When consulting nonprofit administrators, I have found that many individuals involved in nonprofit operations, especially those in small grassroots organizations, carry the belief that their organization is not a business. I suppose the term “business” lends a for-profit connotation, and makes many nonprofit leaders feel that it violates their charitable mission. It has been my goal to make these emerging leaders aware that increased organizational capacity can only be generated if they begin to undertake administrative tasks that were once found only within for-profit entities. With the increased competition that is becoming apparent within the sector, one such critical task is adequate marketing of the organization. Market-driven nonprofit organizations are implementing a variety of market strategies in order to fulfill their mission, meet their programmatic goals, and achieve long-term financial stability.
In the nonprofit sector, marketing incorporates focusing on the needs of your constituents and planning to satisfy those needs over time. Program services to clients are the primary reason that nonprofit organizations exist. Therefore, it is critical to know how to plan and market programs. To become highly effective, begin with understanding your program’s target markets. You’ll need to identify what groups of potential clients exist, what their needs are, what groups you’d prefer to serve, and what programs you might develop to meet their needs.
Plan your market strategy. This, again, may involve “for-profity” (my fave new term) techniques. This strategy may involve undertaking the creation of :
· Business Plans
· Market Research
· SWOT Analysis
· Strategic Plans
· Web Marketing (A must in today’s technology-driven world!)
· Corporate Branding
Keep in mind that an essential aspect of marketing is continuously developing a positive self-image for the organization. The relationship between price and perceived value is nowhere more evident than in the nonprofit sector. Thus every organization must find ways to make clients believe your programs or services have the most value.
Careful market planning allows a nonprofit organization to position itself best to compete for all kinds of support, including funds, by looking systematically at mission, image, constituents, competitors, resources, strengths, and weaknesses, and then devise strategies to gain more favorable position in the competitive marketplace. Ultimately, adequate marketing will help your organization to meet its strategic goals, whether they be to increase revenue, expand your client base, or promote your organization in a new market.
Wednesday, August 27, 2008
Monday, August 25, 2008
Choosing a Board for Your Nonprofit
You have a mission that you are passionate about fulfilling, and you have decided to start a nonprofit organization to do just that. One of the first measures to undertake toward achieving that goal is the selection of the initial Board of Directors for the organization. While this may be only the first of many steps that must be taken in legally forming the organization, it is arguably the most important and should not be taken lightly. The decision of who to place on the founding Board must be made after careful consideration of each potential candidate’s unique set of knowledge, skills, and abilities.
In my experience, most founders of grassroots nonprofits are compelled to select members of their family as their trustees. At first glance this method makes sense. When thinking of those individuals that can be trusted to control your organization, most would immediately lean on family. Unfortunately, if you’d like the organization to qualify as a public charity under IRC section 501(c)(3) you must look beyond family members and seek out members of the general public to provide governance.
A primary concern in Board selection is avoidance of partiality. Most would assume that members of the same family will vote in accordance with one another, without first taking into consideration the effects on public interest. This is the principal reason why the IRS requires 51% of a nonprofit Board to be comprised of “disinterested” parties. Disinterested individuals are those who have no relationship with any other Board member, and who do not receive compensation from the organization for any reason. (Keep in mind that your Board should be primarily a volunteer group anyway.)
When looking to the public to make your Board selections, there are several things you’ll want to keep in mind:
Ø Knowledge- Each member of the Board should be familiar with appropriate, ethical governance practices. Select individuals who have knowledge and experience in the nonprofit sector and who have demonstrated mindfulness for compliance.
Ø Skills- Members of the Board should be able to contribute something to operations. Select individuals who have skills in accounting, law, or business administration. You’ll also want individuals with experience in your specific activities. For example, if you are an educational program you may want a teacher or school administrator on your Board.
Ø Resources- Individuals who have good resources in the community are essential on your Board. Select individuals who have contacts in local legislature, with large corporations, or who have relationships with private individuals who may be potential donors.
Ø Character- Nonprofits must observe the highest standards in order to retain the trust of the donating public and the confidence of those they seek to help. The board provides the public face of the organization, and its behavior, and that of individual board members must be exemplary.
Ø Passion- The organization’s mission should guide every decision the board makes and thus each member of the Board should be able to articulate and demonstrate a real passion for it and encourage their fellow trustees to show the same commitment.
Establishing a Board who will provide excellent oversight of organizational operations while also representing a cross section of your community is essential. If careful consideration is made before every Board election, your organization will succeed in creating public trust and value.
