Richard Perry recently joined us for a webinar in which he showed how to build a donor centered budget, what is needed to support it, and a clear description of every program category to put into proposals and present to donors.

In case you missed it, you can watch a full replay here:

Full Transcript:

Steven: All right, Richard. My watch just struck 1:00. Is it okay if I go ahead and kick us off officially?

Richard: We’re ready. Thank you.

Steven: All right. Great. Well, good afternoon, everyone, if you are on the East Coast and good morning if you are on the West Coast or somewhere in between. Thanks for joining us for today’s Bloomerang webinar, “Packaging Program into Donor Offers.” And my name is Steven Shattuck and I am the Chief Engagement Officer over here at Bloomerang and I’ll be moderating today’s discussion, as always.

Just a couple of housekeeping items before we begin–I want to let you all know that we are recording this presentation. I’ll be sending out that recording this afternoon as well as the slides just in case you didn’t already get those. So, if you have to leave early, perhaps, or you want to just review the content later on or share it with a friend, you’ll be able to do that, have no fear, just look for that email from me later on this afternoon with all those goodies.

As you’re listening today, please feel free to use that chat box right there on the webinar screen. We’re going to try to save some time at the end for Q&A. So, don’t be shy at all about sending in your questions and comments. We’ll be keeping an eye on that throughout the hour and we’ll try to get through as many questions as we can. You can do the same thing through Twitter if you are a Twitter-type person. I’ll keep an eye on that as well. You can use the hashtag #Bloomerang or our username @BloomerangTech.

One last technical advice–if you are having any trouble hearing or seeing the presentation today, we find that it’s usually a little bit better audio quality by phone. So, if you’re listening through your computer and it doesn’t sound that great, try the phone if you can. If you don’t mind doing that, there is a dedicated phone number for you in the email from ReadyTalk that went out around noon Eastern today. So, check that out if you have any problems. That’s usually the best way to go, we find.

If this is your first Bloomerang webinar, I want to say a special welcome to you folks. We do these webinars just about every Thursday. We bring on a great guest like Richard for an educational presentation. We have a lot of fun every Thursday, but in addition to that, we also offer donor management software. So, if you’re interested in that or maybe shopping for a new provider or just want to learn more about Bloomerang, you can check out a quick video demo of the product and see it in action. So, check that out if you’re interested. We’d love for you to learn more.

But for now, I am really excited to introduce my new friend. He is joining us, like you said, from Gulf Coast, Florida. He’s Richard Perry. How’s it going, Richard?

Richard: I’m doing well.

Steven: Yeah. It’s really great to have you.

Richard: Thank you.

Steven: I’ve been a big fan of your agency for a long time. We’ve had your partner in crime, Jeff on the program before. So, it’s really a treat to have you. Richard, I just want to brag on you for a second before I hand it over to you.

If you guys don’t know Richard, if you don’t know The Veritus Group, they’re one of our favorite fundraising agencies, if that’s an apt description of it. Really great content, great blog–these guys really know their stuff and you’re going to see this over the next hour or so. Richard is a founding partner over there. He’s got over 35 years’ experience. And at Veritus alone, he’s already helped raise over $500 million for their clients. So, really impressive work they’re doing over there.

Previous to that, he cofounded The Domain Group, which was a direct marketing agency serving nonprofits in the US, Canada and Europe. And before that, he spent eight years as a development director for a US-based relief and development organization where he did a ton of great stuff, raised a ton of money, increased their donor file by more than 10 times. So, he’s not just a talking head consultant. He’s actually done the things that he is going to be presenting today.

So, I’m just really excited for you to talk about donor-centered budgets and all this good stuff, Richard. So, I’m going to pipe down and let you take it away, my friend.

Richard: Great. Thank you so much, Steven, and thanks everyone for joining us this afternoon. This topic of packaging offers for donors is a very important one. You know what, Steven, I can’t get the thing to move. There we go.

So, here’s the dilemma that most everybody has. I’ve been doing this work, as Steven mentioned, for over 35 years, both in the direct marketing field, television, radio, online, direct mail, all that stuff, but also in the major gift field, which is what Veritus is involved in now. One of the big complaints by major gift officers and indeed by the people doing direct mail and all that is, “What are we going to offer for donors, either an acquisition or what are we going to offer in terms of cultivation and solicitation of our current donors?”

