Ellen Bristol and Linda Lysakowski, ACFRE recently joined us for a webinar in which they shared some ideas on how nonprofits can fix the leaks in their own fundraising buckets.

In case you missed it, you can watch the replay here:

Full Transcript:

Steven: Well, ladies, my clock just struck 1:00. Do you want to go ahead and get started officially?

Ellen: I’m ready.

Linda: Sure.

Steven: All right. Cool. Well, good afternoon to those of you on the East Coast and good morning if you’re on the West Coast or somewhere in between. Thanks for being here for today’s Bloomerang webinar, “The Leaky Fundraising Bucket: What’s Wrong and How to Fix It.” And my name is Steven Shattuck and I’m the VP of marketing here at Bloomerang and I’ll be moderating today’s discussion.

Just before we begin, I just want to let everyone know about a couple of housekeeping items. We are recording this presentation. So we’ll be sending out the recording as well as the slides a little later on this afternoon. So if you have to leave early or you perhaps want to re-watch the presentation or share it with a friend or colleague, you’ll be able to do that. Just look for an email from me later on today with the slides and the recording.

As you’re listening to the presentation today, please feel free to use that chat box right there on your screen. We’re going to try to save some time at the end for Q&A. So don’t be shy. Please ask questions, make comments and we’ll try to get to just as many questions at the end as possible.

Just in case this is your first Bloomerang webinar with us, welcome. We do these webinars just about once a week. We’ve got a special Wednesday edition today for you, which is fun. But in addition to doing all of these educational presentations and resources, our core business is our Bloomerang donor database software.

So if you’re in the market for new donor management software, fundraising software, we’d love for you to check us out. You can go to our website. You can browse our features. You can download a video demo. You don’t even have to talk to a sales person if you don’t want to. So we’d love for you to learn a little bit more about us if Bloomerang is new to you.

So I want to go ahead and introduce our guests today. I’m really pleased to have Linda Lysakowski and Ellen Bristol with us. Hey, ladies, how’s it going?

Ellen: Great. Thanks.

Steven: Good to have you here. Some of you will recognize Linda’s name for sure. Linda’s done a few webinars with us before. We just had to have her back. And Ellen, I’m really glad to have you as well. You’re a new friend to me. I’m really excited to hear what you both have to say about donor retention. But before you jump into it, I just want to let everyone know a little bit about both of you.

Linda is a graduate of Alvernia University and AFP’s Faculty Training Academy. She is a master teacher. She has her advanced CFRE designation, which only about 100 professionals worldwide have that, which is pretty cool. She’s worked in development over 30 years. She’s managed capital campaigns. She’s helped hundreds of nonprofits achieve their goals and she’s trained over 30,000 development professionals internationally, not just in the United States. So really awesome to have Linda here.

Ellen, if you don’t know Ellen, you’ve got to know Ellen. She is the president of Bristol Strategy Group. She works with nonprofits to help them improve their effectiveness, increase their total income, and diversify their funds. She helps board and staff members work more effectively, reduce turnover in their office and she helps them maintain their desired level of quality and services.

She spent her first 20 years selling computer systems. She’s a late bloomer. She’s also a non-native nonprofiteer like me. She launched Bristol Strategy Group after she discovered her true calling, which is sort of bridging that gap between the business world and fundraising.

So I’m really excited to have Ellen here. Ladies, I’m not going to take any more time away from you. Why don’t you go ahead and get us started?

Linda: Terrific.

Ellen: Great. You want to start, Linda?

Linda: Oh, go ahead.

Ellen: Here we are already fighting with each other. Linda and I wrote a book together that came out in 2013 called “The Leaky Bucket: What’s Wrong with Your Fundraising and How You Can Fix It.”

And we did it because when we first met I was telling Linda about my Leaky Bucket Assessment, which so many of you have taken. And I said to her, “Well, this assessment shows what’s wrong with your fundraising and how you can fix it.” And Linda’s immediate reaction was, “That’s a great title for a book.” I want you to know this is a record-breaking book. We had the manuscript done in 90 days.

So I’m going to ask Linda to talk to you a little bit about the book and then we’re going to share with you the biggest findings we have from our Leaky Bucket Assessment and how they’re meaningful for you today.

Linda: Okay. Thanks, Ellen.

Ellen: Linda?

Linda: As Ellen said, we wrote this book together and I have to tell you that I’m an author of about a dozen books, some I’ve coauthored. After I coauthored one book, I said, “I don’t know if this is such a great idea. It actually takes twice as long to write with a coauthor.” But when Ellen and I met, we realized we immediately had something in common.

Actually, before we met in person, we met through the Internet through Charity Channel Press and we discovered that we both came from a business background and we both brought to the nonprofit world a little bit of a different perspective.

So we decided, after I said to Ellen, “Well, that’s a great title for a book. Let’s write it,” we actually turned this book around in 90 days. I think that’s the fastest I’ve ever written a book with someone or without someone else. I think you’ll really enjoy this book if you don’t already have it. At the end, we’re going to give you a special offer on the book so we’ll wait until then to give you that.

I think it’s really been a pleasure and it’s been great for us to work together because we’ve both found that our business expertise and background really gave us a different perspective on nonprofits and how they can still maintain their nonprofit mission but work in a more businesslike manner. So I’m going to let Ellen tell you about the nonprofit Leaky Bucket Assessment and how that all works before we get started. So Ellen, take it away.

