Step 4: Funding
(I will focus on financing for nonprofits. That said, most of this should help anyone as long as you contextualize it.)
If you want to launch a successful organization, you will need capital to get it off the ground in order to create initial momentum, grow the organization, and sustain that growth long term.
An idea without cashflow is a dream -- and dreams don't mean much. After you decide to launch, you'll need cold hard cash to move the vision forward. Therefore, this is the primary role of the founder/Executive Director and the Board of Directors.
Change Your Mindset
Money is what makes or breaks all organizations. This is true for churches, businesses and nonprofits. No money means no mission. So the real question is this - how do you build a financial model that will help you launch, sustain and grow your organization?
A quick word to nonprofit leaders: I think many who run nonprofits struggle to view money the right way. Money can seem unspiritual or not as important or as being "up to God."
It's all about the people, right? Wrong!
Money makes it possible to help the people. Money is a tool and if you don't have money, you won't innovate, solve problems or help anyone longterm - because your organization will not exist.
I see money as my friend. If I'm going to empower local leaders, care for orphans, and see their communities transformed and if I'm going to be a good leader who tries to build a world-class organization, then I'm going to need cash to do both.
Here's what having healthy cash flow will do:
I'm confident that we need much more innovation in the nonprofit world. Actually, I’m desperate for this. Nonprofits in general need to understand that we can't run ourselves like second class organizations. We must set the bar higher.
Solving the world’s greatest problems will require innovation, top talent, and the world’s best technology and systems to get the best results possible. Or, to put it another way . . . money.
We must change our mindsets. Being a 501c3 does not mean we are a second-class organization. If anything, 501c3 should motivate you to be better than the best, because our narrative is rooted in "making the world a better place."
Healthy cash flow will help your organization be more successful, tell better stories, solve deeper problems, and be more efficient in the process.
Positive cash flow will also create a more sustainable lifestyle model for your staff. This will lead to more innovation, creativity, and long term health.
You must solve the money problem. You need a good plan of action if you're launching an organization or currently running one. Pray like it depends on God, but you must work like it depends on you!
Long- Term Sustainability Model
Most nonprofits have to view money through two key lenses: Operations and Projects.
Now, this may get some readers a little upset, but I tell my team all the time that WE are the most important piece of the puzzle. Therefore, operations does not take a back seat to projects.
It's actually the front seat. Yes, of course we are passionate humanitarians, but we're also running an organization. We have responsibilities that must be accomplished.
If you can't raise money, you can't lead an organization, period.
Here's the thing: I want our team and tribe to understand how valuable they are and why it's vital that we take running our nonprofit as serious as a tech start-up company. When a donor gives, I want them to know that we are going to do everything in our power to leverage those funds to get the best results.
The nonprofit has to be healthy if we are going to make the long-term impact we are called to make.
Don't create a false sense of self-humility. If you do, you won't be as effective and you probably won't be around for the long haul. And that is devastating.
Why? Because it's simple: If we can't sustain our operations and stay in business, then we can't solve problems that we are passionate about.
The mission motivates us; the money helps us fulfill the mission. They go hand in hand.
Financial Models: Monthly, One-Time, and Scale
When you launch an organization, you must have a solid financial model that can sustain the organization long term. Diversification is key here.
There are three key areas you must consider:
1) Sustainable fundraising (or capital): How do you do ONE activity and create a monthly revenue stream?
We have two areas that we focus on for sustainable growth -- child sponsorships and The Foundation (individuals who give 100% to operations).
When people enroll in these, it creates a monthly revenue model that we can rely on and a tribe that we can invest in. This gives us the empirical data to hire the right staff and implement the correct systems.
It's vital that you have consistent funds coming through your organization that you KNOW will be there. Think in terms of a monthly subscription model like Netflix or Spotify.
You simply can't chase money month after month and have a healthy organization. The stress is too high, the risk is too great, and the long term sustainability is next to impossible.