So, I’m really happy to be with you today. Let me tell you what we’re going to cover. First of all, I wanted to talk about some principles that underlie this whole thing about taking the budget and taking a program and packaging it. Then I want to talk about that, for a lot of people, nasty little subject of overhead. There’s a reason why I want to talk about that, which will dawn on you in just a second. Then the process and then how to use it.

But first of all, let’s imagine that you and I are working in a commercial company and we’ve just hired a top salesperson. This person is the most outstanding salesperson in the country and we just hired them. We are standing in the office and it’s the first day of this person’s job and they say, “Well, what exactly . . . did you acquaint me with what we’re actually selling?”

So, I say, “Yeah, well, why don’t you come out to the warehouse and let’s take a look.” So, we go into this warehouse. This is the warehouse, the picture of the warehouse. This is what the guy or gal sees. You can imagine what the person would say is, “Well, there’s nothing here. What am I going to sell?” And we’d have a very big crisis on our hands with this salesperson.

This is exactly what happens with nonprofits. There’s a lot of great programs. Everybody’s operating above average on the program side, delivering impact. Somehow that information is not coming over to the fundraisers, the frontline fundraisers and the fundraisers using direct marketing strategies. So, that’s what I want to address here in this session.

Now, why am I telling you about program packaging? Well, first of all, if you’re a leader in your organization, here’s an opportunity to raise more money and to cover overhead and to have less emphasis on the need for unrestricted money. So, if you’re an NGO or a direct marketing person, this is something you can share with your leadership to get them on board to do this with you. If your leader doesn’t get on board, maybe you can do a level of this activity yourself. But that’s why we’re telling you about this.

Now, there’s an old way of doing things that’s changing. Here’s what most nonprofits do with their numbers and financial information. They focus on number crunching and maintaining accounting categories and practices rather than presenting lifesaving programs to their donors. The system is actually hurting fundraisers, which in turn is hurting the organization. It becomes increasingly difficult to raise money.

Now, I want to be really clear that there’s nothing wrong with the idea that nonprofits should follow standardized accounting procedures internally. But many good financial managers who use the system actually don’t realize that without a change in a way they do these reports that major gift officers and donors, it actually restricts the efforts to raise the support they’re accounting for.

So, here’s the other reality about donors is they’re changing. Joshua Birkholz, in his book “Fundraising Analytics” said donors are approaching philanthropy in a completely different way. They’re making decisions more thoughtfully–you all know this–their gifts are following their own intended purposes. They’re asking a lot of questions. They’re seeking a return on their investment. They desire an increased level of personalization.

So, they’re expecting more in relationships. That’s why it’s so important for us to deliver more as it relates to our numbers and our money and our expenses and how we manage money. That’s why we call it program packaging. Maybe another name would be budget packaging.

Well, there’s three important reasons–actually, sorry, five important reasons why–sorry, I lost my way there. There’s five more common budget and finance problems that we’re addressing here. The budget is organized for organizational purposes and not for donors. That’s the first thing.

Here’s the thing that a lot of people don’t understand. The program part of the budget is understated. Therefore, fundraisers are not focused on raising the total amount raised. The reason is because overhead is seen kind of as a necessary evil. It’s really not an integral part of the program.

It’s almost impossible for fundraisers to present what the organization does and quantify it because they can’t get the numbers in the program category. They might get some of the numbers but not all the numbers. Then what often happens in this situation is that fundraisers and donors tend to want to fund programs that are outside the budget. That causes even more problems.

So, our program packaging and budget packaging concept is based on two principles. First of all, it’s about current program, packaging what the organization currently does for people and the planet. And then this view goes down to the smallest level of the organization so the donors can grasp and support what’s happening in every part of the organization. That’s why we focus on the current budget and the current program.

Now, the reason I’m saying current is because we all know we have these aspirational things that happened in our budgets where a donor comes along and wants to support something that is not in the budget. Now, you might do that. That’s fine. We’re not focused on that. We’re focused on the current program. Then we’re focused on the fact that all costs are in. That means that overhead is in there into all of our calculations as well as the current budget program.

I want to talk a little bit about overhead. Now, it’s really interesting on this whole thing about philanthropy, like where did overhead even come into being. I was studying this whole thing and there’s a lot of interesting literature on it. I’m not going to get into a whole bunch of it, but the earliest form, in its earliest form, the word philanthropy comes from the Greek word philanthropia, which means love of mankind.

So, the meaning of the world evolved over time. Back in more ancient times, people were taken care of by feudal lords and all that kind of stuff. Then as society developed, there became a need for people to take care of other people and there were private efforts that were done and there was increased public responsiveness and all that kind of thing. Here in America, Carnegie in 1989 published “Gospel of Wealth,” he called on millionaires to distribute their wealth for the public good.