Ellen: I shall do just that. So this whole thing revolves around a hypothesis regarding productivity. Having spent my entire several decade career generating revenue, I also became really interested in productivity and I’m kind of a geek for performance management and metrics and productivity. So the hypothesis here is that effectiveness, efficiency and productivity leak out of development efforts in ways we don’t notice until the pipes burst and there’s a fundraising crisis, which is no good.

So our Leaky Bucket Assessment measures nine standard practices that we evaluate at four highly scientific levels. It’s either leaking like a sieve or it’s watertight or it’s somewhere in between. We also have–excuse me, I jumped over something–three core assumptions about fundraising that we’re going off. These three areas–prospecting, managing the opportunity pipeline and metrics and measurement–are three enormous areas where fundraising can leak out of the process.

And if any of you listeners work with small agencies where you know you have either no staff or part-time development staff, you know how much your time is at a premium. We look at nine development practices. These practices pervade. So the question isn’t whether or not you have them. It’s whether or not the way you use them contributes to or detracts from your productivity.

So we gathered up all this cool data and we analyzed it in our mad scientist hat. When we had 700 responses, this is what we discovered from the Leaky Bucket. There are a few factoids here that Linda and I fell on the floor over.

For example, only 47% of our respondents . . . by the way, we have close to 1,000 now, but about 47% of the respondents lack a strategic plan. Only 6% use an ideal documented ideal donor profile that includes the standard capacity and wealth profile but also donor motivation. It sort of floored us that 37% of our respondents tracked nothing, no performance indicators around income.

But I think our all-time favorite was what happens when fundraising results fall below desired level and it is that nearly half, 49%, of respondents say, “We’ll um
er
throw more events.” You want to make a comment about that, Linda, before I go on?

Linda: Yeah. I think this was one of the most appalling statistics that we uncovered. I wasn’t surprised by this one, I must say, because that’s been my experience with all the teaching and selling that I’ve done. I think this is the response is if we’re not meeting our goals, we’ll just throw another event or we’ll hire somebody to crank out grants all day long.

And they look at the most expensive things to really improve the performance instead of looking at some of the things they could do that wouldn’t be as high-cost and would yield much better results, for instance, further refining their case for support, training their board. Those are fairly low cost and low time involvement things, which would be much more productive to increase fundraising results. So this one I think didn’t surprise me. It really did kind of shock me.

The two things that really did surprise me were how many people don’t even track their income. I was just totally blown away by that. I’m a former banker. So anybody that’s not tracking as far as how much money is coming in or where it’s coming from but not even tracking their income at all just blew my mind.

The other thing that really surprised me was how few have a strategic plan. I could not believe that over half the respondents don’t even have a strategic plan. So it’s hard to set goals for your organization if you don’t even have a plan in place. So those were some of the things in the results that really amazed me.

Ellen: I wanted to share with you guys how your results were. We really thank you for this. I want you to know that we got a few early. But in the last two days, we’ve gotten 75 responses from you Bloom respondents, which is what I called you. I’m sorry to tell you your results were distributed pretty similarly to the overall study.

I’ll give you the details on who responded. But D, 18% of you were at D. That’s leaking like a sieve; 65% of you were at call the helpline; 11% were at time for preventive maintenance and only 6% were at the watertight level. If you haven’t completed this survey, go to the Bristol Strategy Group homepage, BristolStrategyGroup.com. It’s always open. It’s always free and the links direct on our homepage.

This curve is almost identical to what we’ve seen from the entire 1,000-person study. Just so you know what the distribution of responses were like when we were at the 700 level, our responses are pretty well distributed by respondent title, size of development shop, revenue level and sector.

I’d also like you to know that although the bulk of them have come from North America, we can count amongst our responses Australia, New Zealand, most of South America, most of Europe, most of the British Isles, a few from Asia, a few from the Middle East and our all-time favorite, one from the Galapagos Islands, evidently completed by humans, not tortoises.

So the last thing I want to say about productivity is that productivity isn’t just an idea. It’s actually a measurement. And it takes a lot of things into account, but one of the major considerations is the context for productivity, which has to do with the cost of time. We figured out a way to calculate the actual cost of time, a fund development time. And we figure it by what we like to call opportunity risk.

So we figure you can’t count up how much it costs to send Becky Sue to call on Mr. Moneybags because what we haven’t taken into account is how much opportunity is pending that visit. So we created a little way to calculate this. I’m giving a copy of it to Steve at Bloomerang so you can download it.

What it tells us is that once you take away all the times that can’t be devoted to cultivating funders, you don’t have much time left. So development time is scarce. The average amount of income put at risk for each hour of development that you could lose that amount of money instead of gaining it runs between $1,000 and $3,000. We had one outfit where their opportunity risk factor was $18,500. The CEO turned green and I was afraid we were going to have to call 911.

So we’re taking all of these issues into account so that you can use what little development time you have to really optimize it. The way Linda and I like to run this presentation is I’m going to describe the leaky bucket statement and what it represents and what results it got and then Linda is going to talk about how you can fix it.

So the first of our statements is how you qualify funder prospects. And we find is that 11% have no standards at all and 61% had no documented standards. I hate to tell you this, folks, but when you don’t write it down, the preference is for acquiring a donor are what you think today and how nice that person is to you.

