How To Not Run Out Of Money
This article is primarily about the non-profit sector, and in particular it is for those who have have a responsibility for raising money, including board members. That being said, many of the principles and strategies mentioned in this piece absolutely apply to the for profit business sector as well, especially social change startups, because let's face it, no one wants to run out of money. However, when you have vulnerable populations depending on the programs and services your organization funds, this issue is particularly critical. Especially when you understand the scope of the non-profit sector in the United States.
There are currently over 1.5 million non-profit organizations in the United States that employ over 14 million people. One of the most difficult positions to staff and retain for within such organizations is that of a fundraiser, with both turnover and burn-out rates being incredibly high. Fundraising( also known under the titles of development and advancement) is a highly skilled, crucial, and essential position, and yet very few schools offer degrees for this specialty. It is mostly about learning while doing, as well as being mentored by more seasoned professionals. If we want the non-profit sector to operate in such a way as to maximize their impact, we have to address this knowledge and experience gap by preparing, training and supporting talented individuals specifically for these roles. Non-profits help to improve the quality of life for our most vulnerable and underserved populations, but in doing so, they also help us all as a nation. This is why it is for all of our sakes that we have to do this better.
I've written about this issue before ( "If you know how to ask people for money you will have a job for life"), but I decided to write this article because I recently received one of "those" emails from one of my favorite non-profits. By "those" I mean an email stating that they were facing a budget shortfall and a cashflow issue, and they were asking if I could jump on a call to discuss what to do. I have a long history with this organization and I hold a deep love and respect for them, and frankly I was surprised to receive this email and immediately agreed to a call. Not only that, but I pulled in a favor and asked my dear friend Kathy LeMay if she could join the call as well. If you've never heard of Kathy, allow me to take a moment to explain why I asked this favor of her.
Quite simply, Kathy is a fundraising guru. She is one of the most knowledgeable, purpose-driven, and beautiful people I have ever met. She has been a mentor to me on my philanthropic journey for a decade and in 2018 she stepped in to be the interim Executive Director for Women Moving Millions and did an amazing job. Truly an amazing job. This week she well be joining The Global Fund as their Senior Advisor of Strategic Philanthropy in Geneva, Switzerland, and I wish her nothing but the very best in this endeavour. They are incredibly lucky to have her. But before she crossed the pond, she graciously said yes to join me on the aforementioned call, and the content of the conversation was too important not to share. Afterwards, I asked Kathy a few additional questions about fundraising and development, and her answers were both illuminating and inspired.
JZ: Kathy, when we jumped on the phone with the organization you did not jump right into questions such as when do you run out of money? How much do you need? Who are your top donors you can ask for money? Instead, the first question you asked was to describe their history around fundraising. Why start there?
KLM: When there’s a budget shortfall or cash flow crisis, the instinct is to immediately talk money. How to get it, where it’s going to come from, who can give it. I understand that instinct. Unfortunately, chasing money won’t solve the problem. You may meet a short-term funding gap, but you won’t have created a long-term solution, and in the process, you may damage trusted relationships with donors that may be fatigued by being asked for a rescue.
The better approach is this. Take a deep breath, step back, and assess your organization’s fundraising culture. It's likely that you didn’t wake up one morning and realize that you were short on cash; that reality has been building up for a while. Now ask yourself these questions:
How would I characterize our organization’s fundraising culture?
Does the lion's share of fundraising live with one leader?
Is relationship-building and raising money a team effort?
What five words would I use to describe our fundraising culture?
Did we grow programs with a corresponding revenue strategy, or did we grow programs and think, “The work is so good and we’ve raised funds thus far. We’re sure the money will be there”?
I’ve asked these questions to literally hundreds and hundreds of organizations. What I’ve found is that when you answer them honestly, you’re already well on your way to create a long-term solution to a short-term problem.
JZ: I love question number 4, what five words would you use to describe the fundraising culture? I am sure you have heard a very long list of responses. Once they have them in front of them, then what? Especially when they are in a challenging situation.
KLM: The organization has to ask itself, “Will these qualities get us where we want to go?” These qualities may have helped them go from bootstrap to growing, but perhaps they are not the right ones to move the organization forward.
All involved should connect and talk about what five qualities they need in a fundraising culture for great donor relationship building and mission-fulfillment. Additionally, they can now bring this conversation to donors. For example, “we know we need to make some changes for sustainability. What got us to where we are won’t get us to where we’re going. We want to be open and transparent with you about this shift and we thank you for sticking with us as we improve and strengthen our internal capacities.”
JZ: What are the most common reasons you see with respect to an organization not being able to make their budget?
KLM: There are a few circumstances where not being able to make budget is out of an organization’s control, such as national or international crises, disasters that divert funds to other causes, a stock market dip or crash, and/or a large gift promised but not actualized.