So, all of this time that all of this was developing over time, the whole idea was the rich people gave their money and then everybody else volunteered their time and that’s where this idea of volunteering your time and keeping costs down actually developed. I don’t know about you, we were on one presentation in another webinar and someone said, “You guys are talking way too much about overhead. This is a thing that’s been solved.” Well, it hasn’t been solved. The problem is we need to change how we think about it.

So, a lot of nonprofits and watchdog agencies have perpetuated a misconcept of overhead, even some fine virtue in propagating the idea that overhead understand 20% is right up there with sainthood. Actually, it’s more about impact that we should be looking at. Now, just bear with me on this topic because I’m getting to the point in just a second.

But I just want to talk about this overhead for a little bit more and to basically say that overhead is good, overhead is necessary. If you yourself or your organization has a problem with overhead, then it’s good to try to get your head and your heart right about it to get a balanced view of how much effort it takes to get your program delivered.

Now, let me give you an example. We were working with a client that did an after school program. It was $3.8 million. It turned out in this particular location that the state they were in, the state supported that after school program for $3 million. A part of that included what they would allow to be 10% overhead. The remaining $800,000 was overhead that no one would cover.

So, now there was a donor in this city who wanted to give $150,000 to the after school program. The major gift officer approached me and said, “I can’t approach this major gift donor with this because it’s going to fund the overhead.” So, I said to the major gift officer, let’s call him Paul, I said, “Paul, the whole program is $3.8 million. You are delivering a wonderful after school program in this city. Let’s take the $800,000 and just throw it out. Can you actually do the program without the $800,000?” “Well, no, we can’t, Richard.”

The overhead is actually needed to make it happen. So, we finally got that all straightened out and we asked the donor for the money and basically it was this way, “Hey, donor, we have a $3.8 million budget for the after school program. We’ve been able to locate $3 million of it. We have another $800,000 that we’ve got to find and the donor gave us $150,000.”

Here’s the point. You yourself have to think right about it. Major donors, also need to understand that major donors actually can and do understand this. More and more, enlightened donors are getting this point. When I talk to a business person, I say, “You include your overhead in all of the profit of the product or service that you provide.” They agree that if they didn’t have that overhead they couldn’t produce the product or the service. For some reason, that mentality hasn’t come over.

Again, I’m explaining this in a little bit greater detail because believe me, it is a significant problem in the industry. So, the point is you can make a difference in dealing with this topic if you yourself think right about it and you believe that donors and major donors understand it and you can make a difference in this area.

All right. So, those are the whole topic on overhead. Now the process–the process has about five points. First, we’ve got to get people on board. So, you’ve got to get leaders. If you’re a DoD, your top leadership might not understand the importance of doing this whole exercise, upgrading offers. I think they generally do, but they don’t understand how it relates to the budget. If you’re a fundraising leader, you may get it, but you’ll need to use your skills to get finance and program on board.

We’ve seen a number of situations where a lower level finance person can prevent all of this from happening because they a), don’t see the benefits of it and they don’t have the time to do it. Their judgement, because they don’t see the benefits, they don’t have the time to do it. If you’re a major gift officer or frontline fundraising, you can spend time talking to your leaders about this and share the whitepaper we have on the subject and get their buy-in. So, you’ve got to get leaders on board.

Program, it’s very important to get on board. There’s a number of situations–this may be hard to believe. A lot of program staff many times don’t understand how their program is funded or the percentage of funding that comes from donors, different types of donors, corporate donors, foundation donors, individual donors, etc. Or they may not understand what information is needed to get donors interested and involved.

So, what do you need from program in order to make this donor offer actually work? So, program needs to be on board. And of course they’re very busy people. They need to understand why you need their help so they’ll prioritize their time. So, you’ve got to get leaders, program and finance. Then you’ve got to get a commitment to allocating overhead. So, talking about it.

We’ve attended a lot of meetings with very intelligent and competent and well-placed professionals in some pretty impressive organizations. If I was to list them for you, I think you’d be impressed. They told us that they could not support allocating organizational overhead to individual program categories and projects.

So, like in a $50 million organization, you could have $10 million to $12 million in overhead that just sits there and can’t be raised without going through all kinds of tricks and sleight of hand or that may sound manipulative, so I’m sorry about that. Maybe you have to work harder and get unrestricted funds, or you’ve got to worry about the ratios and so on. This is a very difficult situation. So, the commitment to allocating overhead is a very, very important one. So, the first point is to get leaders on board and to get people on board.

