One lesson about fundraising culture that I learnt as a charity CEO
Being a charity CEO is no walk in the park.
Especially when it comes to creating a fundraising culture.
Most days it feels less like ‘wearing many hats’ and more like riding a unicycle on a tight rope while juggling torches. And balancing spinning plates on your forehead.
As CEO of a small charity, my job was to find that perfect balance – to raise as much money as possible for the cause, while spending as little as possible on raising that money, or fundraising.
To be pulled in two very different directions. Sound familiar?
What makes it worse, it doesn’t work.
Fundraising is an investment-driven business. And this means you won’t raise a lot of money if you don’t spend some money at the start.
It’s a gamble. Not literally, but fundraising does involve a level of risk. And there lies the problem.
Many charities and most Boards are risk-averse; they adopt a very conservative approach to financial management. They focus on managing the organisation and the cashflow, rather than looking at the long-term possibilities. If they are open to investing in fundraising at all, they expect the return to come back within the year.
“Oh, and if it could all be unrestricted, that’d be just swell, thank you…”
So, how do you make the case for investing in fundraising?
You need to make them look at the future. And dream of what can be achieved.
Go back to your Why. WHY was the organisation founded in the first place?
No charity was ever founded on the premise that they would aim to improve the lives of 17% of people in need, and increment this by 2% a year.
Those kinds of statements have never made anyone get out of bed in the morning. They don’t make talented and passionate staff stick around for very long. And most importantly, they rarely make a donor feel compelled to make a gift.
Charities and non-profit organisations exist to solve a problem. To eradicate a disease, to end homelessness, to clean an ocean.
Ask the question:
“Do you want a bit more money now or a lot more money down the road? Do you want to help save a few more lives now, or save many more lives in three, five, even 10 years?”
The cause DEMANDS that you think about all the lives that need saving. It DEMANDS bold investments and tough decisions today so that the problem your charity seeks to solve will indeed one day, be eradicated.
“Is it better to spend £100K on your project and safely demonstrate that you kept your overhead under 20% or to spend £100 million on your cause, radically making the world better, because at some point you made the decision to invest in fundraising?”
Fundraising investment planning involves looking forward, not back
Accountability is what drives the fundraising culture in most non-profits.
This involves accounting for the past in order to demonstrate good stewardship of funds and thereby get more money in the future.
Whilst this may be good for institutional fundraising, public fundraising requires us to draw a picture of what is going to happen in the future, in order to gain the necessary investment today.
Great Fundraising Organisations are future-focused.
Their financial analysis and planning is based on learning from the past, yes, but with an absolute focus on the future and their ability to adapt as the future changes.
Their toolbox includes all your usual tools and indicators for financial management (balance sheet, cashflow analysis, cost per acquisition, etc.) but also some strong predictive tools, such as:
· investment modelling
· if/then budgeting
· predictive key performance indicators (KPI’s)
· cost/profit analysis
· learnings reporting.
These predictive tools are not there to manage cash flow but to deliver growth. Developed by the fundraising team, they are understood throughout the organisation with processes and systems set to deliver them.
The importance of Lifetime Value
While most non-profits will focus on keeping their costs (overhead) down, the Great ones focus on measuring and reporting on fundraising KPI’s. This is one metric I like in particular:
Lifetime Value of their donors divided by Cost per Acquisition
LTV / CPA
That’s all the donations a donor will give during their lifetime (and beyond in the case of legacies) divided by the cost to solicit the initial gift from that donor.
What this means is that you shouldn’t try to keep your Cost Per Acquisition down at all costs. Because Lifetime Value matters in this equation. Maybe it’s worth spending a bit more money to attract more loyal donors who will give you more money and for longer?
A donor-focused approach
When I first started as a fundraiser for Bread and Water for Africa in France, we relied heavily on premiums to recruit new donors. This seemed to work in the short term. The response rate on cold acquisition was 4.75%!
But attrition rates were very high. The charity was literally leaking donors. They’d make a first gift and then never give again to subsequent appeals. We just spent our time and money recruiting donors over and over and then they would seep through our fingers.
We therefore changed the strategy to improve the quality of the messages (both for warm and cold campaigns) and make sure donors felt rewarded and appreciated.
The results: the cost per acquisition went up. BUT the average gift went up as well. People started signing up for Direct Debit, and before long we started receiving our first legacies.
By slightly increasing our CPA – and overhauling our communications – we exponentially raised our LTV.
The result? Cash flow took a dip in the first year, but that strategy paid off in the long run with a much better return on investment at year five. That required courage from the Board and the leadership team.
Focusing on growth
So, when I became the CEO of Bread and Water for Africa UK, I knew exactly how I would approach fundraising, and therefore influence a shift in the fundraising culture.
And that was to focus on lifetime value as the key metric to deliver long-term, sustainable growth.
This sounds simple. But remember those spinning plates? The tightrope? The unicycle?
A change in mindset of this scale requires the whole organisation to be focused and energised behind fundraising growth. And this shift in fundraising culture needs to be led from the very top – the CEO and the Board of Trustees.
And no one ever said that simple was easy.