Do the Math

Maximizing Relationships Requires a Funding Rationale

The absence of strong Funding Rationales (a.k.a. your reason for needing funds) likely means your organization is not maximizing relationships.

At a major-gifts level* there needs to be some specificity in terms of funding a specific program, outcome, or priority initiative. (See 10 Types of Funding Rationales).

If you don’t have a specific Funding Rationale then one of two things usually happens:

  1. The commitment is not maximized.

    People give to support a mission or a cause, and they invest more to support specific impact (or outcome).  Our experience has been that a portfolio gives 3x more when you’re able to clearly define a strong funding rationale!!!  

    This is the difference between asking,”Will you invest $10K in our vision?”  And, “Will you invest $10K to help with this priority and these outcomes that will help us deliver on the vision?”
  2. Funders (over) restrict the funding.

    When we see this, it’s an indication that the funder is creating a rationale because yours is not clear enough!

    Note: While restricted funding is not bad in and of itself, gifts committed with restrictions crafted by the funder hinder an organization’s efficiency or focus. Said another way, if you don’t define your priorities/rationales then someone will do it for you.

*For most organizations this is $10K+ and could come from an individual, corporation, or foundation.

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The Real Estate Questions You Need To Answer – At Altitude

In designing, managing and leading hundreds of ‘building campaigns’, these are questions we ask – at altitude:

30,000’ WHY?
VISION

  • Are we in the Re-Construction Biz or the Impact Biz?
  • What is the Purpose(s) of the ‘Space(s)’?
  • How does it relate to our Vision?
  • Have we dealt with the ‘Footprint’ & ‘Bubbles’ before Wall Coverings & FFE?
  • Do our Financial Goals match our Constituent’s Capacity?
  • Is this about ‘Ownership’ or ‘Control’?
  • How do we Share this Story (of Impact) vs. ‘Sell Recognition/Naming Rights?’
  • Have we explored Partnerships?  Multi-Use Facilities?  24/7?

14,000’ WHAT?
STRATEGY

  • Have we engaged all stakeholder groups to validate that we have the best solutions/plan?
  • Are there other cheaper and/or more creative real estate solutions to achieve our goal? If so, can we address why we’re not pursuing?
  • Have we looked at all Creative Financing Opportunities?
    • Debt/Mortgage?
    • Bonds?
    • Lease?
  • Are we telling the architects and planners what we want and need, what we can afford, how it fits… or are they telling us?
    • Cost per sq. ft. needs to fit our situation
    • Entire Project/Cost must enable our Case for Support

3’ HOW?
EXECUTION

  • Can this be divided into phases? (Both Building & Funding)
  • Can we take 3 to 5 Year Commitments? Do we need Bridge Financing or a Construction Loan?
  • Have we made Everything A Project? (within the Big Initiative)
  • Are there Projects (In-Kind Opportunities) to Maximize Gifts?

In sharing this, I also want to encourage leaders and readers to engage with us EARLY in the formative stages of a building project or strategy. By asking the right questions up front you can save time and money – but it’s not just about that – It’s about identifying the right solution and needs to help you with your impact!

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9 Guiding Principles: Take Charge of Your Development Operation

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We feel that these 9 Guiding Principles are pretty self-explanatory, but here are some notes to help you take charge of your Development Operation. ( Download and print the poster here.)

GP #1 START WITH WHY. What prospects hear (often times) is “We need money to meet our annual funding goal” or “Buy a table at our gala.” These messages have no WHY – no saving, changing and impacting lives – which is exactly what people want to do!
If the number one question of every investor is, “Why do you exist?” and the person you are talking to doesn’t care about your WHY, it’s very hard to talk to her about the what and the how. For more on this, see Altitude Framework PDF, How to Stay at 30,000′ and Simplify Your Message.
GP #2 YOU BECOME WHAT YOU THINK ABOUT! Earl Nightingale, the father of personal development wrote The Strangest Secret in 1956 – the seed from which the personal development industry grew. Here is the ‘Strangest Secret’ – You Become What You Think About! It’s the difference in outcomes when you think about IMPACT, VISION, MEANING, instead of payroll, cuts in funding and survival. Read more here.
GP #3 CHANGE YOUR VOCABULARY! WORDS ARE IMPORTANT! Stop using all the typical ‘nonprofit’ industry jargon. Start using ‘sales’ terms, ‘business’ terms, ‘common sense’ terms.