Here’s the second point. This sounds easier than it is. It’s to create a list of program categories and definitions. I’ve put up here just a sample from the Salvation Army. This is this one slide of one list of 23 categories. But you take your big categories–for instance, we’re working with another information in the Midwest where they have three big categories and then there’s a whole bunch of subcategories.

I’m working with another organization in Washington DC and another in San Francisco where it’s like, “All right. We have to figure out what these categories are.” They’re not necessarily the ones that go on the annual report. So, spend some time creating a list of the categories and then a definition of what that category is. So, that’s the first thing that’s got to happen.

So, this is a little sampling of the Salvation Army. Here’s another view of the Salvation Army in the greater New York area, where you have down on this side locations and then sublocations within that. Then you have all the big categories, education, character building, arts, etc. So, there’s adult programming, youth programming, all these little dots. This is the thing that is basically the program matrix. The actual list of categories and definitions, this is the first thing you’ve got to do in order to package the budget and the programming the donor offers, first thing.

The third thing–people on board is the first thing, list is the second thing–the third thing is to put the entire budget into program categories. Now, that will be easy up to a certain point because they are very . . . the finance department actually has those programs and those direct costs associated with various categories. But I do guarantee you that once you start getting into some of the details, you will find that there is a great deal that’s undecided or not clear, not decided or unclear as to where that expense belongs.

This is where you have to sit with your finance person and say, “Where does this expense go?” Now, in many compensation categories, there’s expenses that are split. So, 20% goes to this program category, 20% goes to that, 30% goes to the other thing and then they have the remaining percentage that is basically just overhead. But the point is you have to place the entire budget into program categories. And then the fourth thing you have to allocate overhead.

This is a little bit complicated, but you see here this is a $50 million organization. Here’s the program categories, all 27 of them. Here’s the budget for each of those categories. There’s the overhead down there. Then we subtracted certain known sources of revenue, including gifts in kind. That nets down to $16 million that’s needed. But that $16 million that’s needed to make up the difference between the revenue we already have and the expense budget does not include overhead.

So, what we’re doing in this column here is we’re basically saying what relationship does this budget number, this $6.4 million have to the bottom, $47 million? It’s 13%. So, therefore, it should carry 13% of the overhead allocation, for a total fundraising need of $2.8 million versus the $2.3 million.

It’s very important in this fourth step to allocate this overhead. Now, your numbers will be different here. Some of this overhead will be higher. It will be lower. By the way, this overhead total, buried in these budget numbers up to here are overhead related to the program categories. This is just general overhead that the client couldn’t figure out, “Where do we put it?” That’s that whole thing.

Now, let’s take a slightly closer look at this thing. You can see this is what needs to be raised without the overhead. So, the sum of these five secure sources is $31 million. So, of the $47 million, we know $31 million is coming in. We have $16.1 million that needs to be raised still without overhead. We have to plug the overhead in. It’s 19 minus what needs to be raised. So, that’s the fourth point in terms of allocating overhead.

And the fifth point is basically creating donor offers. I want to spend some time here because now you actually have the information if you’ve done these things. You’ve created the lists. You’ve placed the entire budget into the program categories. You’ve allocated the overhead. Now you actually know what the numbers are.

So, back to this chart here, let’s say that this line, number 20 here, is after school programs. You know that you now have $2.8 million you’ve got to raise for that program budget. Since you know that, now you have to actually break that down into actual donor offers, which is where we’re going next. So, you’re taking the individual program and you’re creating a donor offer.

Now, I want to spend some time on this donor offers thing because this is also very, very important for making a transition from the numbers and from the information over into something that you can actually present to the donor. Now, the main objective of a donor offer–when I ask that question, I usually don’t have the answer up here. I say, “What do you think the main objective of a donor offer is?” And someone will invariably say, “To raise money.” What we’re saying is no, the main objective of a donor offer is to help a donor make a difference. That’s the main objective of a donor offer.

So, you might say, “How do you do that?” Well, there’s two ways–you match the donor’s interests and passions to the needs of the organization and then you create real connections. So, you’re finding out what the donor’s deep gladness is and you’re matching that to an organizational need that you have packaged, which represents the world’s deep hunger. Your organization exists to deal with the “deep hunger” on the planet and in society. So, you’re trying to make this connection between the donor’s passions and interests and the world’s deep hunger. That’s how you do it. You match those two.