So this is the place where we can lose a huge amount of time. And I know we’ve all experienced this, chasing donors that we call DOA, dead on arrival for hours, weeks, months, sometimes years, even after they’ve told us. They don’t like us. They ain’t going to give nothing to us, but we’re still pouring money down the drain. So our reaction is we’ve got to fix this problem.

So Linda, can you talk about some idea practices?

Linda: Sure. Well, the first thing is that, and you’re going to hear this word in almost every instance, so don’t get bored by it, but the first thing is document those standards so many times. And this is what happens, I think, with strategic plans and development plans. People think, “We have that in our head.” Well, having it in your head isn’t doing anyone any good. It’s got to be documented. So document the qualifying standards. What is a good donor for you? It’s going to be different for every one of the hundreds of you that are listening to this.

And you can’t just look at the ability to give. The old saying in major gift fundraising was the LAI principle, that someone had to have linkage, ability and interest. It’s easy to find out who has the ability in your community. Almost everybody knows that. We all know we’d like to go to Bill Gates and Oprah Winfrey and people that have plenty of ability to give, but do they have a linkage to your organization? Do they have any interest in what your organization is doing?

So you’ve got to look at more than just the capacity of that person or that company or that foundation to give. But are they really looking for investing in an organization like yours? Someone who’s only interested in organizations that serve the blind is not going to be interested in giving to your organization if you serve the hearing impaired. So you’ve got to really look at what that donor’s motivations are to give.

And then you also have to look at danger signs. Those of you who write a lot grants have probably heard the phrase, “The good news is we got the grant. The bad news is we got the grant.” And that could be said about corporate giving. It could be said about individual giving.

Lots of times there are so many strings attached to the money that maybe you don’t want that money. Maybe that’s not an ideal donor for your organization. Maybe the donor themselves has too many strings or maybe the gift that they want to give you is just not appropriate for your organization.

So qualify those danger signs, like what would you consider a danger sign for your organization? If someone wants you to change your mission, if they want to give you a gift that you don’t want to accept and believe me, there are many gifts that you might not want to accept.

So when you qualify ideal donors, you’ve got to take all these things into place. And then you have to make sure that all your solicitors, whether their staff members, board members or volunteers are all looking at that same criteria, that they’re not just running in saying, “I’m going to talk to so and so because they have a pile of money or they just inherited money or they just sold their business and they have a lot of money.” But maybe they’re not the right donor for your organization because they don’t feel passionate about your organization’s mission.

So they’re not going to really want to give to your organization even though they have the ability to do it. So make sure you’re coaching all your team members to use this criteria, to ask the right kind of probing questions so that when you do talk to a potential donor, you’ll know if it someone who fits your ideal profile.

So Ellen, I’ll turn it back to you to talk about the second topic.

Ellen: Well, the second topic is acquiring new funders. Now, we all know donor retention is a big deal. But you always have to acquire new funders because just retaining them won’t get you growth on an absolute basis. We find the same kind of pattern. A big chunk of the respondents to the Leaky Bucket Assessment, about 65% of them, have no real target or they’re just sort of flapping around out there uselessly saying, “We just try hard.”

Now, of those who do have targets for acquiring funders, a fairly large proportion of those only think about how much new money we can acquire instead of how many new funders plus how much money.

The flaw here is when you’re just talking about new money, it’s really easy to get into the frame of mind that says, “Everything will be okay just as long as we can get that big fat grant. All our bets are on that big fat giant grant or that $200,000 gift that somebody’s brother-in-law’s cousin’s mother-in-law might give us,” instead of distributing the risk and saying, “You know, we need $250,000 in new money this year and we ought to get it from 25 new funders.” Then if you and the big fat gift, hey it’s gravy. So this is another area of concern.

Linda: Okay. And how are we going to establish those new funders? Well, I think this is really, again, establishing performance targets for acquiring new funding sources is the first step. Don’t just wish we get new donors, but establish some specific goals. How many new funders do we want to get this year? How many in each category? I think this is really important. You might have certain grants that you go and write those grants every year and every year you get funded by those foundations or those government agencies. But are there some potential foundations out there that you’re not funding getting funding from already? Those are the targets that you can say, “Maybe we want to identify three new foundations this year that are going to give us money.” When it comes to individual donors, your targets will probably be a lot higher and maybe you’ll have to do some acquisition for new donors.

Now, just so you realize it, new donor acquisition is more costly than maintaining your current donors. We’re going to talk about that in a few minutes. But at least set aside a goal for yourself of how many donors you want in the corporate sector? How many foundations do you want to acquire? How many organizations? How many individuals?

Again, publish those targets. When we say publish, we don’t mean on the front page of your newspaper, we mean internally publish those targets. Let your board members and your staff members and your volunteers know how many new donors you’re trying to accumulate so you can set targets for numbers of donors and you can also set targets for dollars that you want to receive from new donors.

All of this should be part of your development plan. Someone asked the interested to that plan referred to the strategic plan or a development plan and that referred to a strategic plan, but you also need a development plan, which even fewer people have. That development plan should list in there what are your targets for new funders in each category and what is your dollar amount so that you have something to go back and evaluate your performance against.

Setting goals is important. So you can measure whether or not you’re receiving those goals. I think it’s really interesting to do that. I think you have to make sure that you not only have those targets but that you write them down, you document them, you share them with everybody internally and then you evaluate your performance on probably a quarterly basis, if not more often, to see if you’re meeting those goals.