Appointments Visits
Power Points Presentation Tools
Asking for Money Presenting the Opportunity
GP #4 THINK BIG. BUILD SIMPLE. ACT NOW. Our absolute favorite Entrepreneur’s Mantra.

  • Think Big with your VISION. How are you changing the world or your world?
  • Build Simple using the Rule of 3.
  • Act Now – Just Visit. Just ASK. Ten steps forward and two steps back is still eight steps forward.

Here is a one-pager on TB/BS/AN that Tom did for Social Entrepreneurs.

GP #5 CHANGE (THE) RULES! This is a little play on words – in this generation’s lexicon, to RULE is a good thing. CHANGE DOES RULE. At the same time, in order to really CHANGE something (yourself, your organization, the world), you also to have CHANGE THE RULES. We believe it’s much stronger than that: THERE ARE NO RULES! Read more in our For Impact Guidebook: CHANGE (THE) RULES.
GP #6 ENGAGE GREAT TALENT. Small or young organizations (for profit/nonprofit alike) often identify FUNDING as their top challenge – until the organization really figures out a working funding model. At that point, the top challenge becomes the RIGHT PEOPLE. (We can help you with this!)
GP #7 DO THE MATH. You can’t ‘SELL’ unless you understand all the ‘NUMBERS!’ Doing the Math means owning and internalizing an understanding of your numbers – Your numbers tell an important part of your story. Doing the Math also means taking the time to simplify the numbers in a way that others – Your board, your prospects and your staff – can understand. Read more about Blue, Red and Green Math here.
GP #8 COMMIT TO SALES. You are in sales! Not everyone wants to hear that but it’s the truth. What is sales? Sales is the responsibility, the calling, the opportunity to carry the story of your organization – how it’s saving, changing and impacting lives – and share that story with people, 1:1, to build relationships with them to ASK them to help save, change and impact lives. Sales is about ATTITUDE!
GP #9 JUST ASK. JUST ASK. JUST ASK. No explanation necessary. Just do it.
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A Sale Happens On Every Visit

Zig Ziglar, one of the greatest sales trainers of all time, said that a sale is made on every visit. Either you sell the prospect on all the reasons why s/he should buy or s/he sells you on all the reasons why s/he should not.  Period. 

My contention is that if you don’t decide to be one side of that either/or then you will almost always let the sale happen TO YOU. You will almost always be sold on reasons why the person cannot give what you had hoped for or what you need to deliver on the plan.

Remember: Hope is not a strategy.

So, decide. Don’t hope.

Years ago, when Tiger Woods was in his prime, he remarked that he does not putt the ball until he has decided it will go in the hole – Until he has that level of certainty, confidence and visualization.

This is the level of conviction you need to bring to every VISIT.

Of course, every putt does not fall and every ‘ask’ does not close.  But, you can’t go into a visit ‘hoping’.  You need to decide the commitment is a foregone conclusion.

As a mentee of Tom Suddes’ for years, I watched and learned the hard work that went into making a great case. Tom would not go into make a visit or presentation until he was able to wrap his mind around the emotion + logic of the case so completely that he thought, “Why would someone NOT make this investment?”

There is an old sales maxim: I am sold myself.  Certainly you don’t visit until YOU are sold.  That work is upon us as sales people to own that conviction.  It’s not up to a manager or a CEO.  It is OUR responsibility to do the work to be totally sold. 

I don’t want to hide this from you – Arriving at that level of conviction, preparation and DECISION is hard work.

For those that still have an aversion to the word ‘sales’ – Get over it.  This isn’t about used cars. It’s about making your case and engaging in such a compelling way that people understand what it will take to save lives, change lives and impact lives. This makes Zig’s challenge perhaps MORE important in the world of philanthropy.

We live in a great world. People are generous. You are doing good work.  

I believe 80% of the time gifts are not maximized because a generous person said he or she would commit $10K and we did not sell them on the true need (e.g. $100K) to deliver the impact. Instead, we were sold on all the reasons why they could not make the larger commitment.

 

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10,000 PUSH-UPS

A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!

This week’s theme is: ACT/EXECUTE on YOUR ENGAGEMENT STRATEGY!

Let’s use this ‘Push-Up’ analogy to help reinforce ACTION.

If you commit to do 10,000 push-ups a year, the SIMPLEST and most SUCCESSFUL way to achieve that goal is to do 30 PUSH-UPS A DAY. (1 set, 3 sets of 10 or 2 push-ups an hour the 15 hours you’re awake.)