But let me explain a little bit more about how a donor offer works. You have to have a compelling need. You have to have a believable solution. If you have those two, then the donor will adopt that. I want to kind of break that down a little bit into what we mean by compelling need.

What you’re going to do is you’ve identified and defined a problem is what you’re doing to come up with compelling need. You’re going to talk about a problem, not the process because donors want to solve problems with their resources. So, the whole thing is what’s the problem? Now, I spend a significant amount of time on this problem thing because I read more and more proposals and donor letters and asks for major donors and proposals to corporations that don’t start with what the problem is.

They start with what the organization is doing, who the organization is, how special we are, how we’re better than someone else, how long we’ve been in existence, our great leadership team, etc., etc. “Here’s our wonderful process and all that stuff.” What we’re saying is basically you have got to start with the problem.

Without a societal problem, there’s no compelling offer. Without a compelling offer, there’s nothing to present to your donor and if you don’t have anything to present to your donor, there’s no chance your programs will match the donor’s interests and passions. And if you don’t have that chance, there’s just not going to be a gift.

So, that’s the absolute fact. Once you get those numbers that I talked about earlier, the very first thing you’ve got to do is construct that compelling need part of your ask or your offer. Then you come up with that problem and you talk about the problem with emotion.

So, for instance, this picture here is about a veteran who served in Afghanistan and was lost over there in terms of his emotions and his psychological wellbeing. This is his dog. If you were to read the story that accompanies this picture, you would see that there’s something missing and it’s emotional and it’s painful and there’s a problem to solve.

So, you’re sharing the problem and you’re talking about the problem with emotions. So, you have a clear understanding of what the problem is and then you’re talking about the problem in human and emotional terms.

Now, here’s the thing about emotion–a lot of people aren’t comfortable with it. We actually understand that. Jeff and I, we have ourselves in tears at least once a week about something that our client is doing, some problem that’s been faced, either a broken human being or a system that is unjust or an environmental thing that has wreaked havoc on a forest or on a lake. We get ourselves in to that space because we want to be in the space where we’re talking about need that is compelling.

So, when you’re constructing this donor offer, you’ve got to identify the problem and then you’ve got to share the problem with emotion. Then through your words and pictures, you’ve got to take the donor to the need. You’ve got to share stories that take the donor to the need.

So, for instance, a vet shared all the horrible things that happened when he was in Afghanistan and that he brought a baby in that was burned. At the time, they were not allowed to help civilians medically and they had to turn away even though they could have saved the baby. So, he’s talking about all of these things. We encourage you to write about the emotion.

Now, I want to pause a little bit on this whole area of taking the donor to the need. You recall that when you’re telling a story to a friend and all of us have used this phrase when we’re recounting something that happened and you say, “I wish you had been there, James or Mary or Pam.” You’re telling a story and you say, “I wish you had been there.” Why do you use that phrase?

The reason you use that phrase is because you know that if they had been there, they would have been greatly affected by what actually happened there. But since you can’t take them there, then one of the things you’ve got to do is take a donor there through words and pictures. You’ve got to describe things in a very compelling way.

I’ll tell you, one of our tests is your description of the need. Does it break your heart? In other words, if you’ve seen it and you feel it, you’ll have an emotional reaction to it. Now, you might be saying as you’re listening to me, “You know, Richard, I’m getting tired of you talking about this emotional thing because you’ve been on it now for three slides or five minutes,” or whatever.

What I’m trying to say to you right now is the whole exercise of packaging your budget and your program for donor offers, frankly, the more easier thing psychologically and emotionally is to do the numbers thing. The more difficult thing is actually to do this work of taking the donor right where the need is through your words and pictures. Compelling need actually breaks your heart and that’s a very important test to have when you’re describing what needs to be done in a program or budget category.

Now, there’s four ways to tell if a donor offer is good. The first way is is it forceful? Is there a strong case for action? That case starts with defining the problem and having compelling need but also having a believable solution. But is it forceful? Is it strong? Does it demand attention? Does it draw you in? Does it attract your interest? Is it convincing? If it’s not believable, it’s not going to be convincing.

Are you absolutely convinced that the need is actually true and believable and that you must do something about it? Then is it irresistible? The donor cannot avoid taking action. These are the things when you have that donor offer, after you’ve done your budget and program packaging and now you’ve moved to creation of a donor offer, I suggest you put these four points against it and say, “Is this actually true? Does it happen?” So, that’s the whole donor offer bit.

