Nonprofits and Donors, Is there a Disconnect?
There has been a lot of talk lately about large nonprofits and the apparent waste of donations and other seeming improprieties. Be that as it may, you are talking about organizations who are raising MILLIONS because they are good at marketing themselves and good at raising money. They do what for-profit organizations do and build the public's trust, and no one questions their good deeds. But do we hold the same assumptions of smaller nonprofits?
As a small nonprofit who works with other small nonprofits, we see something very interesting arise from these media blitzes on "wasteful" charities. We all know that the goal is for 100% of donations to go directly to those being served. But there are some flaws to that ideal. Is that really realistic?
Who is going to do it for free?
Good deeds require good people to perform those good deeds. In the business world, they are called employees and no one thinks about NOT paying them. AND DONT get me started on my tax dollars and the waste in human capital and money in that system! We question it, but just let it go and write it off as the government. (And this thought process will be addressed later when we discuss how people think government will meet the special needs of communities if nonprofits continue to fail securing the resources they need to succeed in their missions) But in the nonprofit world, as donors ask questions about where their money goes, many ask about overhead. I actually went through this with my own organization a year or two ago.
Denver Gives is a 501c3, currently all volunteer, organization. We provide free education, consulting and resources to small (under $500,000 annual budget) and local 501c3s in the Greater Denver Metro area. We began with a good funding model, a young professionals group, which as time went on was unsustainable in Denver for some weird reason. Not too many charity young professional organizations are sticking around here with the exception of a couple well developed organizations, take Active 20-30 for example. Anyway, as our funding from young professionals dried up, we found it hard to get grants, corporate support, and individual support. Part was my fault and my inability to tell an effective story of what we do and why we do it, and part was my boards inability to raise money. Our organization, since 2008, has had yearly budgets from $2,500 to $25,000. Operating expenses are just about $10,000/year.
Overhead or Doing (Good) Business?
When we were having our troubles, instead of focusing on how to get more money into the organization, some board members began looking at our overhead. Overhead of $10,000/year. Let me repeat. We functioned on $10,000/year! Insurance was $300/month, Phone was $40/month, Internet was $25/month, various computer systems and email systems that we have to have to communicate with our limited number of supporters cost something. I wont even go to direct mail and printing costs of business cards and brochures! But needless to say, just to keep the "doors open" was damn near $10,000/year. And my board wants to cut expenses?
Selling vs. Raising Money
It is FAR harder to RAISE money than MAKE money. Ask any founder of a startup or a small nonprofit. Raising money takes a LOT of time and energy. When you are a founder of a startup or a smaller nonprofit, you have to wear MANY hats and the fundraising hat is the hardest to take off because it is the most important thing you can do to advance your business, BUT it's also taking time away from your passion and why you started or are in the business you are in. Founders, for-profit or nonprofit have this dilemma. It's sometimes easier for a nonprofit because even if they raised a ton of money they will still want to do what they are passionate about and that is helping others. A founder of a for profit might want to help others, but most likely they will do it by selling or using the increased revenue to donate money and eventually their time to do good. Philanthropists are important too.
But... if you aren't increasing revenue or raising donations, what happens? When a for profit is losing money, we have all watched Shark Tank. What do the Sharks all say... "SELL SELL SELL!", "You need to bring in more revenue". RARELY do they suggest cutting expenses, knowing most are already bootstrapping as it is. Well my friends, small nonprofits are no different! But people still think they are...
Going back to my organizations story, at that time we had 8 board members. If they each donated just $500/year, or $50/month, that is almost HALF our operating budget! DONE! What if they recruited more board members. Got to 10 or 20 board members and increased the amount by just $100/year or $10/month? Seems simple right? Nope. "Let's see about using Google Voice for free...", "Let's cut out the internet and just use Starbucks...", etc. Hmmm...
Maybe you are beginning to see flaws in the way some people look at nonprofits and how we actually hamstring nonprofits.
The Overhead Myth
Dan Pallota, a TEDtalk speaker (search overhead myth), talks about this phenomena. He feels so passionately about it he created the Charity Defense Council, a nonprofit dedicated to addressing "The Overhead Myth". I HIGHLY recommend everyone interested in donating and EVERY BOARD MEMBER ON THE PLANET watch his entire one hour presentation to the Utah Nonprofit Association on YouTube. It isn't just a defense of charities but enlightening about our society pigeon holes not just nonprofits but those working for nonprofits as well.
Going to the question at hand... "Who is going to do good for free?", Dan gives an example of two people who graduate from the same program in the same college and one goes into the nonprofit sector the other into the for-profit sector. He moves you along their journey to a point at the end where the person who made a LOT of money in the for-profit sector is hailed as a hero and philanthropist for all the money he donated and the person actually doing the work becomes the employee of the philanthropist because he is not a board member of the nonprofit the other works for.
This is not a stab at philanthropists nor board members, nor companies. It's just a comment on how our society wants problems addressed, yet we dont engage enough into those helping make a difference and help them.
I'm getting tired, so some of this is starting to merge together, so will digress.
My point to this is...
Yes, we need to know where your donated dollar is going... but PLEASE realize that people need to make a living, any business has expenses, and if you want community needs addressed and the animals, kids, seniors, and others in need taken care of, these businesses dont have revenue streams, they have you! Support them.
If you REALLY want to know where your donated dollar goes. Do this.
1) Volunteer with an organization first
2) Donate or don't based on your knowledge of the organization from the inside out
You will know if that person running the organization is legit or not, you will see what they are trying to do, or not. You will see if they are using your money wisely, or not. And if they are small... CUT THEM A BREAK! Find a friend or group of friends or co-workers with business expertise, get them together with the leaders of that organization some Saturday or Sunday (neither day during football season however) and HELP EMPOWER that organization to be more efficient and effective!
www.denver.gives - to volunteer with our committees visit our site
www.madvolunteer.com - to find any type of volunteering opportunity OR post your own opportunity nonprofits can review and take you up on it visit MADvolunteer.com. Make A Difference, Differently!
If you are a small nonprofit in the Denver area, Denver Gives is hosting an event on April 29 at at the CU Denver Business School on fundraising and marketing. You can register HERE
They will also host Denver Gives Week (www.denvergivesweek.org) from August 15-20, 2016. And Nonprofit Appreciation Day at Lakeside Amusement Park on Saturday August 20, 2016. Small local nonprofits can use this day to receive HUGE discounts for them and their staff and volunteers for unlimited rides, entertianment, food & beverages and more, or use it as a fundraiser, much like a candy sale, exempt WAY more FUN for EVERYONE! Contact Nonprofits@denvergives.org for more information about that day!