However, generally, the primary reason non profits don’t make their budget is that they don’t prioritize donor relationship building and resource mobilization. They often hire a Director of Development and say, “Great, now that person can bring in the money and we will be set.” They don’t see that person as leading an effort for long-term financial health and wellness, or as building a community of engaged and valued supporters. Instead, they see the position as a magic bullet to take care of their budget stress.
I once put myself in a position where I did just that. I was tasked to raise a certain amount of money for an organization, and even though I knew I was the magic bullet, I chose to ignore my own instincts. The organization was still having trouble making budget after many, many years in business. It’s still so easy to think that one person will make money fall from the sky, and while that sometimes does happen, it’s not a long-term solution. What happens if that rainmaker leaves? How well cared for are the current donors? Have we really created the conditions for mission fulfillment? I still regret having taken that magic bullet role. Our culture wants the great rainmaker because it’s a great story, but the reality is that it’s a story of one heroine versus a story of smart strategy, thoughtful engagement, and leadership.
So here’s what I’ve learned. There’s no one person coming to save a mission or an organization. Leave behind this idea of the great fundraiser who will save the day, and instead focus on leadership and an organizational culture that priorities donor relationship building and mission making. ( JZ's editorial. Heck yes!)
JZ: You presented a path forward for the organization we spoke to, which of course may not be applicable to every organization that finds themselves in this position, but can you describe that path?
KLM: First and foremost, be honest about your fundraising culture. Don’t be embarrassed or ashamed. Detach from the emotionality of it. Look at it objectively. Write the five words up describe your current culture on a giant piece of paper and talk it through with colleagues and board members. It’s likely that this culture got you this far. Be grateful for it. Agree to hold on to the best of what you do (i.e. donor stewardship), and then shed what no longer works. Now, list the five words or phrases that you want to describe your fundraising culture moving forward. Examples include transparent, robust, donor-focused, shared responsibility, and rooted in abundance.
Once you have your five, begin to map out what practices, habits, and protocols you will need to put in place to actualize each one of them. Pay attention to which practices you’re saying goodbye to and which are replacing them. Ask yourself who’s responsible for taking leadership on each. While this may get balked at (ie. “Fundraising isn’t my job”), here’s a few things to remember:
We rarely ask one person to run a program with no input or support from others in the organization. Major gifts is a program. It needs the same support. If it didn’t, non profits wouldn’t be in pretty consistent budget shortfalls and cash flow crises.
While asking for money isn’t everyone’s job, building a culture of sustainability is in everyone’s best interest. We can each contribute our thinking capital towards best practices for a healthy and well run organization.
You don’t have to ask for money to be part of fundraising. You merely need to bring your best ideas and thoughts about how to leave behind a culture of stress and strain around money and replace it with calm and possibility.
Once you’ve had these discussions internally and have the beginnings of a road map, share this with your must trusted donors and supporters. Remember, donors want non-profits to achieve mission fulfillment. They also understand that getting there is more than just great programming. They know non-profits have to build systems that will help the mission soar. Enroll and engage them around this piece. They will bring good, smart ideas to the table, and they will see you leading as a mission maker and not merely chasing money.
JZ: Any final words of wisdom for readers, and especially professional fundraisers that may be reading this?
KLM: Great fundraising cultures don’t happen. They need to be built. They require leadership. If you’re in a development role, this is your leadership opportunity. I often speak about the difference between the profession of fundraising and the profession of mission makers. Where fundraisers are tasked with chasing money, pitching to donors, and funding a budget, mission makers pursue values alignment, radically listen to donors, and aim to fulfill a mission. If you build trusted, values-driven relationships, the money will follow. Remember, donors want your organization to succeed. That being said, their job is not to rescue you. Your organization is not owed loyalty and support. We earn it by putting values and mission first, listening to donors, and determining how we can help them achieve philanthropic success with the mission we love. If you follow this approach, you may have a few budget bumps along the way, but you will be able to say goodbye to the cycle of cash flow crises. You will also have gone a long way in showing donors that you are committed to building the kind of organization that make a mission come alive.
JZ: As you can tell, Kathy is a total rockstar in her field. Please visit Kathy’s company site, Raising Change, for more about her work and advice on fundraising and development. If you want to dig deeper, she just launched a digital Master Class on Fundraising, and I cannot recommend it enough. All details can be found on her website. I was one of the first people to sign-up.
I hope this piece has inspired you to think more critically about the role of fundraising and development in the non-profit sector. If you are currently working in this field I salute you. Your work is essential not just to the organization you are specifically working for, but to the overall health of our economy and society, and I hope the words of advice above can make your incredibly important job just a little bit easier.