Now, how to use all of this–just to summarize where we’ve been so far, what we basically said is you’ve got to take your whole–everything that you do in your organization and you’ve got to create categories and programs and definitions and you’ve got to place the entire budget into program categories. Then it’s very important to allocate overhead and then this whole section on creating donor offers is incredibly important.

Well, how do you use it? This information can be used in all these areas. They can be used in reports, in your direct mail, online for creating offers or for actually reporting back on how money is being used in brochures and collateral and maybe on television, electronic media and events and major gifts and planned giving, capital campaigns, foundation proposals, all of these areas, you can take this information and use it. It’s very powerful information for any kind of fundraising effort and any kind of reporting effort used both in donor acquisition as well as donor cultivation and engagement and solicitation.

So, what I wanted to do is leave a significant amount of time to deal with questions, Steven. I just want to wrap up by telling everyone a couple things that Veritus is doing in the major gift area. We have some courses running in August at making effective donor asks, which actually introduces a whole new way of asking, which we’ve done in collaboration with Andrea Kihlstedt.

You see that on August 7th to September 11th, this is a three-module course. Then Making Year-End Goals, this is a very important course for figuring out how best to use your time and focus for the last months of the calendar year. You can get information on that from right there.

So, I think now, Steven, we can move to questions and we’ll kind of jump into it.

Steven: All right. Awesome. That was great, Richard. Yeah. Like you said, we’ve got probably about 13-15 minutes for questions. So, if you haven’t send one in already, please do. We’ve got Richard on the line here, obviously an expert and he’d love to answer your question.

I’m going to go down the list here from what I see. We’ve got one from Gail here. Hey, Gail. Gail is wondering if you can differentiate, Richard, what overhead is included when you are breaking out that as a category in the budget. What kind of things do you consider overhead? Is it the electric bill, salary? What would you include in that grouping?

Richard: Overhead is traditionally all the administrative costs–office rent, utilities, accounting, HR, IT and fundraising costs. Some people include fundraising costs, some don’t. I say you include all of that. Anything that’s not directly program-related is considered by most people overhead.

Steven: And Richard, have you ever created a donor offer that was specifically geared towards covering overhead? Is that something that you would recommend? If so, how would you describe that? I know a lot of donors can sometimes be turned off by that. They want 100% of their dollars to go towards services and programs, which is kind of an unrealistic expectation, but is that something that you should consider doing, like a pure overhead campaign?

Richard: I wouldn’t. I know there’s one charity specifically that does that. They go out to donors and say, “Why don’t you give us the x-millions of dollars we need for overhead so we can tell donors their gift 100% goes into programs?” The reason we would object to that approach and the reason we object to actually creating a donor offer for overhead is because it actually creates more of a problem related to the subject of overhead. It actually minimizes it, diminishes it. It’s important in its role in actually making the organization work. So, what we’re taking a position on is that overhead is an integral part of delivering the program.

Steven: That makes sense. Just a minute ago, Richard, you mentioned fundraising costs as a percentage of overhead. What do you allocate in that subcategory? What would you consider to be a fundraising cost? Is it the salary of a fundraiser? Is it maybe any materials they produce at the cost of those? What would you include in that subcategory?

Richard: Well, it’s any fundraising cost. So, the compensation to any fundraiser or support person related to fundraising. It would be the direct costs that we use for donor acquisition, donor cultivation, solicitation, any of those costs related to raising money, events. Now, usually, accounting folks take those numbers and allocate certain portions of them and call that education. So, it’s considered a program cost. But any cost related to actually raising the money or in support of functions of raising the money can be a fundraising cost.

Steven: Okay. Here’s one from Ashley. Ashley says that she has the challenge from her administration at times of not wanting to be too transparent. In other words, she’s concerned that they may accidentally reveal that it looks like they don’t actually need much financial help at all. Have you ever run into that and how would you sort of do that balancing act between being transparent but maybe not giving away too much information that could be counterproductive or maybe disincentivize a donor to give?

Richard: I’m trying to imagine, Steven, what situation that might be. Can you discern in the question or can Ashley actually send in a clarification? What are they trying to either hide or have less focus on?

Steven: Yeah, Ashley, give us a little more to work off of there, what specifically you wouldn’t want to reveal or what could send a signal that you may not need much help after all? While you do that, actually, I’ll just skip down to Josh’s question here. Josh says he writes grants and they usually want to support specific programs. So, with this method, would you recommend when you’re writing a grant proposal, Richard, that you roll overhead into the program budget to ask them to support it? Have you had any experience using this model?

