains about one-third of what you’ll raise if you recall from our third post — but it is also necessary to look at what folks are actually raising within each market. To do so, we gathered philanthropic data from a set of peer organizations who raise money from, and for use within each of GCC’s metropolitan areas.

By plotting these points for each market, we were able to create a distribution of philanthropic revenue by market. In Figure 1 you can see this distribution for each of GCC’s markets. Each blue dot represents philanthropic revenue of a peer nonprofit; the red dot is GCC; and the “box” is the middle two quartiles; the line in the middle is the median; and the “whiskers” a measure of standard deviation.

Figure 1: Distribution of Philanthropy by Organization for GCC’s Market

 

A rough gauge of potential is the median, or “typical” for the peer group. If you are above or below that line, that would indicate higher or lower performance, respectively, all else equal (note, obviously not all else is equal as these organizations range in size, capacity, strategy, mission, etc., but we find this to be a solid starting point).

Now, as always, this data is useful to inform judgement, but not good enough to replace it. So we need to overlay the story. For example, we might find that Chicago, which looks like a gross underperformer, is in fact in year 1 of operation. Perhaps San Francisco had an unfilled Executive Director position for half the year so performance below the median actually represents heroic efforts by the team. Maybe Boston was highly focused on building out public funding streams and divided their focus accordingly. Durham turns out to be a largely a programmatic outpost with minimal development staff. Context always matters!

Caveats aside, if we add up the red dots, we’ll find GCC is raising about $10.3M across all five markets. If we use the median or typical as a proxy for potential, we can add up these up and see GCC can raise up to $14.7M in these same markets. Perhaps an initial ballpark estimate for our five year revenue goals? Maybe a starting point for next year’s goal as we can see where we might increase a lot (Chicago?), or not at all (Durham?).

Hopefully you said “yes”, and then added “but we need to refine our ballpark estimate a lot before I feel comfortable committing my team to these as five year goals.” I hope you also said “knowing what is possible over time is a helpful, but our immediate need is to set targets for next year… this helps a little but don’t we need to take it further?”

Yes, the answer is yes. But I’m in the midst of an “Agents of Shield” binge, so we’ll save some for later. Stay tuned next week, same Bat Time same Bat Channel, for our next post where we will zero in on GCC’s annual and five year revenue goals!
* Inspired by The Derek Zoolander Center For Kids Who Can’t Read Good And Wanna Learn To Do Other Stuff Good.

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