[inaudible 00:26:43]

Ellen: Before we go on, I prefer to encourage people to evaluate performance against funder development plan monthly because I think quarterly is not often enough and more frequently than monthly is too frequently. But I think what Linda and I have seen a lot in our many combined years of working with nonprofits is that what passes for a fund development plan is actually a schedule of events and campaigns and not a strategic fund development plan that includes the things we’re discussing here.

So let’s go on to an issue that is near and dear to the hearts of Bloomerang because Jay Love is so actively involved in this issue and that is the question of retaining current funders. A huge amount of research from the Fundraising Effectiveness Project conducted by the association of fundraising professionals that says this is a serious, pervasive and long-lasting problem where we see for $100 raised, $105 are lost. For 100 new donors or 105 new donors acquired, 102 are lost.

So the problem of funder retention is absolutely mission critical. And the science of business process management, it’s been proven without a doubt that having formal performance expectations in the form of targets that are documented and discussed is one of the major differences between achieving goals and not achieving goals.

But what do we see around donor retention? 17% with no targets. That is 17% of our 700 respondents to date; 57% are infamous preferences. I often think when people check off, “We have preferences for doing this or that,” they’re really trying to make themselves feel better. Because as I said before, a preference has no motivating factor associated with it.

Modest percentage do have retention targets and a tiny percentage, 9%, have retention plus other metrics. For example 9%, say, retain so many funders per funding category plus employ so many types of campaigns and retention practices. So as Linda says, I’ll leave it to Linda, the cost of doing business.

Linda: We have found out that it cost six times as much to acquire a new donor as it does to retain a current donor. So although as we said, it is important to look for new donors because occasionally you are going to have donors who die, who move out of your community and they now are not supporting organizations in your community any longer, or they just lose interest in your organization. That’s going to happen.

So you do need to acquire new donors, but it’s so much more effective if you can retain current donors and not spend a fortune chasing after new donors because your best donors, if you’ve ever done major gift fundraising or capital campaigns or planned gifts, you know that most of those big gifts come from people who are already donors to your organization, maybe not major donors, maybe $50 a year donors, but if you can continue to cultivate and retain those donors, you’re going to find that in the long run, those are the people that are most of the time going to be the major donors to your organization.

So our best practices in this regard go back to what we said about some of the other categories, establish and document those donor retention targets. Obviously we’d all like to retain 100% of our donors. That’s probably not going to happen because of those people who move or die or have a change in their financial status or many of those types of things can happen.

But try to establish maybe that you want to retain 90%, 95% of your donors. I think you’ve got to have some kind of targets. Again, publish them internally. Don’t just assume that everybody knows how many donors you’re trying to retain and then, again, measure those against your plan regularly.

Some strategies, I think, that can really help you retain donors, Ellen mentioned the FEP project and AFP and the Urban League work together on this project along with a bunch of software companies, especially Bloomerang has been very instrumental in that process. But AFP sponsors classes called Retaining Your Donors, which is based on this FEP Project. So if you’re attending the international conference of AFP, or check with your local chapter because many of the local chapters run a workshop specifically designed around retaining donors.

But obviously donors are going to stay with you who feel that you really appreciate them, that you appreciate their gift. So some simple things like using thanking and recognition strategies, cultivation events for your donors, getting donors to know your story and get them to meet your clients if possible. I know that’s not always possible in some areas because sometimes you have confidentiality issues. But anytime you can bring donors and clients together, they’re going to have a much more closer bond with your organization.

There was a study done a number of years ago which I thought was quite interesting. It showed that the one thing donors wanted more than anything else was to know how their money was used. I think so few organizations actually tell donors, “Yes, your $50 gift made a difference.”

We might tell a $50 million donor exactly down to every light fixture in the building what we did with their gift, but sometimes we forget that everybody wants to know that their gift made a difference. So even if it’s a $25 gift, tell them that their gift along with others helped them do this or maybe even that their gift allowed you to do something specific.

So if you can retain that kind of relationship with your donors, you’re going to retain their dollar contributions as well. So I think there are a lot of best practices that will help you develop what is a good relationship with your donors so they will retain them and they won’t leave you and go somewhere else. Most people don’t stop giving because they die or move away or lose all their fortune. Most people stop giving because they simply think the organization doesn’t care enough about them. So if you can show them that you do, you’re going to be much more successful.

So Ellen, you want to move on to the next category?

Ellen: Yeah. I want to report that there’s something we hear all the time because we flog our clients, I’m sorry, to exercise better donor retention tactics. The first thing come back and tell us is the donor said, “Oh gee, I never hear from you unless you’re asking me for more money.” So find a way to interact with your donor that isn’t you have your hand out yet again.

Along with donor retention comes the question of donor development, upgrading funders. This is one of the reasons you do retain your donors because if you get a $50 donor and they stick with you for a few years, you’ve earned the right to ask them to give you more money and if they’re young and they become more affluent and so on and so forth.

But we constantly see these same curves in our statistics. A large proportion have no standards or targets or even ideas about upgrading funders. They let the funders take care of themselves. In 47% of our cases, there’s encouragement, “Gee, a fund development team would be a good idea to upgrade funders,” but only 5% set any targets and run campaigns specifically to upgrade those funds.