To reinforce this point even more, let’s say you wanted to do 1,000 x (your age) push-ups a year – The SIMPLE EXECUTION is 3 sets of (your age) a day…every day. (For example, if you’re 49, you would do 49 push up 3 times a day. This actually gets you more that 49,000 but you get my point.)

In this model, you can’t skip 3 days. You can’t wait until June to begin. You won’t hit your goal.

Just like with push ups, you can’t wait until November to make 100 visits (because you’ve only made 3 visits a month up until then.)

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The GOAL of Every Development or Advancement Team

What really is the GOAL of any Development Office, Advancement Office, Development Officer, Hospital Foundation or College Foundation???

In my world, it’s to: WRITE A TRIPLE NET CHECK TO THE (BLUE) ORGANIZATION!

Our role in ‘development’ is to provide as much GREEN INCOME as possible to help SCALE and GROW the BLUE IMPACT!

It’s that simple.

What does ‘Triple Net’ mean? I borrowed it from the real estate industry, where it’s usually referencing a triple net lease. (Read more here: Triple Net)

For us, it means that ALL COST OF FUNDRAISING is deducted from the REVENUE generated by the Development Team (Green People)… therefore, resulting in a triple net (actual check) being ‘written’ to the organization. (Again, the Blue People.)

I don’t want to go too Jack Nicholson on you, but I do want to make this crystal clear.

  • This has nothing to do with the IRS, accounting, 990 AR’s or whatever.
  • This has nothing to do with CASE (Council for the Advancement and Support of Education), AFP (Association of Fundraising Professionals), CRFE, etc.
  • This has nothing to do with what you decide to ‘count’ or not ‘count’ relative to the cost of fundraising.

The only measure of success is determined by how much money (INCOME) you provide to your organization/institution to help them Save Lives, Change Lives, Transform Lives (IMPACT).

Put one more way, our job in ‘Development’ is to FUND THE VISION.

This is getting long, but it’s a really important topic to me at this moment. Here are 3 more BIG thoughts around this subject:

  • Everyone in our industry knows that the absolute best way to raise the most amount of money… at the least cost… is through ‘MAJOR GIFTS’. This is where we actually sit down, shoulder-to-shoulder, on a visit with a qualified prospect and make a great presentation and ultimately present the opportunity for them to help.

    The cost is a ‘nickle on a dollar’ while the ‘special events’, golf outings, mailings, etc. cost is ‘three quarters.’.

    I have to tell you that I have seen far too many Development Operations spending one dollar to raise one dollar in the last few years.

  • I can quickly show anyone reading this the way to raise $1M in the next year, and I will personally guarantee it!
    • Hire 10 Major Gift Officers, paying them each $100,000 a year to ensure good quality people.
    • Have them trained at our Boot Camp (on how to make a visit, how to present the opportunity, etc.)
    • They will each raise $100,000 in real money over the course of the year.

    There it is. They just raised $1M for your organization. When you look at that silly scenario, you realize that raising money is not the goal/measurement of a Development Office.

    In our world, a Development Officer should be doing a minimum of 10X and ideally 20X their respective ‘cost‘.

  • ‘Cost of Fundraising’ is not some fuzzy math issue. Again, it’s not how you decide to ‘count’. It’s actually a very easy and simple equation:
    R – AE = N³C

    Revenue – All Expenses = Net, Net, Net Cash. (To be shipped over in a Brink’s truck to the BLUE PEOPLE.)

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Set Your Goals for Engagement!

A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!

This week’s theme is: Set your goals of ENGAGEMENT.

Set your 2016 Goals for Engagement now! These goals need to be SPECIFIC, WRITTEN and MEASURABLE.

Here are 3 Examples:

  • The ‘33 GIFTS’ Plan

    We will ENGAGE with our TOP 50 PROSPECTS in order to generate 33 COMMITMENTS, which will provide 90% of our funding needs!

    This will be a SELF-FULFILLING PROPHECY.

    E.g. We will generate $1 Million from:

    1 Gift of $200,000
    2 Gifts of $100,000
    4 Gifts of $50,000
    10 Gifts of $20,000
    16 Gifts of $10,000+
    33 Totaling $1 Million

    Note: Need $5M? Multiply the right column by 5. (Or 4 for $4M and so on.)

  •  

  • The ‘Spartan 300’ Plan

    We will ENGAGE with our BEST 300 prospects (including our Top 33), which will generate buckets of money to Fund Our Vision.

