Impact of Tax Reform on Nonprofits?

In this webinar, Larry C Johnson will interpret the early data and share the significant growth opportunities created by the new legislation.

Full Transcript:

Steven: All right, Larry, my watch just struck 2:00 o’clock. Is it okay if I go ahead and kick us off officially here?

Larry: Please do.

Steven: All right, great. Well, good afternoon, everyone if you’re on the East Coast. I should say good morning if you are on the West Coast or somewhere in between. Thanks for being here for today’s Bloomerang webinar “Sky is Falling? Impact of Tax Reform.” One of my favorite topics. One of my favorite speakers too, I’m excited. Thanks for being here all of you. My name is Steven Shattuck, and I’m the chief engagement officer over here at Bloomerang, and I’ll be moderating today’s discussion as always.

And just a couple of housekeeping items for you. I just want to let you all know that we are recording this session, and I’ll be sending out the recording as well as the slides, once again, this afternoon. So, if you have to leave early or maybe you just want to review the content later on, share it with a friend, share it with a colleague, you’ll be able to do that. Have no fear. I’ll get that stuff in your hands this afternoon, scouts honor.

Most importantly, as you are listening today, please feel free to use that chat box right there on your webinar screen. We’re going to save some time at the end for Q&A. We’re going to do questions along the way also, so don’t be shy, don’t sit on those hands. Send those questions in. You can also do that on Twitter. I’ll keep an eye on the Twitter feed as well.

And if you have any trouble with the audio by your computer speakers or through them I should say, we find that the audio by phone is usually a little bit better quality. So, if you have any trouble, don’t give up on us completely. If you can dial in by phone, if that’s going to be comfortable for you, try that before you totally give up on us. There’s an email from ReadyTalk that should have a phone number in there for you that you can try.

And if this is your first Bloomerang webinar, I just want to say an extra-special welcome to all of you folks. We do these webinars just about every week. Although we took last week off. That was the first week of the year we took off I believe. So, hope you’d forgive me for that. But one of our favorite things that we do here is our weekly webinars.

But what we are most known for is our donor management software. So, if you’re in the market for that or just kind of curious about what Bloomerang has to offer, check us out, check out our website. There’s a quick video demo that you can download and watch just to get a sense of what our software can do.

But don’t do that right now because you’re all in for a treat. One of my favorite repeat guests on the Bloomerang webinar series. It’s always good to have Larry C. Johnson joining us from beautiful Idaho. My favorite state, as a matter of fact. I’m not just saying that because Larry’s here. Larry, how are you, my friend? You doing okay?

Larry: I’m doing just fine. It is beautiful today in Idaho.

Steven: Nice. Well, you are all in for a treat because this is the webinar we’ve been planning for a little while. Larry always has a unique spin on things. That’s one reason I like him. It’s one of my favorite things about him is he really gets people thinking in, maybe, ways that they weren’t before. And today is going to be a no exception. Trust me, you’re going to enjoy this one.

Just to brag on you, Larry, really quick before I turn things over to you. If you folks don’t know Larry, he is the founder over at The Eight Principles. He is also the author of the award-winning book of the same name, “The Eight Principles of Sustainable Fundraising.” He speaks a lot. He’s internationally recognized speaker, coach. He does a lot of training. He’s been doing this for over 30 years and he has over $500 million raised attached to his name. So he definitely knows what he’s talking about.

He’s super active on several boards including the Philanthropy Council of the Carter Center, as in Jimmy Carter, our 39th president. So, definitely a heavy hitter in terms of counsel and training. And like I said, he’s over in Boise, Idaho. So, if you’re nearby, check out his beautiful ranch. Maybe he’ll even take you horseback riding if you’re nice to him.

So, Larry, I am going to turn things over to you to tell us all about the impacts of the latest tax reform. So take it away, my friend.

Larry: All right, let’s see here. How do I do . . . Are you going to control the slides or am I?

Steven: You can. You can be able to just click the bottom there.

Larry: Okay, okay. Nothing’s happening yet. What am I doing wrong here? I’m moving it but the screen isn’t moving.

Steven: If you double-click the little slide, it should go.

Larry: Uh-uh. Now, you know, I have the slides [inaudible 00:04:30] on the button.

Steven: There you go.

Larry: Oh, there we go.

Steven: There you go. You did it.

Larry: Okay, okay. Okay, so I take it’s a little pause there. So I double-click each one. Is that what I have to do?

Steven: Yes.

Larry: Okay, all right. All right, the sky is falling? Is it really? Okay, let’s have some honesty. How many people out there really think that philanthropy is in trouble because of last year’s tax legislation? Just say “yes” out there to the chat.

I’m getting everything, yes, no, not sure, perhaps. I mean, sure. All right, I love audiences that are awake and who contribute. I really, really, really like that. This is going to be something where you’re not expected to sit there and listen to me passively. I want to hear back from you via this chat box because we’re going to be asking questions all the way through this thing. And at the end, there’ll be a general question session. But during it, I’m going to throw out some general questions to you like that and I want to get the response.

What does that do? It first, I’ll get you involved and secondly, it helps me know to whom I’m speaking and what they’re thinking. Because I want this to be meaningful. So the answer to this question is yes and no, and it depends on your approach to fund development.

So, let’s look at this for a minute here, I’m just thinking to make this work. Ah, you know it’s that time of year, little chicks are out there. Well, how many people out there know the story of Chicken Little?