And we’re going to see the same kind of thing when we move forward to the best practices, kind of like we’ve had before. So in addition to targets and so forth, maybe you can improvise here a little bit about strategies for accomplishing upgrading as well as [inaudible 00:36:54].

Linda: Upgrading is really important. One of the advantages of . . . I don’t know how many people on the line are Bloomerang users, but so many times I think organizations try to run their fundraising by keeping Excel spreadsheets and you just can’t do that.

You have to have a good software program that will allow you to do things like cross-selling and upselling as a perfect opportunity. If you have a good software system, if you’re doing direct mail, you can thank your donors who gave you $25 last year and ask them to up their gift this year to $35 or if they’ve given you $100 last year, you can ask them to upgrade to $150 this year.

The other thing that you can do if you have a good software system in place is allow you to do that cross-selling. Yeah, sometimes we put our donors into an automatic little bucket and we say, “Well, this donor likes to give to our music program.” So we never contact them unless we’re asking them to give to our music program. But it might be that donor is also interested in the performing arts other than music. So maybe they would give to your dance program or maybe they would give to a visual arts program.

So don’t lump your donors automatically and think they only have one interest. Use those opportunities to cross-sell. If they’re giving to your annual campaign, maybe you can cross-sell them and get them to give to your capital campaign or maybe you can entice them to make a planned gift.

Again, this goes back to getting to know your donors, which I think is so critical, and recording everything you do learn about those donors into that database system. So if you’re looking for, “Gosh, I want to know which donors really like cats as opposed to dogs,” you should be able to go to your Bloomerang system and say, “Oh, these are the people we have coded that they really have cats so now we’re having a special project to save feral cats and this is something this donor might be interested in.”

So the more you get to know your donors and record everything you know about them . . . sometimes we know more than we think we know about our donors but it’s just lost because nobody is ever entered into your system. So this is why you need Bloomerang to get the system to where you can really look at the relationship with each donor individually and know when it’s time to upgrade them and know when it’s time to cross-sell them to something different.

So again, you want to establish a strategic plan for each of your major funding sources while this foundation gives to XYZ program but they also seem to have an interest in ABC program and that’s the kind of thing that you want to keep track of and, as I say, constantly communicate with your donors, not just when you’re asking for money, but invite them to some cultivation events or go visit them one on one in person and find out what their interests are. And if possible, do that in their home or office because you’ll learn a lot more in their home or their office about their personalities and their interests than you will by talking to them on the phone or by having them come to your office. So it’s getting to know your donors.

I just wanted to say one thing before we move on too. We have a lot of questions here about identifying those qualities that do make the ideal donor. So Ellen, I’m thinking and maybe Steve that maybe we need to do a “Fundraising the Smart Way” webinar to follow up on this one where we can get into a little more [inaudible 00:40:53]

Ellen: That is a great idea. We should talk about how do you know who’s an ideal donor, although we will give a short answer to this a little bit later. I’m going to move on in the interest of time so we can talk about fund diversification.

By the way, keeping track of your fund diversification is a royal headache if you don’t have a decent donor management platform. It’s a whole lot easier if you do. So the whole idea behind fund diversification is that of risk management.

It’s the idea that if you’ve got too many eggs in too few baskets, you are at risk and what we’ve seen in recent years is the vast number of nonprofits that were formed as single payer organizations, where a government agency became privatized and 100% of its money–okay, 97% of its money–came from a specific government source.

What we’re obviously finding is that government at all levels is becoming either unable or unwilling to support nonprofits. Many private foundations are saying, “Gee whiz, we’ll only support you for x-years in order to get you ready to raise your own money.” There is more funding diversification than we feared we would see, but it is not perfect yet.

So we were glad to see nearly half who come in getting money from a variety of sources is better than we had hoped. We can find more balance. There’s plenty of room for improvement, but this is an area that everybody needs to pay attention to. Even if you do lots and lots of major gift work, don’t have two major givers and a whole bunch of small gifts.

Linda: And I have to confess [inaudible 00:43:30] area that when Ellen shared these statistics with me the first time I said, “I think people lied. I honestly don’t think that many people are as diverse as they claim they are.” Because I really think a lot of people, in their minds diversity means, “We have 12 special events a year, so our funding sources are diverse because we don’t depend on one event.” Well, depending on 12 special events is worse than depending on one special event probably because you’re not going to have time to do anything else.

Ellen: Any follow-up, yeah.

Linda: So when we say diverse, that doesn’t mean you get grants from 12 foundations or you have 12 special events a year. We mean that you are getting money from corporations, you’re getting money from foundations, you’re getting money from individuals, you’re using direct mail, you’re using telephone fundraising, you’re seeing your major gift people in person. So when we talk about diversity, we may have a different definition of diversity than some of our respondents had.

But again, documenting the specific growth for each category and you won’t turn this around overnight. You won’t go from being totally dependent on grants to having 300 major donors in one year. It’s going to take some time to cultivate this.

So when you set those targets, don’t be so aggressive that it’s unrealistic and then you get frustrated and say, “Well, that didn’t work. We have to try something else. We’re going to just stick to our grants or to our special events.” But set those targets and review them and set them realistically, but do be a little bit aggressive with them. Set some target goals that may be aggressive but not totally unrealistic.

