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Room40Group

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We need to talk. It’s about revenue.

By | Philanthropy, Revenue Strategy

Ever notice that nonprofits dedicate many hours (and many dollars) to developing their programmatic strategy?  It’s a big change from 20 years ago – and it is usually time and money well spent.  But, nonprofits rarely do the same for their revenue strategy.  “Their what?”, you might say.  Exactly.

Organizations spend too little time on revenue strategy – what they will raise, how they will raise it and why, with limited time and money. This was our big “ah-ha” towards the end of 2017. We don’t have to tell you revenue is a big issue; you tell us all the time.  Somehow, every conversation comes around to revenue.  It either starts there or it ends there.  It’s inescapable.

Here’s a critical observation that will help us start to crack open the issue of “too little revenue, all the time”:  Nonprofits are in (at least) two businesses.  What does that mean?  Why does it matter?  And what does it have to do with revenue strategy?  We’re so glad you asked.

Two businesses?  What does that mean?
It’s tempting to think of your “business” as your programs.  It’s what you exist to do: feed the hungry, teach the children, provide services to those who need them most.  There is a set of activities (with associated costs) and a set of beneficiaries.  Your program staff and all the people that make their work possible (IT, HR, Finance, Accounting) are part of this “business” that serves your clients.

But look around your organization and there are other people (and costs) that are not directly serving your beneficiaries. They are engaged in different activities: planning galas, developing relationships with donors, submitting grant applications and reports, advocating for public funding, and on and on.  Their “customers” are different, too: individual donors, institutional funders, hosts and guests at your fundraising events.  They aren’t soliciting your clients (unless you are a college, university or hospital); they are engaging with an entirely different population, including individuals, corporations, foundations and public funding sources.

The fact that they are doing different things (costs) for different people (customers) than your program staff means they are in a different business.  Namely, raising money. So, yes, your program is your “business”, but it’s only one of your businesses.  Raising money is also your business – your second business – and it’s an important one!

There is a handy 2×2 from Bain & Company that illustrates this business of two businesses. It is generally used in the for-profit context but it applies to nonprofits just as well.  (Did you think the dawn of 2018 stripped us of our love of 2x2s??) High cost sharing and high customer sharing = one business. Low cost sharing and low customer sharing = two businesses.


Two different customers, two different sets of costs = two businesses.  Why does it matter?
Different businesses have different goals, require different activities and resources.  Knowing what it takes to run your programs and how to do it isn’t the same as knowing what it takes to raise money and how to do it.  (In case you hadn’t noticed, this is why the ED job is so dang hard!)  You’ve probably intuitively known you’re in two businesses for a long time.  Being able to describe your businesses, you can start assessing their needs and results with greater clarity and efficiency.  Instead of a two-headed monster, you can see you actually have two monsters! You can differentiate between an investment in one and an investment in the other and the return on those investments.

What does all this have to do with revenue strategy?
Strategic plans are all about allocating limited resources.  They tell you what to focus on (and what not to).  Organizations with programmatic strategic plans have a clear argument for resource investment on the program side.

Just like your program strategy, your revenue strategy clarifies what you are doing with limited time and resources, how and why – for your revenue business.  Taking the time to develop a plan, including a good hard look at your philanthropic potential compared to your own performance and that of your peers, will help you decide where to invest, which activities to spend your time on and what to say “no” to.  It will help you see if your goals are achievable and make the case for the resources you will need to achieve them.  It gives critical context to your tactics, allowing you to justify the investment required to reach your goals.  Now, doesn’t that sound dreamy?

We’ve been helping clients with organizational strategy for years.  It’s all about programs and operations.  More recently, we’ve been working with organizations on revenue strategy, within the context of growth or program strategy, but increasingly as a standalone issue.  It has been eye-opening for us, and for them. So far, we’ve found investing in revenue strategy with the same diligence and rigor as a program or operating strategy yields a high return… staff, board and funders can more clearly articulate your mission, resources are allocated more efficiently, and oh yea, you raise more money.

If one of your businesses has a strategy and the other doesn’t, it’s not hard to imagine that goal-setting, resource allocation, and decision-making is going to be easier in one than the other – and the one without will suffer.  Our hypothesis:  We can’t escape the land of “too little revenue all the time” without addressing this imbalance – without a revenue strategy.

So, there you have it.  Our ah-ha from 2017 and our early thinking about revenue in 2018.  Next week, we’ll ask for your perspective.  What do you think?  Do you agree revenue strategy is important?  Do you think we’re just plain crazy?  Keep an eye out for a survey.  This is too important to be a one-post topic!

Yours in pursuit of revenue,

The Room40 Group

Show me the money!

By | Cool Analysis, Philanthropy, Room40 News

Yes!  We will show you the money!  The Map of Opportunity: A Practical Guide to Philanthropy in the U.S. is for sale!  Get your very own copy for $495 (individual) or $995 (organization).  Click here to buy it now.