    E.g. We have 3 members of our SALES TEAM, and we will collectively make 30 VISITS ENGAGEMENTS a month for 10 months (using August and December for R&R).

    We will use a 3x3x3 goal which challenges us to collectively make 3 visits a day, 3 days a week, 3 weeks out of the month.

    Note: If you have one member of your sales team, divide this goal accordingly: The ‘Spartan 100’ plan!

  •  

  • The ‘1,000 ENGAGEMENT’ Plan

    As a larger For Impact organization with 6 committed Relationship Managers, we will make 1,000 VISITS/PRESENTATIONS this year.

    Each of our 6 Relationship Managers will have a Portfolio of 300 Qualified Prospects. Each of us will make 167 VISITS/PRESENTATIONS (ENGAGEMENTS) this year.

    We will average 15 QUALITY VISITS a month and do all of the appropriate preparation, predisposition and follow-up.

    We will do ‘DISCOVERY’ on every visit and with every prospect. We also commit to make the FULL PRESENTATION around the TRIPLE ASK for TODAY, TOMORROW and FOREVER (Annual Operations, Campaign Priorities and a Legacy/Planned Gift.)

    *20% of these 167 visits will become our TOP 33 gifts for each Relationship Manager.

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R.O.I.

RETURN-ON-INVESTMENT.

What every ‘Investor’ wants from their investment and what every For Impact organization should want from its development/advancement/fundraising effort.

I feel this concept is completely absent or totally misunderstood from our sector – Something I want to help change.

With all due respect to the industry, I just don’t get it. An organization invests money and resources in their development/fundraising operation – could be a one-person shop or 50 people in the college advancement division. I’m not sure how else you would measure productivity or success without making ROI the #1 barometer.

ROI is very simple to calculate. It’s a numerator/denominator math problem:

  • Here’s how much money we Raised (the numerator).
  • Here’s how much money we spent/Total Expenses (denominator).
R – TE = NET, NET, NET CHECK/FUNDS to support IMPACT!

In the For Impact approach, the development function ‘write checks’ to the IMPACT.

R ÷ TE = ROI and COST OF FUNDRAISING.

For example, if you are a hospital foundation raising $2M a year in ‘fundraising Revenue and your total expenses are $1M then your ROI is 2X or 100%; and your cost of fundraising is 50%.

There are two ways to increase your ROI and decrease your cost of fundraising:

  • Increase the Numerator (Revenue)
  • Decrease the Denominator (Expenses)

In our For Impact world, our own benchmarks are as follows:

  • 3X is minimum model/benchmark.
  • 4X is great.
  • 5X is something you should be very proud of.

If you’re running a Campaign within an existing development operation or as a separate initiative, I believe the cost of fundraising should be a nickel (five cents on the dollar.) That would give you a 20X ROI.

If you are a For Impact leader, senior staff, executive director or a board member, I hope the above gives you some sense of comparison.

Note: One last example of why ROI is a completely different level of thinking than simply “This is how much money we raised this year.”

I can guarantee a small not-for-profit organization an additional $100,000 this year. Hire two ‘major gifts officers’ at $50,000 apiece. Send them to For Impact Boot Camp. I guarantee that they can go out and raise $100,000 in the next year (combined.)

Same thing would be true with a larger organization at $1M. Hire five major gift officers at $200,000 each. I’m fairly confident if they followed any sales process they would each be able to raise $200,000 in the next year for a total of $1M.

Ok, I think you get the point.

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Everything’s a Math Problem

Looking back, I know that almost every successful campaign that we have run in the last 33+ years (500+ Campaigns) was successful because we:

  • Kept in SIMPLE.
  • Had Clear Goals, Numbers and ‘Math.’
  • Measured our Progress, Daily!

For example:

  • How much MONEY (Income) do we need? And over what period of time?
  • How many QUALIFIED PROSPECTS do we need to generate?
  • What does our FUNDING PYRAMID (Gift Chart, 97/3) look like?
  • How many COMMITMENTS do we need to make this happen?
  • How many VISITS do we need to make in a week? A month?
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Your Funding Plan Supports Your Case

A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!

This week’s theme is DO THE MATH.

A big epiphany for organizations we work with continues to be – your funding plan actually is part of your case for support.

To me, the funding plan is the HOW behind the big picture dollar goal and the big picture dollar goal is what you need to deliver on your vision. So, in essence, this is HOW you will deliver on your vision. Is that important? You bet!

I’ve found that most organizations don’t have a funding plan – They haven’t done the math.

