Making Business Decisions about Relationships

A note: It’s okay to make business decisions about funding relationships.

The context for my note: I was working with one organization to put together a $6M project and revamp the development operation. This particular org had 1.5 development positions and received about 40 gifts annually from corporations and foundations in the ranging from $2500 – $10K. The problem was the development was spending too much time ($$) and energy to secure those gifts. Sometimes a $5K grant would take three meetings, two days of grant writing and as much time to complete reporting.

This is not a ‘not-for-profit issue’, it’s a business issue. Spending a lot of time for a little money—or to lose money—is not good business.

I told the team we needed to change and heard common objections:

• “But these are relationships. Mr. XYZ loves us and he’s done this for several years. We can’t just change.”
• “But we know we’ll get the grant. We can’t just not take the money.”
• “We can’t just walk in and say, ‘we’ve made a business decision and now things have to change!’”

Yes you can. Make a business decision AND explain the business decision to your funders. Making business decisions and having strong relationships is not mutually exclusive – it’s responsible. You’re not here to be some charity… you’re here to make a difference by leveraging resources effectively. At the same time, you can decide where if and when you need to move the line to accommodate a relationship… so long as you have a line.

If Hoops Then > $30K Rule:
For this organization we created a new rule. If we have to jump through any hoops we need to set a $30K minimum (as a goal). Otherwise, the hoops aren’t worth the hassle.

Factor into the cost:

• All the staff (sales) time needed to write request, have meetings and submit requests.
• In many cases a controller’s or CFO’s time who needs to crunch a bunch of numbers to make data look pretty for a request.
• Delivery of the CORE program time – you want to maximize money toward this. If you have to create a bunch of new programs for the money then consider whether or not it’s worthwhile.
• Reporting time
• And most of all the OPPORTUNITY COST of not finding and meeting with better prospects.

The Result: We went to each recurring funder and explained that we had made a business decision that we needed to set a minimum threshold for ‘partnership’ at $30K. We explained the rationale.

Sometimes we walked away (or were turned away).
Sometimes funders got rid of the hoops (in which case it made it ‘profitable’ for us to accept a smaller gift)
Sometimes we turned $10K commitments in to three year commitments
More often than not we were told in some way, “Sure. No problem. This makes sense.”
Bonus: The team is now thinking bigger about every opportunity. No longer chasing mice – because they can’t.