So I think that’s really important for you to think about when you’re going forward and really understand the meaning of diversity and fundraising. It’s just like diversity in an organization. Sometimes people think diversity only means ethnic diversity when there are a lot of types of diversity. There’s gender diversity, age diversity, geographic diversity. The same thing holds true in fundraising. It’s not just having 12 different events or having 15 different corporate funders. It means all types of fundraising. So Ellen, I’m going to turn it back to you so we can get through all this in the next 15 minutes.

Ellen: Sure. I just want to . . . oh, I jumped ahead because I’m clumsy here. Let’s go back to we’re going to talk about the size of your development shop, which has a surprising impact on fundraising effectiveness.

We find that 57% of our study base, that was when we had 700 responses, 57% have either one part time staff person or one person plus the part-time staff person. That part-time staff person is usually the executive director who also has to pay everyone, manage all the back office stuff, run the programs, clean the bathroom, do the marketing . . . need I go on?

What we like to say here is that development is not only a full-time job, it’s a professional job. Just because you don’t mind talking to people about money doesn’t mean you know how to fundraise. Just because a member of your board says, “Oh, I know him, her and this other guy. I’ll talk to them,” doesn’t mean they’re going to do it.

One reason that the association for fundraising professionals exists is to prove that fundraising is a profession. So there are some really interesting stats from a recent study that I’m going to share with you in a moment.

But when the organization is young and small, you don’t often think, “Oh, we need a fundraiser or we can’t afford a fundraiser.” So let’s talk about why we have to pay attention to staffing up the development shop. Linda?

Linda: I think this is so critical to understand that development is important. So many times I really believe that nonprofits are almost ashamed to say they’re paying fundraisers to work in the development office. If you haven’t read Dan Pallotta’s book, “Uncharitable”–I know he has another new book out that I haven’t read yet–but I think he really makes a good case for bringing development out of the shadows and really making it important.

Unfortunately, what happens is development is the last kid on the block. We start a brand new program organization and we hire program people first of all because we have these programs to deliver and our community needs them and our clients are grateful. And then as the organization grows, we might hire an executive director and then a finance person.

Then all of a sudden, the organization is growing so fast and there’s such a demand for it that we don’t have enough money to run all these programs. So when we hire development, they’re the last person there. Our goal is really to hire development staff as early as possible. If you don’t have dedicated support staff for that development office, it’s going to make a big difference.

So many people hire a development person and think, “Well, this person is going to sit at their desk and manage the database and write all the grants.” This is one of the reasons we love Bloomerang because it’s something that it’s so user friendly. You don’t have to have somebody sitting there managing it all day.

That development person needs to be out and about. You really should have a support staff person for them. Otherwise you’re going to have to adjust your targets. You can’t expect a development person to write all the grants, visit all the major donors, maintain the database, to write all the letters, and send all the thank you letters and everything else.

Ellen: And do all the social media marketing and write the blog. Let’s not forget those things, right?

Linda: Exactly. Well, see, unfortunately, I think they expect development staff to do everything.

Ellen: And pay them nothing. Let’s not talk about that.

Linda: One of the key studies I think that really opened my eyes and I think Ellen is going to talk about this is how many staff people actually are in nonprofits. So Ellen, go ahead.

Ellen: Yeah. I just got back from the Alliance of Nonprofit Management Conference, which is the association of capacity builders. We looked at a 2012 study from the Nonprofit Research Collaborative, which is part of the group that does the fundraising effectiveness project. Their statistics based on a very large sample measured how many organizations were able to meet their fundraising goals distributed by staff size. As you can see here, only 39% of those who had no paid staff were able to meet fundraising goals.

Now, the best performance in this study was a full-time staff of one to four individuals. By the time you get to one to four dedicated fundraising people, you can usually specialize. You can have a grants person, a corporate relations person, an individual giving/events person and a major gift person, just as an example, or you can have people dedicated to marketing and outreach and so forth.

I don’t know why at five or more the statistics went down a little bit. So this was just a snapshot kind of reinforcing the notion that it’s really difficult to grow financially without people dedicated to doing development.

Of course, the other thing we see is well intentioned board members and others who say, “Well, you’ll just do the fundraising in your spare time,” which is where we end up with executive directors who are working 90 hours a week and then we wonder why they quit or end up in the hospital. So we can make up development time by working in our sleep.

So I’m going to move over to metrics. Let’s go through this pretty quickly because we’ve been talking about metrics throughout this whole conversation. But what we found here, and you guys can read this slide, of those who measure anything, only 63% measure total income, 47% measure income per category. These are trailing indicators. You can’t measure your income until after the income has been poured in the basket and counted up.

So a trailing indicator doesn’t tell you anything about what’s going to happen. It tells you what you’ve already done. A small proportion measures stuff that we can consider early stage or leading indicators, like are you visiting with your donors, especially when you’re not talking about money.

So an axiom of mine is this. If the only thing you measure happens after the process is complete, you haven’t learned much about the process. We can talk briefly about how to setup leading indicators because they’re very helpful. Linda, you want to take it?

Linda: Sure. I’ll keep this really quickly. But I think it’s important you measure some things before they happen, such as how many people are in your pipeline before you decide how you’re going to approach them and measure things like how many people are being converted from suspects to prospects to expects and the number of times you’re going to talk to donors. Those are the things that happen before they make their gift.