Three simple action steps to get you there:

  • Determine the dollar amount you need for both operations and projects. What is the lump sum? 80% of organizations can’t answer this question.
  • How many investments would you need and at what amounts to achieve this goal?
  • When? (One year? Three years? Five years?)

The funding plan does a few things as it relates to your case:

  • It makes it believable and achievable.
  • It shows a potential investor how she/he would fit into the funding vision.
  • It also illustrates that you’re not just picking a number out of the air – there is logic – Which gives you and your investors confidence.

Extra bonus: There are times when you can actually ask the potential investor, “Where do you see yourself in this plan?” Then, you let them select a dollar level – Something we call “The Clueless Close.”

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Do the Math to Simplify Your Funding Story

A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!

This week’s theme is DO THE MATH.

Doing the Math means owning and internalizing an understanding of your numbers. Your numbers tell an important part of your story.

Doing the Math also means taking the time to simplify the numbers in a way that others – Your board, your prospects and your staff – can understand.

In our For Impact World you must:

DO THE ‘BLUE‘ MATH around your Cause and Case and Impact. i.e. How many people/families/students/patients/kids do you impact? Or how many people/families/students/patients/kids NEED this impact?

DO THE ‘RED’ MATH around your Staff, People and Operations.
i.e., What are the people or operational costs associated with delivering your current or desired impact?

And DO THE ‘GREEN’ MATH around your Income, Funding Plan, Goals, etc.
i.e, What is your total need for the year or next 1,000 days based on the BLUE and RED and how will you get there?

Note: Here is a list of questions you can ask your CFO or CEO to get the information you need for math.

Next, use this Math to frame your Funding Rationales. Funding Rationales help to answer your Prospect’s question, “What do you need from me?” and help you get ‘numbers on the table’ tied to a Person, a Program, a Project or a Funding Plan. For example:

A unit of Impact.

One of the simplest ways to do your math is around a Unit of Impact – A Person, A Student, A Family, A Village, A Patient – You get the idea. Quick math:

You can use this math to ask a prospect, “Can you help us by underwriting 10 students this year?” or “How many students would you like to underwrite this year?”

Your Gap, or even better, the cost of EXTRAORDINARY Impact.

Gap math is a common way to do your math and simplify a funding rationale.

 

 

I recently worked with a fantastic Hospice organization who refuses to talk about the gap and instead asks prospects to fund Extraordinary Care for every family. This Hospice has (fluctuating) revenues from reimbursements, but they don’t cover everything. This is where philanthropy comes in – For $1000 you can underwrite Extraordinary Care for one of the 3000 families they serve each year.

The true cost of programs.

This is a big one. Organizations frequently underestimate the true cost to deliver a program, which is essential to a funding rationale. Knowing the real numbers boosts confidence in the ask and helps the funder buy in. You can ask someone to underwrite part or all of the program.

Along with the previous point, you can do the math to tie programming costs to impact in multiple ways. Here’s a clean and simple example to illustrate the concept using the example above. The Read Aloud Program impacts 1600 Kindergarteners and their families (80 classrooms/20 students per class at 40 schools.) You can do the math to create simple funding rationales:

$80,000 to underwrite the program for one year, or;
$2,000 per school, or;
$1,000 per class, or;
$50 per student.

Funding a Project or Priority.

This is commonly used with a ‘campaign mindset’ – projects or priorities that have a larger funding goal than some of the examples above. Casting a vision, packaging up three year Priorities or Projects and then understanding a dollar amount/funding rationale for each.

For example, “As we discussed, our vision is to be there for every family who needs Hospice Care in this community. Part of achieving that plan is to secure a Hospice House where we can care for people who can no longer stay at home, or have no home. Can we talk to you about being part of this plan?”

or

“We’ve put together a plan to scale and innovate in our three core areas – Family Literacy, Read Aloud Programs and Teen Services – that would require $1.3M of the next 1,000 days. Here’s what we would use the funds for – 1000 Families in Literacy Program, increase 1:1 teen Mentoring by 30%, excellent data and evaluation, 5-10 new school relationships…”

(more…)

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Creating Great Funding Rationales

A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!

This week’s theme is BUILD YOUR FUNDING RATIONALE.

In this video we cover the ‘Last 3 Feet’ tied to Creating Great Funding Rationales (hint: “Unrestricted” does not make a great Funding Rationale!)