The Map of Opportunity reveals:

  • The distribution of philanthropy across the U.S.
  • How much money is in each of the Top 50 markets
  • Practical advice for raising more money

The Map of Opportunity is an 180-page report presenting never-before-seen data on philanthropy in the U.S.  You will see how philanthropy is distributed across the U.S.  You will get detailed information about philanthropy in the Top 50 markets, from NY, NY to Providence, RI, including:

  • How much philanthropy is from Foundations, Corporations and Individuals in each market
  • How philanthropy is distributed across the counties in each market
  • The top 10 Foundations, Corporations and Zip Codes for individual giving in each market

The Map of Opportunity pairs this critical data with easy to follow how-to guides to help your organization use the data to raise more money.  We show you how to:

  • Create a shared understanding of your philanthropic market(s) within your organization
  • Assess the long-term potential of your market(s) and others
  • Set revenue target(s) for the coming year

Get your copy today.  You won’t be disappointed.

The Map of Opportunity:  Philanthropy in the 381 Metropolitan Statistical Areas in the U.S.

Yours in data and insights,

Anna, Ben, George, and Harleen
The Room40 Group

[Psst…  not convinced yet?  Check out a free download of the Executive Summary and a couple pages of each section.  Take a peek and then buy the other 160 pages with confidence.]

Who is the Room40 Group?
A consulting and advisory group, we work with the leadership of nonprofits to help their organizations improve, grow and change.  We created the Room40 Group to help nonprofits combine data and learning from peers in pursuit of better decisions, faster.

“Where is the Money?”

By | Cool Analysis, Philanthropy, Room40 News

“The need for our services feels endless. We must find the dollars to do more, but WHERE’s the money??”

We asked ourselves this question time and again as nonprofit executives.  It was so pressing – and so hard to answer – that we decided to dedicate ourselves to the data collection and analysis that would help us answer it.  After 2+ years of collecting, analyzing, sharing, testing, head-scratching and validating, we have some data and insights to share.  Data and insights that, we believe, will help nonprofits answer the question: “where can we raise more money?”

In May, we will release these insights as The Map of Opportunity: A practical Guide to Philanthropy in the U.S.  The Map, for the first time, reveals the distribution of the $333B in philanthropy in the U.S., showing the 381 metro areas from which 90% of it originates.  (Just look at all that space without dots — that’s the other 10%.  Yikes.)

The Map of Opportunity:  Philanthropy in the 381 Metropolitan Statistical Areas in the U.S.

The Map is a practical guide to using the data to generate insights and take action, answering these critical questions:

  1. How much philanthropy is in my market?
  2. How much can I raise in my market over time?
  3. What revenue target should I set for next year?

The Map includes data on individual, corporate and foundation giving by county for the top 50 philanthropic markets in the U.S.

Sample Market Overview: Boston, Massachusetts

Three “Insight to Action” sections show you how to put the data to use:

  • Orient Leadership to Markets: Learn how to use The Map to create a shared understanding within your leadership team of the markets in which you raise money – a prerequisite for making better decisions faster.
  • Assess the Potential of Your Markets (and others):  One-third of what you raise can be explained by where you are.  We show you how to combine The Map with peer data to assess the potential of a market.
  • Set Your Annual Revenue Targets:  Now we get tactical and show you how to combine what you’ve learned about market potential with what you know about your internal pipeline, competence and capacity to help you set revenue targets for the next year.

Of course, there is no silver bullet; The Map alone won’t solve all our problems. However, it CAN inform and improve decision-making, helping you raise more money.

Keep an eye out for the big release in the coming weeks.  For $495, you can have your very own copy.  If you want to be sure not to miss it, drop us a line and we’ll put you on the pre-release list for an extra special note when it’s up for sale.  We’re excited to share it with you!

All the best,

Anna, Ben, George and Harleen
The Room40 Group

Good things come in 3s!

By | Growth strategy, Room40 News

Did we say good things? GREAT things. Check it out: rings in a circus; wheels on a tricycle; feet off the ground (and rising) De La Soul is; blind mice; Stooges; members in Destiny’s Child; ingredients in a BLT… we could go on.

Truly, three is a magic number. So in that spirit here’s a little update on the 3 awesome things that have been happening in Room40.

Growth strategy, baby!

We’ve been working with two amazing organizations:  ioby and Braven.

ioby (in our backyards) is a crowd-resourcing platform that provides neighbors with the tools and support they need to create positive change in their neighborhoods.  (Think: opposite of NIMBY.)  We are helping ioby’s leadership develop a strategy, financial model and growth plan to support 5000 projects a year.  Check them out!

For too long, being the first in your family to go to college also meant you weren’t as likely as your peers to get a good job. Braven is changing this – and attracting a lot of attention in the process!  We are working with Braven’s powerhouse team identifying the best growth strategy for them.