In my experience, most founders of grassroots nonprofits are compelled to select members of their family as their trustees. At first glance this method makes sense. When thinking of those individuals that can be trusted to control your organization, most would immediately lean on family. Unfortunately, if you’d like the organization to qualify as a public charity under IRC section 501(c)(3) you must look beyond family members and seek out members of the general public to provide governance.
A primary concern in Board selection is avoidance of partiality. Most would assume that members of the same family will vote in accordance with one another, without first taking into consideration the effects on public interest. This is the principal reason why the IRS requires 51% of a nonprofit Board to be comprised of “disinterested” parties. Disinterested individuals are those who have no relationship with any other Board member, and who do not receive compensation from the organization for any reason. (Keep in mind that your Board should be primarily a volunteer group anyway.)
When looking to the public to make your Board selections, there are several things you’ll want to keep in mind:
Ø Knowledge- Each member of the Board should be familiar with appropriate, ethical governance practices. Select individuals who have knowledge and experience in the nonprofit sector and who have demonstrated mindfulness for compliance.
Ø Skills- Members of the Board should be able to contribute something to operations. Select individuals who have skills in accounting, law, or business administration. You’ll also want individuals with experience in your specific activities. For example, if you are an educational program you may want a teacher or school administrator on your Board.
Ø Resources- Individuals who have good resources in the community are essential on your Board. Select individuals who have contacts in local legislature, with large corporations, or who have relationships with private individuals who may be potential donors.
Ø Character- Nonprofits must observe the highest standards in order to retain the trust of the donating public and the confidence of those they seek to help. The board provides the public face of the organization, and its behavior, and that of individual board members must be exemplary.
Ø Passion- The organization’s mission should guide every decision the board makes and thus each member of the Board should be able to articulate and demonstrate a real passion for it and encourage their fellow trustees to show the same commitment.
Establishing a Board who will provide excellent oversight of organizational operations while also representing a cross section of your community is essential. If careful consideration is made before every Board election, your organization will succeed in creating public trust and value.
Wednesday, August 20, 2008
Nonprofit Does Not Mean Tax Exempt
A common misconception in my field of work is the notion that an organization is exempt from paying taxes simply due to the fact that it has been organized as a nonprofit. Unfortunately, this particular misunderstanding could leave an organization facing tax debt with both the IRS and their state franchise tax board.
Nonprofit status is a concept of state law. Choosing to incorporate as a “nonprofit” or “nonstock” organization may, in fact, come with certain privileges, such as eligibility for state and federal tax exemption, however this exemption is far from automatic. I always liken tax exemption to a driver’s license- if you choose to request the privilege, you must apply, pass the test, and then, most importantly, follow the rules. For those organizations that choose not to pursue this privilege, payment of annual corporate taxes is required.
The road to tax exemption, for most nonprofits, is paved with compliance. Organizations must be familiar with all processes and procedures, and be prepared for detailed reporting. In addition to the provision of particular clauses in the organizing document that precedes an extensive application process with the IRS, charities must be mindful of state and local tax exemption and registration requirements. Additionally, organizations that have been granted exemption must be aware that that not all income received is eligible for exemption, and be mindful to pay required taxes on any unrelated business income.
Nonprofit coursework may prove to be essential for the novice director or Board member. For those whose time constraints do not warrant such coursework, the assistance of an expert may be necessary in maintaining compliance with all state and federal regulations.
Nonprofit status is a concept of state law. Choosing to incorporate as a “nonprofit” or “nonstock” organization may, in fact, come with certain privileges, such as eligibility for state and federal tax exemption, however this exemption is far from automatic. I always liken tax exemption to a driver’s license- if you choose to request the privilege, you must apply, pass the test, and then, most importantly, follow the rules. For those organizations that choose not to pursue this privilege, payment of annual corporate taxes is required.
The road to tax exemption, for most nonprofits, is paved with compliance. Organizations must be familiar with all processes and procedures, and be prepared for detailed reporting. In addition to the provision of particular clauses in the organizing document that precedes an extensive application process with the IRS, charities must be mindful of state and local tax exemption and registration requirements. Additionally, organizations that have been granted exemption must be aware that that not all income received is eligible for exemption, and be mindful to pay required taxes on any unrelated business income.
Nonprofit coursework may prove to be essential for the novice director or Board member. For those whose time constraints do not warrant such coursework, the assistance of an expert may be necessary in maintaining compliance with all state and federal regulations.