  • Create a Funding Rationale tied to a Unit of Impact if possible – “Our goal is to underwrite all 3000 of our families each year at $1500 per family. How many families can you help support?”
  • Package up your Programs – “Here is the Impact we’d like to have in each community and it will take about $100,000 per community to make it happen.”
  • Use a Leadership Circle membership goal as it relates to the Opportunity to Save, Change and Impact Lives – “When we have 50 members in our Leadership Society (@$10,000+ per year) it allows us to innovate new programs and provide core support to existing impact. It also allows us to move quickly when needed – To save and change more lives.”

Previous video in this sequence: Using Altitude to develop your Presentation.

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10 Types of Funding Rationales

A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!

This week’s theme is BUILD YOUR FUNDING RATIONALE.

Here is a list of some of the framing devices we often use to create Funding Rationales. (i.e., you need these numbers to rationalize the ASK!)

In an abridged form:

  • The Gap: Using a gap number to justify the ASK.
    Tuition: Tuition is $6K, cost per student is $8K. Gap is $2K. Could ask someone to underwrite THE GAP for five students.

    Project: Receive federal grants to the tune of $45K/year for $60K/year program. Ask someone to fund the gap for three years = $15K/year or $45K ASK.

  • The Widget: Break down projects/programs/model into a cost per person or cost per unit. Package this as the ASK. Typically, I use the widget to create the simplest and strongest sell.
    “One child for one year.”

    See also: See Chipotle vs. Max and Erma’s

  • Funding the Prototype: This is a different way of funding your annual operating budget for a start-up. Communicate how your model works and what is needed to make the model happen – then run a funding pyramid.

    Example: This year we need $1.1M to build the prototype.

    Going to need:

    1 @ $200K
    2 @ $100K
    3 @ $75K
    4 @ $50K
    6 @ $25K
    10 @ $10K
  • Funding the Vision: Think of this as funding the model/prototype and future projects/priorities for the next 3-5 years. If you will, this is ‘the campaign pitch’ but with a more holistic view of ALL funding priorities. Within Funding the Vision:

    Leadership Commitments: Top tiered commitments that validate the funding plan.

    Momentum Commitments: TIMELY gifts. Could be Leadership or not… but means so much because of the timing. Provides a lot of leverage, energy, etc.

  • TRANSFORMATION: Justifies all caps on that one. Sometimes it’s simply about a number that would completely TRANSFORM our organization, the investor, etc. This is a rationale that extends far beyond a ‘campaign lead’.
  • Project Sponsorship: “Can you underwrite the medical program for three years @ $30K/year?”

    Note: If it were me… get rid of the notion of asking people to fund ‘operating’ or ‘infrastructure’. Literally everything you do can be packaged as a project, priority or program.

  • Angel Investment: “We’re going to need 10 investors at X to get this idea off the ground. We’re taking something of an angel-investment approach. Can you be one of these angels?” – Very much about timing, the level, the funder, etc.
  • Strategic Partner: Often a corporation or foundation that provides ongoing, high-level funding support on an ongoing basis. It’s a great relationship because you [the org] are a means of delivering on the funder’s priorities in the community or sector.
  • Protection: This is a rationale or way of asking someone to ‘protect’ and annual investment with a planned gift/legacy gift. More on that here.
  • Leverage: We need to raise X to generate 10X.

    Note: Yesterday I was on the phone with an organization that needs to raise $5M to generate $1Billion. To make my point. They need to raise $5M to generate $1,000,000,000,000.

    Obviously, you don’t need all of these. I’m hoping the brief descriptions can spark some answers to common questions like:

    “What do we ask for?”

    “How do we package our operating to justify a big ask?”

    “How do we rationalize the number?”

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How to Create a Funding Rationale Tied to Impact

A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!

This week’s theme is BUILD YOUR FUNDING RATIONALE.

Essentially there are three ways to create a funding rationale – the three P’s. You can ask someone to invest in:

A PERSON

It would be more accurate to refer to this final rationale as a ‘unit’ but then I would lose alliteration. You can do the math to figure out the cost to impact one student, one class, one session, one exhibit, one visitor, etc. This could be a total cost or a ‘gap cost.’

A PROGRAM

This could include seed funds to launch a program, sponsorship for a program or gap funding for a program. The cost of the program is set against the impact of the program – You’re selling the impact of the program.

A PLAN

Commonly used with the ‘campaign mindset.’ Cast your vision, attach a dollar amount, articulate a funding plan then ask someone to be a piece of the plan.

You can use one, two or all three – but you must HAVE a simple funding rationale:

“Could you sponsor a classroom? (or 5?)”