With special events especially, sometimes I think we just look at the dollar that came in but we don’t look at things like the time it took us, how much volunteer time was spent, how many donors are getting fatigued by being invited to events constantly. So look at some of those things in addition to the results of how many actual dollars did you make at that event.

So Ellen, do you want to talk about the tool box before we . . . ?

Ellen: Yeah. Let’s talk about this one too. Watching your fundraising toolkit is a big predictor of whether or not you’re going to be successful. We already know. There’s a typo in here about the proportion of people who had strategic plans. Not as many people as should are using donor management tools. Only half of the respondents, they documented case for support.

There are so many resources out there. There are free tools. There are webinars. There are books. There are programs. There are trainings. There’s no shortage of information for helping you learn how to create a strategic plan, a donor profile, blah, blah, blah. There are zillions of consultants out there who can help you do this stuff. But what we find is that there’s a majority of organizations kind of rolling their own or doing without. The lack of these tools hurts productivity.

So Linda, you want to talk a little bit about it? Go ahead.

Linda: One thing I would say that’s really critical is make sure you have an up to date case statement and from that case statement, you’ll develop all the other materials. Make sure you have a development plan, which of course stems from your strategic plan, things like policies and procedures and evaluation tools are critical too. But I think the case statement and the development plan are two really critical aspects.

Ellen: So we’re going to now look at . . . yeah, the last of our . . . oh, sorry. What did I do wrong, Linda? [inaudible 00:57:35]. The last of the Leaky Bucket statements is the question about what do you do when fundraising results fall below desired levels. We were afraid a lot of people were going to say, “Off with his head,” fire the development director. Fortunately, that’s only 15%.

But as we told you at the beginning of this presentation, the vast majority either throw more events or write more grants. Those are high-cost, low-return uses of time. Staff and board training and improving the case statement occurs in the minority of instances and those are relatively low cost initiatives with a moderate to high return.

So what we need to do here is do something different. Linda?

Linda: I think again, the most important thing is look at the cost and benefit of all your events and activities and really look at the benchmarking and metrics that you’re doing. I know we want to take time for some questions. So I’m going to quickly jump into the last couple of slides.

That is a special offer that we have for you. I promised a special offer on our book. If you’re interested in a 15% discount on the book, if you order before the end of October and use the code “linda2015book.” You can go to the Charity Channel Press website and order “The Leaky Bucket.” And then we have a whole 10-week course on this where we get into more detail and we’re giving Bloomerang users a discount on that, a $100 savings.

So we’ll kind of be open to questions. Since we don’t have a lot of time for questions, I do want to give you our email addresses so you can contact us directly in case we covered something that we didn’t have time to answer a question on. But let’s move into questions real quickly if we have some and then Jay, maybe you have some things you want to add.

Steven: Yeah. Absolutely. Thank you, Linda and thank you, Ellen for all that awesome information. I love hearing other people talk about retention since we like retention here at Bloomerang. I know we’re close to the 2:00 hour and if people have to duck out, we definitely understand that. But I thought it would be fun to just stay on a little bit late for questions if you ladies don’t mind. We can maybe answer just a few.

Ellen: Sure.

Linda: Sure.

Steven: And Linda, I know you were answering questions in the chat. So thanks for doing that. But there are some questions here. Joe asked a few. I’m just going to kind of roll through them. Joe’s wondering is there a matrix of some sort to give us the qualities of a donor so that you can start determining what kind of donor you should target. Is that a matrix that maybe you should create on your own assumptions about people? How would you recommend people go about actually documenting what their ideal donor looks like?

Ellen: This is really an important issue. It’s something we spend a lot of time with in our methodology, fundraising the smart way. Joe, you are absolutely right. There is a matrix. You have to build it yourself. The three issues you want to determine are what are the characteristics of your ideal donor in terms of capacity? “My ideal donor needs to have a net worth of X. My ideal donor needs to have the willingness to give $5,000 a year. The ideal donor needs to live in these zip codes,” and so on and so forth.

In the capacity area and in all the areas, you really need to say what’s right for us? What answer are we looking for? If this person is ideal, they should be able to give us this or have that kind of wealth profile.

The more tricky area is the matrix around their qualitative criteria, what’s called the value exchange. In order to do a really job at that, you have to know first of all what makes your organization worth raising more money for in the first place? If you’re doing what too many nonprofits continue to do, and this is one of Dan Pallotta’s big issues, if you’re apologizing for your need for money or if you’re trying to constantly tell people, “We don’t spend any money on our back office. You’re making a mistake.”

You need to say, “Okay. We’re capable of changing the lives of children with special needs and here’s how,” or, “Because of us, homelessness is declining or we do such a great job at preserving antique needlework,” whatever it is, you have to know what makes your organization so great. Then you have to figure out, “Okay, if we look at the best donors we’ve ever worked with, what charitable itch did they want to scratch when they discovered us?”

So there’s, “We’re great at this, that and the other and the people who do best as our funders want what we have to offer. They have a passion for children with special needs, saving antique needlework, improving the plight of the homeless in their community and so on.”

So it’s something you really have to work with. You also have to talk about if they match those criteria, are there other things that tell us they’re litigious, they’re difficult to work with, they want to give us 50 bucks and have a much greater level of recognition than we can afford and so on and so forth.

I have a series of whitepapers about how to determine all this stuff on my website and I can send all of you links or I can send all of you links to Steve or you can just email me and I’ll send you the links.

