What Color Are Your Dollars?
Terry Richey
One of the best fundraisers we know says: “All money is not the same color of green.” By that, she recognizes that fundraising is not simply about how much you can bring to your mission but about a balance between funding types so that you have sufficient operating income. We saw this first hand with a non-profit CEO determined to grow his revenue 20% each year. (His board unwisely set this as an objective.) He was consistently making his revenue target. However, at the same time, operational funding was lagging behind. In the drive for topline growth, a tradeoff was made that relegated unrestricted funding to a secondary concern. It became a primary concern when 15% of the staff had to be laid off despite the best fundraising year in their history.
What we’ve used as a model for fundraising planning incorporates five dimensions that all donations, gifts, and grants have as components:
Adaptability
Scale
Time
Renewal
Cost
The first of these is “adaptability.” In other words, how flexible is the funding in how it can be used? Most nonprofits can describe the adaptability of a gift or grant in three ways: Unrestricted. This is completely flexible for any use serving the organization’s mission. The donor trusts the organization to make the best use of the funds. Restricted but budget relieving. These funds come with restrictions on their use but the use of the funds will cover a budgeted expense of the organization. In many circumstances, this allows an organization to free up previously budgeted funds for another use. Restricted. The third area of adaptability is the least flexible. This type of funding carries requirements from the donor for its explicit use.
You can count on the fact that as gifts get larger, the restrictions get tighter.
As gifts and grants get larger, they usually become restricted as the donor seeks to assure specific outcomes are accomplished with their investment.
Of course, the easiest organization to operate is one that receives all of its funding as unrestricted. A few of those exist, but as organizations become larger and more sophisticated, they find that restricted gifts have an important role to play in launching new programs and making capital improvements. You can count on the fact that as gifts get larger, the restrictions get tighter. Many non-profits work to include some unrestricted operating expense as part of every restricted gift. Some even require it.
But the fund development palette has many more colors (and complications) than simply the adaptability of gifts and grants.
“The Color of Money” is the first in a series of posts which will review the five dimensions of funding: adaptability, scale, renewal, time, and cost. Visit our blog in the months ahead as we explore the other four dimensions. If you would like to have the full series in advance of publication, please email Terry Richey (terry@TimberlineStrategy.com) or Berkeley Darr (berkeley@TimberlineStrategy.com.
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