We’re always keen to learn about great organizations looking for help planning their growth or adjusting to having grown.  No surprise, some of our favorite projects have been for friends of friends.  So, don’t be shy: you are an excellent matchmaker.  Introduce us to your favorite nonprofit, we’ll do the rest!

Your on-going quest to find the $$!
(aka, “Can’t we get better at this fundraising business?!”)

We are *this close* to introducing our latest labor of love:  a map and practical guide to all the philanthropy in the U.S., broken down by individual, corporate, foundation with detailed stats for the top 50 metro areas.  And what to do about it.  Yeah, get your head around that:  how much $$ is in Boston, vs. San Fran, vs. NYC (and 47 others…) and how it can help you make better decisions, faster about revenue strategy and annual targets.  This is the data and “how to” that we were sharing via LinkedIn posts last fall.  It’s grown up to be a real (big) thing: data and “how to” you can’t live without.  If you want to get on the “pre-release” list, drop us a line.
Is it just you three?

Actually, no.  We loved being 3, but it couldn’t last forever.  We have a fabulous new Associate Harleen.  She comes to us from Boston College, having just spent a year in the Jesuit Volunteer Corps in LA.  She has a passion for nonprofits, a great sense of humor and incredible tolerance for 40-somethings who think they are wicked smaht, pretty cool and exceptionally funny.  Yup – we found our unicorn.  And we’re looking for more! Know some people who would be a great fit for Room40? We’re all ears.

So, those are our 3… what are yours??  Drop us a line and let us know.  And don’t forget to introduce us to your old college roommate who is on that Board that is looking for a consultant to do a strategic plan.   We’ll tell them you’re still as smart and funny as you were back then.  Promise.

– The Room40 Team:  Anna, Ben, George and Harleen

A New Perspective on Philanthropy and Fundraising

By | Cool Analysis, Philanthropy

We have been hard at work developing groundbreaking analysis and insights on philanthropy and fundraising. We are authoring a series of Linkedin posts to walk you through our work to date, some of our initial insights, and how you can access this information, knowhow, and better practices should you so desire. We thought we would also deliver them directly to your inbox so you don’t miss out.

 

Oh, for the Love… There MUST be a Better Way

“Oh, for the love…” I can’t tell you the number of times in my I’ve said those words in

my nonprofit executive life. While they have been uttered for a variety of reasons, a consistent focus of my expletives was fundraising, expansion, growth, oh my!

Deciding where to go, what to do, and how to resource are fundamental duties of any nonprofit executive, yet as nonprofit executives, Ben, Anna and I always felt underwhelmed by the available data and struggled to make effective, timely decisions across our organizations and markets.  We decided there MUST be a Better Way…except when we looked around, there wasn’t.  There were analogues like Forrester Research, Corporate Executive Board, Advisory Board where we saw glimpses of what we wanted for the nonprofit sector, so we knew it was possible, but it didn’t exist… yet. It was up to us to make it happen.

And so that’s what we’re doing:  for the past two years, we’ve been developing Peer Performance Insights (PPI) on philanthropy and fundraising, a data-driven approach to answering the questions we struggled with:

  • How much philanthropy can I raise in my existing markets?
  • What if I expand to new markets? How do I evaluate my team’s fundraising targets across geographies?
  • How does my fundraising performance stack up against peers, and what can I learn and improve?

We’re excited to start sharing “the Better Way”: how the PPI helps answer these questions.

Philanthropy is Local, Local Markets are not Equal

Our first step in building the PPI was to size the philanthropic market for the 381 metropolitan statistical areas in the United States. We know, thanks to Giving USA, that $373B in corporate, foundation, individual philanthropy originates in the United States, but now we know from where!

Below in Figure #1 you can see a map of the United States and 381 “dots”, each representing a metropolitan statistical area. The size of the dot represents the size of the philanthropic dollars originating from those markets. Blue are the top 15 biggest (YUGE); adding in the orange brings us to the top 30 (way smaller); the green brings us to the top 50 (significantly smaller still), and the brown rounds out the remainder (chicken pox).

Insight #1: Philanthropy is local, and highly concentrated in a small number of large markets. Not earth shattering, I know, but stick with us. Plus, maps and dots are fun.

Figure 1: Philanthropy is Local

Figure #2 takes a closer look at those top 50 markets (blue, orange, green) in snazzy bar chart form. Here we can see even among the top 50 there is a strong concentration towards the left, and holy New York, Batman! This chart starts to explain why most of our national multisite nonprofits tend to cluster in the blue markets… high concentrations of need in urban areas coincident with high concentrations of wealth. This both makes a ton of sense, and makes me a little sad when you consider how much need exists in suburban and rural areas.

