Category: fundraising

case for support, communications, fundraising, messaging, planning, rationale, theory of change

How to define your organization’s unique value

In my last post, I discussed how a theory of change can help your organization to focus its mission. This is the result of better defining your organization’s unique niche within the system in which it operates.

But how do we identify our organization’s unique value proposition? What parameters can guide us to determining our unique niche within the system? What will tell us how we can be most effective at creating the change we wish to see?

There are three components to a unique value proposition:

  • The benefit you offer to your constituents
  • How you are solving the problem
  • How you are different from others

The first describes the good stuff you do or provide, while the second identifies how that good stuff actually responds to the need and solves the problem you’re tackling. The third point is about how you distinguish yourselves from others working on the same issue, whether it be in approach, methods, or focus (thematically or geographically).

The theory of change is critical for laying the foundation of understanding about the problem, the other actors in your problem space, and the difference approaches to solving the problem and creating your vision.

Then when it comes time to define an organization’s unique value proposition, I ask questions around three areas:

Competencies. What is your organization good at? What skills and technical expertise does your staff bring to the table? What have you accomplished in the past as evidence of this? And conversely, what are you not good at? In what areas are you weak that you are less likely to be successful? Where have you not been successful or where have others been more successful than you in the past?

Need. Sure, you may be good at something, but is it needed? When you look at the system in which you work, do your strengths align with one or more areas that will contribute to transforming the system? How does your work make a significant contribution to solving the problem in the long run? How is what you’re doing today going to make it easier for people tomorrow? And conversely, in what ways does your work not solve the problem? What other approaches are needed that you will not do or that you are not prepared to do?

Position. So you’re good at something, and that something can help solve the problem, but is this something that others are already doing? Is what you’re offering different from what is already being done? If so, can you define and demonstrate those differences? Conversely, are there areas of need where others are not intervening that fit your competencies? Is there something that needs to get done that no one else is doing and you could do successfully? Could you adapt your organization to do what’s needed?

By looking at what an organization can do well, how what it does affects change, and its positioning relative to others, it becomes much easier to understand the unique value proposition. This in turn makes it easier to attract support for your work, because it is important, effective, and unlike anything else out there. And who wouldn’t want to support a worthy cause like that?

Do you know your organization’s UVP? Do you have a clear theory of change that helps you understand your organization’s purpose and positioning? How would understanding your organization’s UVP help you with your messaging and fundraising?

If you’re interested in developing a theory of change that does all of the above, check out The ToC Workshop, a special eight-week program designed to help you get the most out of a theory of change for your organization.

board, case for support, communications, fundraising, invaluable, leadership, management, planning, strategy, theory of change

Want big money? Inspire confidence

Over the holidays, I got around to reading Vu Le’s blog entitled “Hey, you want nonprofits to act more like businesses? Then treat us like businesses” in which he points out that while funders demand nonprofits act more like for-profit businesses, they don’t invest in them like they do for-profits.

While I wholeheartedly and passionately agree with Vu’s requests from funders – more money, more overhead, faster decision-making, more risk-taking, less micro-managing – I think he fails to fully consider the funders’ criticism.

His blog begins with the inciting incident – funders once again asking nonprofits to behave like for-profit businesses. Vu’s title states his viewpoint – if you want nonprofits to behave like businesses then you have to treat us that way – but I think that’s confusing the chicken with the egg.

Yes, to a large extent, nonprofits are backed into a very tight corner because of the way funders invest in them. And yes, I personally believe that if change is going to happen on this front, that funders will be the ones to truly make it happen.

However, you don’t treat a child like an adult just because the child says that’s the only way he’ll grow up and act like one.

Let’s first clarify something: Yes, nonprofits are businesses. Like for-profit businesses, they strive to produce enough goods and services to meet demand; they need to advertise and promote their work; they need to raise enough revenues to cover the full cost of doing business; and they need to reinvest in improving the efficiency and effectiveness of their businesses. The differences are that

  1. nonprofits exist for the public good, to better society or the world in some way, and as such
  2. their “customers” (or constituents) usually cannot pay enough to cover the full cost of business, which means nonprofits are dependent on a third-party donor or funder to subsidize their work; and
  3. they do not distribute their profits to their investors (as Vu rightly points out in his blog).

But when people say that nonprofits should behave like for-profit businesses, well, I think they’re right. Some people who say this are misguided and don’t understand how nonprofits operate (the three points above). But what many are talking about is the way nonprofits manage their organization, from leadership and planning to operations and revenue generation. Nonprofits are often started or run by smart, passionate people who identify a societal need and take action, but few of them have any business or management experience. And I’ll be honest: it usually shows.

Take this one client I worked with last year. He fit this description – a university professor with a sharp mind, a keen understanding of his work, a vision of how to solve a problem. But when I asked him what his business is, he responded, “Well, I don’t have a business. I run a nonprofit.” And this kind of thinking is why he had no strategic plan, no fundraising plan… and a fully volunteer-run operation without enough funding to pay for staff or expand his efforts.

Here’s the thing: if you want funders to invest in you like they do for-profit companies, you need to inspire confidence. When you come to a me as a funder with a good idea, I’m interested in hearing more. But when you fail to present a clear, thoughtful plan for executing the plan, financing the work, and producing concrete, measurable results, what makes you think I’m going to just throw a large sum of money at you?

Do you think for-profit businesses just walk up to venture capital firms without a business plan? Without proof of concept? Without projected financials and results? Of course not. Start-ups work hard to put forth a solid, convincing plan based on numbers and hard evidence. (And they are more open and up-front about the risk, which makes it easier for investors to take a risk, because it is known and calculated.)