Steven: There’s another question, Ellen and Linda, from Jeffrey and I think it kind of dovetails nicely into that. He’s asking about getting board buy in, specifically. So all these things you’ve talked about today, what if the board says, “You know what? We’re just going to fundraise anyone who has money. We don’t really care about doing all this work, creating matrices and donor profiles.” What advice would you have for someone who maybe needs to get buy in from their board to start doing these kinds of things?

Linda: I think you need to involve the board in some kind of training where they really understand that you can spend your time going after people with a lot of money, but if you don’t have some kind of connection to them and they’re not interested in your organization, you really need all three of those things–linkage, ability and interest.

Sometimes they just need to have somebody from the outside come in and work with them and find out that their money is much better spent, your time is much better spent looking for people that have all three of those, even if it’s maybe the ability isn’t as great but the linkage and interest are there. They’re going to get more money from those people because they care about the organization, not just because they have money. Because everybody is after those same people in your community that have money, believe me.

Ellen: Yeah. Linda makes a good point. If you’re going to go through the effort of crafting a unique matrix that’s relevant for your organization, get your board involved in the matrix creation. It really doesn’t take that long. It’s very easy to demonstrate the results of flatting around aimlessly just trying to stand in line behind the wealthy influential people in your community hoping they’ll give you money. We all know the results there are not very good.

Steven: Yeah. Makes sense. Well, Mia here was wondering let’s say you do all this, you’ve got your profile completed, you’ve done all that preliminary leg work, you know who your donor is, what do you do next? How do you make that initial contact with that donor profile that you know is the right match? How do you actually go out and make that initial contact?

Ellen: Well, I’d like to take this first.

Linda: Oh, go ahead.

Ellen: Yeah. I have a kind of contrarian view on this. In the current economy, in the current technological environment we live in, you don’t go to donors, they come to you. So the business of understanding your ideal donor helps you figure out what your messaging needs to be, how to signal the monetary economic and spiritual or heartfelt value of your organization.

This is why no nonprofit can afford to be without effective social media marketing. If you don’t know how to do it yourself, recruit somebody’s 14-year old nephew, hire a high school intern, do whatever you need to do. But start getting the word out and all the same information has to go into your website because these days, by the time we encounter our prospective donors, they’re already out there going and trolling around the Internet looking for targets for philanthropy. They’re assessing them.

If you’re not visible to them, you’ll be sorry. Then there are, of course, other more conventional techniques, the open houses and all that stuff. And don’t forget direct mail. That still works.

Steven: Oh yes.

Ellen: Linda, you want to add anything?

Linda: No, I think once you establish that initial contact, then it’s evaluating who does have the ability to move up that donor pyramid a little bit and start making some personal visits, finding the linkage to that person is really going to help you with that too. That’s why involving your board and even other volunteers in this process of developing the criteria is helpful because as they develop their criteria, they’re going to think of people they know who meet this criteria and to make that introduction to you.

Ellen: Yeah, and most of our board members are like the ideal donor to start with, whether they’re giving us money or not because they wouldn’t be serving on our board unless they had a passion for the cause and were willing to invest their time and brain power.

Steven: Yeah.

Ellen: So they start to think, “Hey, wait a minute. This is somebody like me.”

Steven: Makes sense. Well, I think that’s probably a good place to stop. I don’t want to keep people on the line too much longer than we said we would. But I think it’s fair to say you ladies will take some questions via email. Is that something you’re willing to do?

Linda: Definitely.

Ellen: Absolutely. We’d be delighted to do that.

Steven: Cool. Yeah. Reach out to these ladies. They obviously know their stuff and are willing to answer your questions offline. So don’t be shy at all. I know we didn’t get through all the questions and I apologize for that. Btu we’d love to keep the conversation going.

Like I said at the top of the program, I’ll be sending out the recording as well as the slides in just a couple hours. So stay tuned for an email from me. You’ll be able to review this great content. Speaking of content, we’ve got a lot of great resources on the Bloomerang website. You can check out some of our downloadables. We’ve got a great blog. You can look at our video podcast and register for an upcoming webinar if you enjoyed this one.

I just want to highlight next week’s webinar. We’re going to be talking about . . . actually, we’re going to be listening to an actual case study from Susan Schaefer and Bob Wittig. They’re going to share an actual case study of how they sort of went in and helped a board that was kind of on the rocks that was having some trouble.

So if you’re interested in board development, definitely check out that webinar. It is one week from tomorrow. Again, totally free, totally educational. We’ve got some other webinars listed on our registration page. You can check those out. You may find a topic that you’re interested in. We’d love to see you again on another presentation.

So Ellen, Linda, this was very awesome to have you. Thanks for sharing your knowledge this afternoon.

Ellen: Thanks for having us.

Steven: I’ll be in touch a little later on. So thank you again to all of you.

Linda: Part two to answer all those questions.

Steven: That’s right. Well, you’ll be hearing from me. Have a great rest of your afternoon and hopefully we’ll talk to you again at another webinar. So have a great rest of your day.

Ellen: Thank you.

Linda: Bye.

Major gift fundraising

Kristen Hay

Kristen Hay

Marketing Manager at Bloomerang
Kristen Hay is the Marketing Manager at Bloomerang. From 2018 - 2020, she served as the Director of Communications for the Public Relations Society of America's local Hoosier chapter. Prior to that she served on several different committees and in committee chair roles.