Richard: Yeah, we’ve had. Yeah, we have had experience using this model. Here’s where it can go good or bad. On the good side, let’s just say you’re applying for a $500,000 grant for x-program. You’ve ascertained that in that $500,000, there is a 23% overhead attached to it.

Steven: Okay.

Richard: And you’ve allocated in the exercise, say, another 10% according to my process. So, now you’ve got 33% overhead in the $500,000. We’ve seen situations where you go into the grantor and you’ll say, “We’re asking you for $500,000 for this, here’s the outcomes, here’s the impact, here’s all the stuff we want to do. Here’s the timeline, here’s the deadline, here’s the problem we’re addressing, etc.” In some situations, the grantor says, “Great, here’s the money.”

In other situations, the grantor says, “How much of that is overhead?” Then you’ve got to say 23% of it is direct overhead related to the program. Then you have to explain it. We always state that we should explain it. Don’t try to hide it. In some situations when you explain it and you make the case that we couldn’t actually operate these programs if we didn’t have these costs, the grantor accepts it, in other places, they don’t. It just depends on how the grantor feels about all that and how they think about it.

What we’re suggesting is that we have to more and more go down the track of explaining these things to people. Back to my example of the after school program, $3.8 million, $800,000 of overhead. We can’t run it without the overhead. That’s the big point. So, when someone says, “You know what, folks? I can support that. That’s overhead.” “Well, then we can’t run it, sir. We cannot run it.”

Steven: Right.

Richard: So, that’s the unfortunate situation. But I would tread easily, carefully on that whole subject in terms of submitting grants, but it might be interesting to try it. The only loss could be they would say, “We’re not going to give you the $500,000, we’re going to give you the $425,000, fine.”

Steven: Better than nothing.

Richard: Yeah.

Steven: Going back to Ashley’s question, it looks like Ashley’s organization gets a lot of government funding. So, she was concerned that perhaps telling donors that that’s the case may be a turn off to them and perhaps maybe they say, “Since you’re getting all that funding, what do you need my help for?” What do you think about maybe being transparent about those other sources of funding even though you are asking for money from individuals?

Richard: That goes to my after school example. In fact, we have a number of clients that deal with this very situation. So, that’s why I’m saying you have to say, “Here’s the total cost of what we’re doing.” Now, unless actually these government sources are actually funding all of your programs 100% plus all the overhead and everything, then you’d be in an ethical situation where you were going out to donors trying to get money you didn’t actually need.

Steven: Right.

Richard: What I’m saying is we’ve got to go out to these donors and basically say it costs $10 million to do this. We’ve got $6 million already in grants, that’s from the government. We need $4 million more or whatever. I would reframe the ask to go down that track.

Steven: Okay.

Richard: Is that clear?

Steven: I think so. Ashley, maybe we can connect you with Richard afterwards if you want to keep talking more. Richard, you used the word ethically, which is also in Allison’s question. Allison is wondering–it looks like her organization is experiencing a lot of staff turnover. Ethically, how do you make the case for increasing fundraising for overhead costs in order to curb that? Is that something that you should maybe be transparent about or not in her case? How would you tackle the question of overhead as it pertains to staff turnover?

Richard: I’m trying to discern what the connection is between the turnover and overhead. Do you understand that connection?

Steven: Yeah. She wants to spend more to help recruit and retain talent, so maybe training or better onboarding. That kind of thing. Yeah.

Richard: Okay. Yeah. I got it. So, first of all, it is ethical to do that, to spend more, it’s not illegal, it’s not dishonest. It might bump your ratio. Like you might have a certain ratio you’re trying to protect and it might change your ratios. I think the only thing is when that comes up, if it does, then you explain it. I would just explain it, “We have not spent enough time or energy or money on getting the level of talent we need to get in the door. The reason this went up one point, Mr. Jones or Mrs. Smith, is because we spent extra money in vetting the people. We hired a headhunter, etc.”

What we’re finding more and more is that donors that are up and coming and that are kind of growing and maturing in this area of overhead actually understand this stuff. I often say to them if they don’t, I say basically the difference between a nonprofit and a for profit is the nonprofit doesn’t pay taxes. Everything else is all the same. We have the same challenges in terms of overhead and HR and IT and everything else. So, we need to spend money in order to have the right people in the door and the right IT system and offices and computers and all that kind of thing.