If you want to be treated like a for-profit company, you need to inspire the same kind of confidence that for-profit businesses do. To do this you should have a handle on basic business principles, including:

  • Planning. Most organizations have a strategic plan, but does that plan provide a convincing picture of how you will create impact? Does it show how you will strengthen and grow your organization to achieve that impact? Does it include concrete measurements and evaluation of progress and success? Do you have a financial plan that illustrates how you will raise enough revenue to cover the full cost of doing business (not just program expenses)? Does it consider what will happen in the event you don’t raise enough funds? Do you have a budget that not only shows how you will allocate your resources but that also reflects your strategic goals? And do you have a thoughtful theory of change (the equivalent of a business plan) that describes the system you work in, what it will realistically take to achieve change, and your organization’s unique role in creating that change?
  • Finance. Do you have a system to properly manage revenues and expenses? Do you conduct thorough financial reporting on a regular basis? Are you allocating your resources to maximize your impact and improve your cost effectiveness? Do you have a diversified revenue portfolio that covers the full cost of doing business? Do your financial reports show that you have learned from the past to improve your financial standing? Are you able to adapt to changing financial circumstances (a big grant you didn’t get, an economic recession, insufficient overhead, etc.)?
  • Management. Does your leadership inspire confidence? Are they organized, thoughtful, compassionate, and focused on the mission? Does your nonprofit have a high turnover rate or high retention rate? Does the organization have a clear and logical structure to achieve its goals? Does the organization have a culture that is positive, cohesive, evidence-driven, and supportive of learning and development? Does the organization have a human resources function, with clear policies and infrastructure to effectively manage staff? Do different people and teams within your organization communicate and collaborate effectively? Has your organization successfully navigated through a period of rapid growth?

There are other aspects of an organization that can inspire confidence – a strong brand, solid partnerships, compelling communications, an honest risk assessment and a realistic risk mitigation plan, a history of success or proof of concept, etc. – but the three listed above are critical aspects of an organization that funders will question when making decisions about whether to fund your work or not.

And sure, you can say, “Well, if funders only invest in our program work, how will we ever have the time and money to invest in all this other stuff?” To which my response is: ask for it. If you can demonstrate a need for these things, and the benefits they’ll bring to your organization, it’s not a hard case to make. Most funders know the importance of supporting the nonprofit enterprise and will at least add some funding to a project grant to help you build out those competencies. Program Officers are real people with real feelings, and they genuinely care about helping your organization succeed (even if their bosses and the decision-makers are more interested in a return on investment). Especially if you have solid relationships with existing funders, ask for what you need.

I am passionate about nonprofits and I admit I am as frustrated as anyone with the way the sector is held back and inhibited by current funding practices. And again, it’s a chicken-and-egg scenario: if we want funding practices to change, we need to inspire more confidence, which might mean asking for funding to do it.

In the end, though, it does no good to play the whiny child, complaining that we won’t grow up until we’re treated like grown ups. Demonstrate that you deserve to be treated like one, and it will be much easier to get the respect and support you deserve.

fundraising, planning, strategy

5 things most fundraising plans are missing

A fundraising plan is a critical document for any organization. After all, it states how the organization will generate enough revenue to cover its costs, and if it can’t cover its costs, it can’t make progress towards its mission.

While an organization can do without a formal plan written on paper, the benefits of having a detailed plan are manifold – being strategic can focus one’s efforts, ease decision-making, create efficiencies, and improve effectiveness.

I’ve seen many fundraising plans, ranging from a few ideas jotted down on the back of a napkin to lengthy, sophisticated plans. Yet I repeatedly find some components missing that are often the most useful aspects of a successful fundraising plan:

  • Situation analysis. Development teams often design a plan looking forward, setting goals based on what they achieved the previous year, but they don’t go far enough to look at what else worked and didn’t in their prior efforts, nor how circumstances have changed. The best plans incorporate lessons learned from previous years, consider the current conditions, and avoid repeating mistakes made in the past.
  • Diversified revenue sources. Most plans think about the two common funding sources – individual donors and institutional funders – and that’s it. But if you can diversify your portfolio, you’ll have greater financial stability and resilience in the long run. Think about different way for your organization to generate revenues and earn income, and be sure to consider sources of both restricted and unrestricted funding.
  • Resource assessment. Fundraising plans are organizational, and so they often focus on what the organization needs to earn. They don’t always focus on what the organization will need to be successful at fundraising. What resources do you currently have to execute the plan? What resources will you need at a minimum and what resources would you want to have to expand your efforts? Taking stock will help ensure that your plan is practical and that your development team is set up to succeed.
  • Detailed work plan. More sophisticated organizations know that having a list of how much you want to raise from different sources is just the start. If you want to actually achieve your fundraising goals, you need to know how you will execute. This includes what your timeline and benchmarks are, what your priorities are, what your activities will be, and who will be responsible for what tasks. Having a detailed work plan makes the execution far more efficient and effective, especially if you’re working on a team.
  • Contingency plans. No fundraising plan is foolproof. There is always risk involved, with some revenue sources more likely than others. So what happens if you fail? What’s the backup plan? While most fundraisers can tell you about the probability of receiving funds from different sources, many cannot say what will happen if they don’t meet their goals. If you want to increase your chances of success, do a bit of scenario planning to account for different possible outcomes. It will improve your organization’s financial sustainability in the long term.

If the planning is done right, it should be easier to meet your goals. And if it’s easier to meet your goals, you’re more likely to raise enough funds for your organization. Now who doesn’t want that?

For more on how to develop a strong fundraising plan, check out this upcoming workshop – Smart Planning for Financial Sustainability – at the Foundation Center in San Francisco on Tuesday, June 2nd. Register today!