“Could you underwrite the program this year and next?”

“Could we ask you to take the lead on this plan?”

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10 Action Steps to Help You Engage in 2016

*Warning: It’s pretty easy to run down this list and blow off a number of these with a “We’ve already got this/done this” attitude. I encourage you to take a look at the resources we’ve provided below and create an Action Plan for 2016.

Here are 10 Action Steps, to help you ENGAGE:

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Set Your Goals for Engagement!

Set your 2016 Goals for Engagement now! These goals need to be SPECIFIC, WRITTEN and MEASURABLE.

Here are 3 Examples:

  • The ‘33 GIFTS’ Plan

    We will ENGAGE with our TOP 50 PROSPECTS in order to generate 33 COMMITMENTS, which will provide 90% of our funding needs!

    This will be a SELF-FULFILLING PROPHECY.

    E.g. We will generate $1 Million from:

    1 Gift of $200,000
    2 Gifts of $100,000
    4 Gifts of $50,000
    10 Gifts of $20,000
    16 Gifts of $10,000+
    33 Totaling $1 Million

    Note: Need $5M? Multiply the right column by 5. (Or 4 for $4M and so on.)

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  • The ‘Spartan 300’ Plan

    We will ENGAGE with our BEST 300 prospects (including our Top 33), which will generate buckets of money to Fund Our Vision.

    E.g. We have 3 members of our SALES TEAM, and we will collectively make 30 VISITS ENGAGEMENTS a month for 10 months (using August and December for R&R).

    We will use a 3x3x3 goal which challenges us to collectively make 3 visits a day, 3 days a week, 3 weeks out of the month.

    Note: If you have one member of your sales team, divide this goal accordingly: The ‘Spartan 100’ plan!

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  • The ‘1,000 ENGAGEMENT’ Plan

    As a larger For Impact organization with 6 committed Relationship Managers, we will make 1,000 VISITS/PRESENTATIONS this year.

    Each of our 6 Relationship Managers will have a Portfolio of 300 Qualified Prospects. Each of us will make 167 VISITS/PRESENTATIONS (ENGAGEMENTS) this year.

    We will average 15 QUALITY VISITS a month and do all of the appropriate preparation, predisposition and follow-up.

    We will do ‘DISCOVERY’ on every visit and with every prospect. We also commit to make the FULL PRESENTATION around the TRIPLE ASK for TODAY, TOMORROW and FOREVER (Annual Operations, Campaign Priorities and a Legacy/Planned Gift.)

    *20% of these 167 visits will become our TOP 33 gifts for each Relationship Manager.

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Res Ipsa Loquitur

From the archives, three great nuggets from Tom about facing your/your organization’s reality in order to move forward.

  • RES IPSA LOQUITUR. THE THING SPEAKS FOR ITSELF. This is some kind of Latin legal term. Loosely translated by me, it also means IT IS WHAT IT IS.
    • You’d like to have endowment to cover your entire operating budget. It ain’t going to happen. Ever.

      Instead, use a Leadership Circle membership goal as it relates to the Opportunity to Save, Change and Impact Lives, “When we have 30 members in our Leadership Society (@$10,000+ per year) it allows us to innovate new programs and provide core support to existing impact. It also allows us to move quickly when needed – To save and change more lives.”

    • You have a member of your staff or team that needs to get off the bus (they aren’t coachable and aren’t going to change.) It’s as much in their interest as yours. IT IS WHAT IT IS until you decide to make a change. (See Nick’s recent post on the ‘No Eeyore’ Rule.)
  • FACE THE BRUTAL FACTS. My friend Jeff Bernel, who headed up the Gigot Center for Entrepreneurial Studies, told this to me very directly one day at lunch. I’ve never forgotten it.
    • You need more money. You expect that to happen by doing the same thing you’ve been doing. It won’t.
    • DO THE MATH. Do the ‘BLUE’ Math around your Impact. Do the ‘RED’ Math around your Staff, People and Operations. And Do the ‘GREEN’ Math around your Income, Funding Plan, Giving Pyramid, etc.

      You need to know where you stand now and what you need in the future. For example:

      • Your Tuition is T. The Cost of Education is C. T – C = G. The GAP. Know it. Sell it.
      • DO THE MATH!!
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Do the Math to Simplify Your Funding Story

Doing the Math means owning and internalizing an understanding of your numbers. Your numbers tell an important part of your story.