Steven: Yeah. Makes sense. Richard, we’ve had more than a few attendees that represent arts and culture organizations. So, we’ve had a couple people from museums, one from a history museum, one from a jazz music organization. Do you have any experience doing this with that type of organization, specifically these people are asking about making those emotional appeals?

It sounds like maybe they’re struggling a little bit because of the type of organization that they are. Maybe it might be a little bit easier for an organization with animals or children versus a museum or a theater or something like that. Any advice for types of organizations to really package these things in an emotional way? Have you worked with any directly that maybe you could speak to?

Richard: Yeah, we have. We have. Here’s the thing. If you take whatever your cause is in the arts field, so we’ve done a bunch of work with the New York City Ballet and we’ve done some consulting with community choirs, so you have to look at what is it that you’re providing? So, let’s say you’re providing art work or let’s say you’re providing music or you’re providing history. The interesting question is to take that item, that big category of effort and say, “What’s the societal problem that the provision of this service or experience, what’s the societal problem that that’s addressing?”

We had an example in one city where a donor basically said, “When I listen to that music, it takes my troubled soul to a different place where I experience calmness.” So, when you hear me say those words, “It takes my troubled soul to a different place where I experience calmness,” you have hopefully an emotional reaction to those words. That was a donor that was actually saying, “Here’s what I value about what you’re doing in the music field for me.”

History might have a whole other meaning. So, it would be interesting to ask donors in these art situations what is it that this means to you personally. If you didn’t have it, what would you be feeling? You could get to some of that emotional content.

Steven: I love it. We’ve probably got time for one more question, Richard. I’m going to flash up your major gift offer here while we cover that. Joe’s here wondering is there a space for volunteers in this process? Have you had any example leveraging volunteers and either crafting the budget or maybe crafting those programs offers after the budget is made? Is there room for volunteers to help in this process, do you think?

Richard: We actually have one client where we’re working on some of that. Certainly, a volunteer could actually deliver the offer to a donor would be a very interesting thing to do. A volunteer that, say, is a photo journalist or a writer could actually go collect stories from programs or the front line of programs.

So, back to your whole thing about the arts world. A volunteer can spend time actually being with people in the museum or being wherever they’re experiencing that and asking them questions and gathering information. So, information about the story of the donor or the story of the user or the consumer of the service is very important information that volunteers can gather and might even be able to craft, gather word as well as images, electronic images for use electronically and in print form.

Steven: And would you include that in the budget if you were investing time and money and maybe training those volunteers or coordinating them in any way? Do you think that’s a worthy budget line item as well?

Richard: Yeah, I absolutely would. In fact, in this one organization, there’s a whole manager, director of volunteer services. And by the way, we’ve also suggested that there ought to be a manager of donor offers. All that person does is sit in the organization and create donor offers for all the fundraising expressions–events acquisition, cultivation, direct mail, online, etc. We desperately need this kind of service in the nonprofit world to get to what the whole budget represents. Remember, the whole budget of an organization is what it’s using to actually deliver its services, which is why we ought to be able to convert that entire budget into donor offers, which is the whole point of this whole webinar.

Steven: I love it. Richard, this is great. We’re about out of time, but I’ll give you the last word. Where can people find out more about you, maybe get in touch with you if we didn’t get to your question? I know we didn’t get to all of them, but can people email you or visit your website? What would you suggest?

Richard: Go to our website, You can email me at and I’d be glad to have a chat with you. Also, don’t forget what you see on the screen there, the Major Gift Academy. This is one of the foremost training academies, online academies in the country on the subject of major gifts and important information there. I would suggest you go there and kind of snoop around and see what’s going on.

Steven: Yeah, check it out. Really good stuff. Like I said, Veritus Group’s blog is one of the best I’ve read. I’m going to share that l ink as well. This is great, Richard. Thanks so much for joining us today.

Richard: Thank you.

Steven: And thanks to all of you for taking an hour or so out of your day. We’re going to keep it going with our webinar series. We’ve got a great one coming up one week from today. Rachel Muir is going to join us and she’s going to help us get into the heads of donors and find out what makes them tick and respond to all these great things that Richard laid out for us.

Do join us for that if you can one week from today, 1:00 p.m. Eastern. If you’re not available or if you’re perhaps not interested in that particular topic, we’ve got some great ones on our webinar page as well, totally free, totally educational. We’d love to see you again next week or sometime after that.

We’ll call it a day there. Look for an email from me later on this afternoon. I’ll be sending out the recording and the slides once again and hopefully we’ll see you again next week. So, have a great rest of your Thursday, have a safe weekend and we’ll talk to you again soon.

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.