For Help One Now, here's some financial breakdown (I will use a simple model for clarity):
With 1000 kids sponsored at $40 per month and $8 of the $40 goes to Help One Now operations, 1000 kids sponsored x $8 per month x 12 months = $96,000 in revenue. Of course, these numbers are scalable year after year.
If 100 people join The Foundation, and they give average of $250 a month ... well, you can do that math. More importantly, we know we will have "x" amount of funds to operate year after year, and we also have the ability to grow.
We now have some data and long term revenue to plan well.
2) Large Donors or Projects
Throughout the year, you're going to need some large-scale numbers to come through. This may be to complete a massive project or to fund the organization.
For instance, you could have a Gala where you raise significant funds on one night for operations. We have never been good at this, but some folks are amazing at it.
For Help One Now, we have decided to use each Christmas season to take on our biggest project that needs the most funding.
Last year, we raised over $150,000 in six weeks to build a school in Haiti during this time. We did not have this kind of money in the operations budget, but each year, we will use the holidays to try and fund our largest project.
Some organizations will leverage large scale donors or foundations to accomplish the goal. Just know your strengths and go for it.
3) How do you create an initiative and give it away so people can run with it?
This is the third spoke in our financial model.
1) Monthly sustainable revenue.
2) Annual large asks for big needs.
3) A constant flow of cash through our initiatives.
Let’s use "in app" purchases as an example. Companies will launch an app and create immediate revenue when a customer purchases the app. Then, they can also encourage in-app purchases also, using the app to create additional revenue over and over.
I wanted to created an initiative in which I could go to bed at night and folks across the world were raising money for Help One Now. This is how you build an organization that scales and also adds value to the tribe. (Something we will talk about next week)
So we launched Garage Sale for Orphans. The first year, we developed a prototype. We shared the vision organically and then allowed the natural momentum to take off.
Once we knew folks would do it, we then invested resources and staff to scale. We had the data, people loved the idea, and it helped fulfill our mission.
Here's what it looked liked:
Year One: Through one on one "asks," we raised nearly $50,000.
Year Two: We built a website and dedicated a part-time staffer and raised $150,000
Year Three: We dedicated a full time staffer, built a better web experience and hired a firm to help us scale - we hope to raise $500,000 in year four and $1,000,000 in year five.
For the record, we also made a million mistakes along the way.
Scale is your friend when you launch an organization.
Here are a few graphics that show you how our model works. We know that if we grow our child sponsorships and Garage Sale for Orphans initiative and do one or two annual fundraisers, our organization will grow year in and year out.
We can leverage those funds to ensure we are doing the work that we are passionate about and making the world a better place.
Make the ASK
You have to create a healthy financial model, create tools that will activate your tribe and then you have to do the hard part -- ASK.
I know this is scary for many. But again, you simply cannot start and organization and be too scared to seek for financial support. Nonprofits, start ups, small businesses … we all need funds.
Practical Steps For The First Year.
Create a list of potential donors and set up a one on one meeting, either in person or online. The ask is simple: Fund the organization or key projects on the ground to help build momentum and positive case studies.
Create a pitch deck that tells your story and shows the impact that will be made if they invest. Make sure the pitch deck is simple, personal, and story driven with data to back up the story. I would say 70% story and 30% data.
If you're leading a start up, I would spend at least 50% of your time sharing your vision and raising capital for your organization in the first year.
You will surely face resistance. You will make all kinds of excuses. Your grandma will tell you no and you will be devastated. But great leaders push through the no's until they get the yes's.
If you work the systems, tell stories and back it up with data, you will begin to build a group of investors who engage and help you have the funds you need to do the work that you are passionate about.
I’m rooting for you! Get to work, dream big, make the ask, don’t let the “no’s” get you down. You are a leader, and leaders get work done!
Also, if you missed the any recent parts of the series, click below to catch up.
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