Editor's Note: Learn from a panel of experts and entrepreneurs who have successfully financed their own ventures and are helping others do it at the Thought Leaders Live 2013 event May 29, in Long Beach, Calif. Event and ticket information can be found here.
This article was excerpted from Nonprofits Made Easy. Buy it today from EntrepreneurPress.com.
Cash, as they say, is king. Without it, you can't provide the programs and services that your nonprofit is designed to provide. Unlike a for-profit business, you can't promise investors a return on their investment (except a psychic return) or look to future sales to provide a profit. So where do you get the necessary cash?
You ask for it. You ask individuals for direct donations. You ask foundations and government agencies and corporations for grants to support specific programs and projects. In time you can ask for direct donations from corporate and private philanthropies. The overall term for this asking is fundraising.
There are two fundraising commandments: simplify and focus. Many small nonprofits have trouble raising money because they pursue every conceivable opportunity, thereby diluting their efforts and losing sight of their mission.
Fundraising involves all acts of soliciting donations for a nonprofit agency. It includes efforts to raise money from:
- Philanthropies (either private or corporate)
Add fees for service and similar revenues to the list. While these are not charitable donations, they can be a significant source of funds for a new nonprofit.
Most startup nonprofits are limited to seeking donations from individuals and special events. (A very few might be able to secure government funding for a specific program, but this is rare.)
Once up and running they might qualify for specific grants (usually program-related) and philanthropic donations. Program officers (who make the donation decisions in these organizations) look for a good track record, proven success, and a strong executive director as proof that their donations will make a positive difference and achieve their program and philanthropic goals. By definition, startups lack the first two and won't be able to overcome this barrier without an exceptionally well qualified and well connected ED.
In any case, fundraising starts simply enough.
It all begins with the case statement: a short (one or two pages) written statement that lets prospects know what you intend to do with their donations and why their donations will make a positive difference to the community. The case statement makes the case for making the donation, provides the basis for collateral material (brochures, letters, pamphlets and so on), and helps keep the message of your nonprofit consistent and compelling. Without a clear case statement, your message will be muddled and lost.
Step 1: The Case Statement
Here are some of the questions to answer in your case statement:
- Why are you in business? That is, what is the problem you are trying to alleviate or resolve? This is an expansion of your mission statement.
- What outcomes do you anticipate? These should be measurable and publicly observable, not a vague "improve lives" kind of statement. What specifically are you trying to accomplish with this specific program or service?
- How is your organization different from other organizations?
- How will you achieve your program and service goals? What methods will you use? Your coverage of this point doesn't have to be exhaustive.
- What major accomplishments has your nonprofit achieved? People give to successful organizations and tend to avoid giving to struggling ones.
- What is the history of the organization? When was it founded, by whom? How is it financed? What is the organization's philosophy? How does it work with other nonprofits?
It is longer than an elevator speech (that 30-second spiel designed to stimulate interest) but much shorter than a business or strategic plan. The overriding purpose of the case statement is to persuade the potential donor to open his or her checkbook and make a donation to your nonprofit.
To make it more effective, personalize the case statement. Sometimes this is called seeking a "poster child" for the organization. The giving decision is ultimately based on emotion, not on pure reason alone. Accordingly, you want to put a face on the organization's beneficiaries. An after-school program will help a young woman avoid trouble, a dental program will help children have healthy teeth and gums, a homeless shelter will keep families out of the rain and cold. And so forth. Paint a picture with realistic people (or animals) receiving important benefits. That makes the case personal, as opposed to impersonal. It also makes it more exciting.
Who writes the case statement? Ideally, your stakeholders will all play a role. To save time and concentrate efforts, start with the board members and the executive director, who will be the primary askers. Sketch out a rough case statement and then ask for constructive criticism from other stakeholders, including employees, clients, early donors, and friends. Each group will have valuable suggestions. Ask for ideas on a poster child-and keep in mind that in advertising agencies the first few ideas are tossed out on the theory that early ideas are generally weak. If they indeed have value, that is, if they communicate the spirit and urgency of the program or service, those ideas will resurface.
Another dimension of revising the case statement involves aiming at your target. You will naturally slant the statement toward the people you are wooing. This does not mean that the case statement is entirely plastic: most of it will be constant. You will just emphasize facts and numbers to the analytically inclined, the emotional tugs to the sensitive, the prestige of donating to those who need reassurance that they will be joining a select group. This is not cynical, by the way. It is just smart selling.