Friday, August 15, 2008
Fundraisers - To Reward or Not to Reward…the Debate Continues
Once again last evening while perusing the web I stumbled upon arguments for and against percentage based fundraising. With as many times as professional groups such as the Association of Fundraising Professionals and the American Grant Writers Association have denounced the practice I would think it would be a dead issue, however the debate continues. Thus, I will add my thoughts on the topic.
Percentage based fundraising is closely coupled with percentage based grant writing. In both cases the nonprofit being served promises to pay the fundraiser or grant writer a “commission” on all donations or grant awards received. Many argue that this greatly reduces the chance that the organization will expend funds for which they will receive no return on their investment. This argument is understandable on the surface, but to get a clear idea of just why this practice has been condemned you must fully analyze the potential ramifications. Some simple examples should suffice.
Think about this. A grant writer is promised a 10% commission on any awards received from their proposal. The grant writer then spends 20 hours working diligently to prepare the proposal, hoping for success. The proposal is submitted to a small community foundation with a request for $25,000. Had the proposal been funded as written, the grant writer would then receive $2,500 for their 20 hours of work. Not bad. But what if the community foundation happens to have a donor advised fund that was established specifically for the purposes outlined in that proposal and that donor recommends a donation of $250,000?? The grant writer would then get $25,000 for the same 20 hours of work. That’s a bonanza for the writer, but is that really in the best interest of the organization’s constituents? In my opinion, the excess $22,500 should be used to feed the hungry, clothe the homeless, educate the children-whatever the organization’s mission may be.
Percentage based fundraising is closely coupled with percentage based grant writing. In both cases the nonprofit being served promises to pay the fundraiser or grant writer a “commission” on all donations or grant awards received. Many argue that this greatly reduces the chance that the organization will expend funds for which they will receive no return on their investment. This argument is understandable on the surface, but to get a clear idea of just why this practice has been condemned you must fully analyze the potential ramifications. Some simple examples should suffice.
Think about this. A grant writer is promised a 10% commission on any awards received from their proposal. The grant writer then spends 20 hours working diligently to prepare the proposal, hoping for success. The proposal is submitted to a small community foundation with a request for $25,000. Had the proposal been funded as written, the grant writer would then receive $2,500 for their 20 hours of work. Not bad. But what if the community foundation happens to have a donor advised fund that was established specifically for the purposes outlined in that proposal and that donor recommends a donation of $250,000?? The grant writer would then get $25,000 for the same 20 hours of work. That’s a bonanza for the writer, but is that really in the best interest of the organization’s constituents? In my opinion, the excess $22,500 should be used to feed the hungry, clothe the homeless, educate the children-whatever the organization’s mission may be.
Wednesday, August 13, 2008
Where's All the Free Money???
How often do you worry about funding your organization? Do you lose sleep at night wondering how you’ll find the revenue necessary to fund all the activities your organization was created to produce? What steps have you taken to get to where you need to be?
I’ve worked with dozens of grassroots nonprofits who have outstanding missions, with leaders who are truly passionate about their cause. These selfless individuals have incorporated organizations that should provide vital services to their communities. Unfortunately, most of these organizations are continually struggling to make ends meet. Many will fail within the first few years of operations. It happens over and over again.
A common mistake made by the founders of grassroots nonprofits is that getting money will be easy. You are, after all, a charity. So why wouldn’t people line up to donate? You’re a 501(c)(3), so the grant money should come pouring in any time now, right? These are common misconceptions. Remember that you’re competing with 1.2 million other U.S. 501(c)(3) organizations who are also seeking donations. There simply aren’t enough altruistic individuals out there who have money to give away. So how will your organization succeed when so many others fail? Start with a solid fundraising plan. Know where you need to be, how you’re going to get there…..and WORK HARD.
Here’s some suggestions to get you started.
Ø Recognize that strategy is as important here as in the business world….okay, as important as in sports. Planning is critical to successful nonprofit management. Make a plan today, and get to work!
Ø Make sure your Board knows that they can’t just sit back and vote on a few things once a year. Directors should pull their weight in the fundraising efforts. And they should make a donation themself.
Ø Commit some resources to fundraising activities. You have to spend money to make money. Enough said.
Ø Get help. A 3 member Board with no paid staff can’t do it all. Search for volunteers, expand your Board, ask favors of your family.
Ø Educate yourself. There are tons of books and websites with information on fundraising tips and tools. Check them out. Learn something new.
Ø Diversify. Don’t count of funding your organization solely with one multi-million dollar grant. It’s not going to happen. You should be receiving revenue from a variety of sources- individual donors, corporate sponsors, grants, fundraising products, special events, maybe even program fees.