Insight #2: Not all philanthropy that originates in a market stays in a market – and how much stays depends on the size of the market.  For the largest markets, we estimate ⅔ stays in market, and ⅓ goes elsewhere. For the middle of the pack, about ¾ stays in and ¼ goes elsewhere, and as you get smaller the in-market dollars approach 100%. Who cares you ask? Well this has some interesting implications for how you might construct your ask, particularly if you are raising money for multiple geographies. Finally, note there are, of course, exceptions to these general rules of thumb… Hi Seattle and Mr. Gates!

Figure 2: Local Markets are not Equal

We’ll stop there for today. Hopefully we’ve captured your attention and interest. If I’m you, I’m thinking “cool charts”, but where’s the “so what?” How does this actually help me make any decisions?

No worries friend, we’ll get there. Stay tuned next week, same Bat Time same Bat Channel, for our next post “Yes, Market Size Really Does #@$#@ Matter”.

Does Boston have too many nonprofits?

By | Uncategorized

Yesterday’s Boston Globe ran a front-page article on an important and provocative question: “Does Boston have too many nonprofits?”  It sparked a lot of conversation is our office, as I imagine it has in yours.

The article starts by telling a story about OneGoal— a Chicago-based organization helping under-served high school students enroll in and complete college— and their recent decision to expand to Boston. The article then describes the decision by some local funders, schools and partners to work with them, and others not to. In the course of telling this particular story the article walks close to, and touches on, a number of questions that will be familiar to folks who have put their shoulder to this kind of wheel: Is the often fragmented and entrepreneurial state of the nonprofit sector a strength or a weakness? How should funders interested in greater impact best focus and direct their efforts? Are there better ways we should all be working together to tackle the deep and challenging inequalities in American education?

A first observation about all this: I love that the Boston Globe is asking these kinds of questions! At the Room40 Group we spend lots of time wrestling with this sort of stuff as we help our nonprofit clients grow, change and improve. It often feels like nonprofits only get promoted to the front page of the newspaper because of some real or perceived scandal. This week the Globe used above-the-fold, front-page real estate to ask a complicated question about how we can all have more impact. Perhaps I’m a glass-half-full guy but this feels like progress, of a sort.

A second observation: The Globe article acknowledges that lots of nonprofits in Boston are already working on making college accessible, and graduation a reality, for individuals that have the deck stacked against them. In response to the statistic that forty similarly-minded organizations are currently partnering with Boston Public Schools one local foundation executive comments: “The market [is] pretty saturated.” But both the article and this statement confuse the means with the ends. Nonprofits trying to move the needle on college attainment work in two “markets”: one for charitable funding; the other of students receiving services. Are either of these “markets” saturated? In other words, are there no students left in Boston who could use the services of OneGoal or its peers? And if we believe an unmet need is there: how much potential money is needed and could be raised to address it? In this particular article the Globe neither asks nor answers either question.

It’s a pity, because these two questions are central to the matter of where and how nonprofits try and increase their impact. The interviews quoted in this Globe article raise the specter of redundancy and ask if we should do more to avoid it. But if the nonprofits the Globe cites are collectively reaching less than 100% of the students who need their services isn’t the need under-met, rather than over-met? Indeed, redundancy may have benefits. Some of the organizations cited in the Globe article focus their resources on access, or getting kids into college. Others focus on retention, or keeping them there through graduation. Are kids in need better served only getting one or the other?

If the Globe wishes to argue for focusing and consolidating resources on nonprofits that are having the most impact, it should make that case. But this article doesn’t argue for bringing effective and proven programs to all kids in need; it only asks whether we should reduce the number of organizations doing the work.

At the Room40 Group we routinely help nonprofits quantify and compare across geographies the size of the unmet need they wish to address. We have also built a proprietary database of all the private philanthropy in the United States so we can size the potential charitable support for different causes in different places. Nonprofits can have significantly more impact if they make good decisions about where to grow and how to pay for it. Making these decisions with confidence requires asking the right questions, and then answering them with the right analysis.

Because we’re consultants, we sometimes like to show things in 2×2 matrices. It’s a stereotype, I know; please don’t hold it against us. The one illustrating this post we’ve used to help clients think about how the amount of ‘potential funding’ and ‘unmet need’ influences where they grow.

When considering OneGoal— and the other Boston nonprofits highlighted by this Globe article— the Globe and local funders could ask: How big is the unmet need(s) they are individually and collectively trying to address? What will it take and how much potential funding is required to address it? The answer to these questions would suggest how much more needs to be done, and how we might think about achieving it. The question the Globe asks—in effect: How many organizations do we need to do everything well?— is best answered in this context.

That’s our view.  What’s yours?

 

Full transparency: The leadership of the Room40 Group knows many of the individuals and organizations referenced by this article, either personally, professionally, or both. Several are current or former clients. George Chu, my co-founder and partner, is a former Board member of Bottom Line.

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