Doing the Math also means taking the time to simplify the numbers in a way that others – Your board, your prospects and your staff – can understand.

In our For Impact World you must:

DO THE ‘BLUE‘ MATH around your Cause and Case and Impact. i.e. How many people/families/students/patients/kids do you impact? Or how many people/families/students/patients/kids NEED this impact?

DO THE ‘RED’ MATH around your Staff, People and Operations.
i.e., What are the people or operational costs associated with delivering your current or desired impact?

And DO THE ‘GREEN’ MATH around your Income, Funding Plan, Goals, etc.
i.e, What is your total need for the year or next 1,000 days based on the BLUE and RED and how will you get there?

Note: Here is a list of questions you can ask your CFO or CEO to get the information you need for math.

Next, use this Math to frame your Funding Rationales. Funding Rationales help to answer your Prospect’s question, “What do you need from me?” and help you get ‘numbers on the table’ tied to a Person, a Program, a Project or a Funding Plan. For example:

A unit of Impact.

One of the simplest ways to do your math is around a Unit of Impact – A Person, A Student, A Family, A Village, A Patient – You get the idea. Quick math:

You can use this math to ask a prospect, “Can you help us by underwriting 10 students this year?” or “How many students would you like to underwrite this year?”

Your Gap, or even better, the cost of EXTRAORDINARY Impact.

Gap math is a common way to do your math and simplify a funding rationale.

 

 

I recently worked with a fantastic Hospice organization who refuses to talk about the gap and instead asks prospects to fund Extraordinary Care for every family. This Hospice has (fluctuating) revenues from reimbursements, but they don’t cover everything. This is where philanthropy comes in – For $1000 you can underwrite Extraordinary Care for one of the 3000 families they serve each year.

The true cost of programs.

This is a big one. Organizations frequently underestimate the true cost to deliver a program, which is essential to a funding rationale. Knowing the real numbers boosts confidence in the ask and helps the funder buy in. You can ask someone to underwrite part or all of the program.

Along with the previous point, you can do the math to tie programming costs to impact in multiple ways. Here’s a clean and simple example to illustrate the concept using the example above. The Read Aloud Program impacts 1600 Kindergarteners and their families (80 classrooms/20 students per class at 40 schools.) You can do the math to create simple funding rationales:

$80,000 to underwrite the program for one year, or;
$2,000 per school, or;
$1,000 per class, or;
$50 per student.

Funding a Project or Priority.

This is commonly used with a ‘campaign mindset’ – projects or priorities that have a larger funding goal than some of the examples above. Casting a vision, packaging up three year Priorities or Projects and then understanding a dollar amount/funding rationale for each.

For example, “As we discussed, our vision is to be there for every family who needs Hospice Care in this community. Part of achieving that plan is to secure a Hospice House where we can care for people who can no longer stay at home, or have no home. Can we talk to you about being part of this plan?”

or

“We’ve put together a plan to scale and innovate in our three core areas – Family Literacy, Read Aloud Programs and Teen Services – that would require $1.3M of the next 1,000 days. Here’s what we would use the funds for – 1000 Families in Literacy Program, increase 1:1 teen Mentoring by 30%, excellent data and evaluation, 5-10 new school relationships…”

(more…)

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Triple Net

I learned about the TRIPLE NET concept during my days as a real estate broker and playing real-life ‘monopoly’ purchasing houses and commercial buildings.

In simple terms, the real Triple Net lease means that the tenant is responsible for all of the costs relating to the asset being leased. Usually this means that in addition to the rent, the tenant is required to pay for real estate taxes, insurance, and property maintenance.

In the For Impact world, I use this Triple-Net concept to explain the true value of any fundraising activity.

For example, everyone talks about how much money they generated at their (not) special event. “We sold ‘x’ tables/tickets, etc.” The number stated is almost always revenue.

  • Net Revenue would be total money generated minus actual cost of the event (food, etc.)
  • Net, Net Revenue would then subtract the cost of labor/staff who worked on the event (often two or three people for six months or a year).
  • Triple Net would then also deduct the cost of volunteer time and energy.

Note: Depending on how you want to play this game, there could be one more net, which would be the opportunity cost if staff or volunteers have been working on major gifts or top prospects.

Many smaller events that generate $5,000 or $10,000 in (single) net (revenue minus actual cost) end up having 1,000 women/man hours of volunteer time which comes out to $5 or $10 an hour. Ugh!

Try the Triple-Net math with your fundraising activities:

Is the Net-Net-Net really worth the effort?
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