Ø Keep records. Any idea who it was that gave you that $20 donation last year? They probably don’t remember either.
Ø Ask and you shall receive. Be prepared for some rejection, but if you don’t ask, most likely people won’t give.
Ø SAY THANK YOU!! Nothing makes you want to do something again like being told how wonderful you are for having done it the first time.
I’ve worked with dozens of grassroots nonprofits who have outstanding missions, with leaders who are truly passionate about their cause. These selfless individuals have incorporated organizations that should provide vital services to their communities. Unfortunately, most of these organizations are continually struggling to make ends meet. Many will fail within the first few years of operations. It happens over and over again.
A common mistake made by the founders of grassroots nonprofits is that getting money will be easy. You are, after all, a charity. So why wouldn’t people line up to donate? You’re a 501(c)(3), so the grant money should come pouring in any time now, right? These are common misconceptions. Remember that you’re competing with 1.2 million other U.S. 501(c)(3) organizations who are also seeking donations. There simply aren’t enough altruistic individuals out there who have money to give away. So how will your organization succeed when so many others fail? Start with a solid fundraising plan. Know where you need to be, how you’re going to get there…..and WORK HARD.
Here’s some suggestions to get you started.
Ø Recognize that strategy is as important here as in the business world….okay, as important as in sports. Planning is critical to successful nonprofit management. Make a plan today, and get to work!
Ø Make sure your Board knows that they can’t just sit back and vote on a few things once a year. Directors should pull their weight in the fundraising efforts. And they should make a donation themself.
Ø Commit some resources to fundraising activities. You have to spend money to make money. Enough said.
Ø Get help. A 3 member Board with no paid staff can’t do it all. Search for volunteers, expand your Board, ask favors of your family.
Ø Educate yourself. There are tons of books and websites with information on fundraising tips and tools. Check them out. Learn something new.
Ø Diversify. Don’t count of funding your organization solely with one multi-million dollar grant. It’s not going to happen. You should be receiving revenue from a variety of sources- individual donors, corporate sponsors, grants, fundraising products, special events, maybe even program fees.
Ø Keep records. Any idea who it was that gave you that $20 donation last year? They probably don’t remember either.
Ø Ask and you shall receive. Be prepared for some rejection, but if you don’t ask, most likely people won’t give.
Ø SAY THANK YOU!! Nothing makes you want to do something again like being told how wonderful you are for having done it the first time.
Friday, August 8, 2008
Good Intentions Aren't Enough
Most of us know that planning is a way of looking forward and deciding what we will do in the future. We plan our personal lives in detail from our youth- what we will be when we grow up, what to study in college, who and when to marry, how many children we desire, and how we’d like to spend the golden years. That’s why it’s so bewildering that many organizations are not aware of the importance of planning their future. Beyond initial incorporation and attainment of 501(c)(3) status, generally grassroots nonprofit possess a “live for the moment” outlook. Unfortunately, this is a primary reason why many nonprofits do not experience success after start-up. As a nonprofit leader, if you’re a fan of getting things done you’re going to have to plan. However, priorities do not exist in a vacuum- together with your Board you’ll have to evaluate the context, cost, time requirements, and resources available each step of the way. To be successful in mission fulfillment, your organization will have to engage in strategic planning.
Strategic planning is a disciplined effort to produce decisions and actions that shape and guide what an organization is, what it does, and why it does it. It is a process that produces fundamental decisions that shape and guide the management of an organization. This process focuses on both the internal and external environments in which the organization functions. The process requires information gathering, identification of the mandates governing the organization, clarification of the mission that drives the organization, consultation with key stakeholders of the organization, identification of the issues facing the organization in the future, the development of strategic alternatives to address those issues, a plan for implementation, and evaluation of the implementation. Development of a clear vision of the future will then serve to motivate employees and to keep the organization moving toward achieving the goals identified in the strategic planning process. Additionally, strategic planning can function as a team building strategy facilitating communication and participation within the organization.
Ideally, the process of strategic planning leads to the development of strategic management. In strategic management, mechanisms are in place which facilitate the ongoing monitoring of the environment to identify potential issues that the organization may face in the future. The implementation, evaluation, and reassessment of the strategic plan are part of daily management activities increasing the flexibility of the organization to respond to changes in its environment.
For both strategic planning and management to be effective, a strong commitment from the organization's leadership is necessary. Each organization needs a process sponsor to endorse and legitimize the strategic planning process, and a process champion who takes on the responsibility of making the process work. With the support of management, strategic planning and management provide an organization flexibility to respond to a changing environment and to proactively plan its future. Strategic management, in essence, allows the road to success to be paved with good intentions. It beats the well known alternative.
Strategic planning is a disciplined effort to produce decisions and actions that shape and guide what an organization is, what it does, and why it does it. It is a process that produces fundamental decisions that shape and guide the management of an organization. This process focuses on both the internal and external environments in which the organization functions. The process requires information gathering, identification of the mandates governing the organization, clarification of the mission that drives the organization, consultation with key stakeholders of the organization, identification of the issues facing the organization in the future, the development of strategic alternatives to address those issues, a plan for implementation, and evaluation of the implementation. Development of a clear vision of the future will then serve to motivate employees and to keep the organization moving toward achieving the goals identified in the strategic planning process. Additionally, strategic planning can function as a team building strategy facilitating communication and participation within the organization.
Ideally, the process of strategic planning leads to the development of strategic management. In strategic management, mechanisms are in place which facilitate the ongoing monitoring of the environment to identify potential issues that the organization may face in the future. The implementation, evaluation, and reassessment of the strategic plan are part of daily management activities increasing the flexibility of the organization to respond to changes in its environment.
For both strategic planning and management to be effective, a strong commitment from the organization's leadership is necessary. Each organization needs a process sponsor to endorse and legitimize the strategic planning process, and a process champion who takes on the responsibility of making the process work. With the support of management, strategic planning and management provide an organization flexibility to respond to a changing environment and to proactively plan its future. Strategic management, in essence, allows the road to success to be paved with good intentions. It beats the well known alternative.
Wednesday, August 6, 2008
Nonprofit Websites: Avenues to Attract Potential Donors
Today’s nonprofits are realizing that the presence of increased competition in the sector is necessitating exceptional promotion of their organizations. Nonprofit administrators are continually developing new marketing and fundraising strategies to help them become better communicators of their missions, to foster growth, and to increase the impact of their causes; thus making the world a better place. With the emergence of the World Wide Web, charities and churches are awarded an outstanding new opportunity to market thier services, build their reputations, and attract potential donors.
Thus, leaders in the nonprofit sector are faced with the task of developing a website that will not only advertise services, but also stand out as unique, comprehensive, and, most importantly, inviting to potential donors. Charities are asking how they can and should be
harnessing the web’s power and seeking to understand how to integrate it into their overall marketing mix. Looking through the eyes of a potential donor, nonprofits must seek to understand and harness the power and the potential of the Internet so their organization will become more effective and better equipped for the future.
So what works? Items that are most advantageous in attracting a potential donor, and that must be easily viewable on any nonprofit website include:
1. Your name, logo, and MISSION. Possibly add captioned images that clearly represent your mission.
2. Photos of people-those who you have served or who represent your primary target.
3. Some way to get questions answered quickly- search on site capability or a FAQ link.
4. Encryption whenever you ask for anything beyond email address, especially donations.
5. A call to action. Make the ask! Request donations, volunteers, etc.
6. An invitation to future communication. Sign up for our e-alerts or e-newsletter, etc.
7. A link to on and off-line contact information.
8. Images or statements indicating how gifts are used.
9. Appreciation for previous donors. Thanks, logos, recognition, etc.
10. Last, not least, search engine optimization. (the process of improving the volume and quality of traffic to a website from search engines via targeted keywords)
Thus, leaders in the nonprofit sector are faced with the task of developing a website that will not only advertise services, but also stand out as unique, comprehensive, and, most importantly, inviting to potential donors. Charities are asking how they can and should be
harnessing the web’s power and seeking to understand how to integrate it into their overall marketing mix. Looking through the eyes of a potential donor, nonprofits must seek to understand and harness the power and the potential of the Internet so their organization will become more effective and better equipped for the future.
So what works? Items that are most advantageous in attracting a potential donor, and that must be easily viewable on any nonprofit website include:
1. Your name, logo, and MISSION. Possibly add captioned images that clearly represent your mission.
2. Photos of people-those who you have served or who represent your primary target.
3. Some way to get questions answered quickly- search on site capability or a FAQ link.
4. Encryption whenever you ask for anything beyond email address, especially donations.
5. A call to action. Make the ask! Request donations, volunteers, etc.
6. An invitation to future communication. Sign up for our e-alerts or e-newsletter, etc.
7. A link to on and off-line contact information.
8. Images or statements indicating how gifts are used.
9. Appreciation for previous donors. Thanks, logos, recognition, etc.
10. Last, not least, search engine optimization. (the process of improving the volume and quality of traffic to a website from search engines via targeted keywords)
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