Okay, I see one person that not so really. I used to, not really. All right. Well, let me give you a little background. The story of Chicken Little is actually an ancient story and it comes from Homer. It really goes way back into antiquity. And very briefly, it’s this. A little chiclet was out in the fields, and one day, an acorn fell on his head. He looks up in the sky and he says, “Oh, my god, the sky is falling.” So then, one by one, he runs to his fellow barnyard animals and tells them the sky is falling. They don’t ask him to verify or validate why he thinks that, they just immediately accepted and go on to the next.

And after about five or six of these, they come upon a fox. And we know the role the fox plays in the ancient fables. He’s the crafty one. He’s the one that always has an ulterior motive. And he tried. They want to go see their king to get the final answer. And he says, “Well, you know, you can go down here in this tunnel here and it’ll get you to the king faster.”

Fortunately, Chicken Little was smart enough to realize that wasn’t a tunnel. That was the fox’s den. And that was a dead end. You weren’t coming out if you went in. So they said no. And they went to the king, and the king said as he reached over and he took the acorn off Chicken Little’s head, he said, “Sky isn’t falling. It’s just an acorn.” “Ah,” everyone said.

Look at the elements of that story. People taking something that’s said, unquestioning. A third-party making surreptitious use of that hysteria. And disaster being avoided only because they sought out a true authority. So it had a good ending.

So let me just tell you right now that the sky is not falling because of tax reform. It is introducing some new things in the landscape. We’re going to talk about them. And after much whining and complaining and hand-wringing, you know, I just get so weary of some of that. I really do. It’s like, “Come on, wait a minute, guys. You know, where did you get some of this stuff?”

Finally, and I guess it was two months ago, in February, we have the first real data that comes out of the changes. And here, I’m going to share a little bit with you. There you go. So, what’s the scoop? All right, here’s the scoop. For gifts that are greater than or equal to $1,000, they went up 2.5% last year, a little more than 2.5%. For gifts under $250, they dropped about 4.5%. The number of donors’ total went down to 4.5%.

Now, that’s in the background of the following facts. The reasons that people give have not changed. How many of you have ever accessed any of the U.S. Trust studies on donor motivation? Well, for those of you who haven’t, I certainly suggest that’s the first thing you do. And you’re going to see a list in there of why donors make gifts. And getting a tax benefit is still around number 20th or 21st in the list.

I can tell you that in my 30 years of experience, I have never run into a situation, of course, I’m dealing at more than $250 when I show up, all right, where getting a deduction was a determinate for the gift. It could affect the timing, sometimes it can affect the amount. But it doesn’t affect the motivation. And then in this background of this scoop, this new data, the absolute total of giving continues to rise.

All right, now, if you just think about what we’ve just talked about and you look at that in those numbers, they raise a lot of questions. You know, it’s not a simple, “Oh, my god, you know, my . . . it’s going away.” No, it’s not. We’re going to have to look through a different lens, and this is going to be the hardest thing you’re going to do in the next 35, 45 minutes. You’re going to have to start looking through an entirely different perspective. And I want you to stay with me on this because if you can, you’re going to leave this hour demonstrably different than how you began it. And I guarantee you.

All of us have confirmation bias, all of us look at things a certain way, and unless we’re willing to question that, we’re never going to grow or do things that give better results. We’re going to get the same results. What is the definition of insanity? Doing the same things, expecting different outcomes. Well, there’s a lot of that in the world. And the nonprofit community is no different. All we have to do is just listen to what people say. So, if you can muster the mental focus and the emotional courage to look at some of the things in a different way, and perhaps, challenge how you currently think about certain things, you’re going to be able to create some real important leverage.

See that feather there? It doesn’t take much if you know the right levers to really grow your fundraising program. That’s the key. You’ve got to know the right levers, the right feathers. We’re going to be talking about several of these.

It’s been said that the tax return will negatively impact smaller nonprofits disproportionately because they are more dependent on small gifts. Well, yes and no. It’s not a function of size. This lever is not a function of size, it’s a function of understanding and approach. It’s not a matter of how big your organization is, it’s a matter of the way you’re looking at it and the way you’re going about it.

There are actually large organizations whose fundraising, although it would look as though they’re raising lots of money, and they probably are, that’s a relative term. They’re really all screwed up. And the only thing that’s keeping them alive is momentum. But if you really want to get beyond what’s going on in the current market, you must begin to understand fundraising in a somewhat different way than you probably do. And the first thing we’re going to do is we’re going to talk about the first principle of the eight principles.

Donors are the drivers. For those of you who have not read the book, you can read the book. There’s a download on my website that lists all eight principles. Let’s kind of look at the point right now. The point is donors drive, they are in charge of philanthropy. I’m sorry, it’s not up to you. It’s not up to your great mission, it’s not up to all the good you want to do, it just isn’t about that. I’m sorry, it’s not. And the sooner you can recognize that fact and appreciate it and check your ego, the better off your fundraising is going to be.

But the clever thing about this is donors don’t drive fundraising with their money. No, absolutely not. Now, that’s not to say that money isn’t involved at some point, because it is. But it’s not the driving factor for those donors. Donors are interested in philanthropy for one reason. They want to see self-actualization. They want to leave a legacy. They want their own values confirmed. That’s what they want.

If you think about that slowly, that’s going to influence everything you do in fundraising. From the way you present yourself, to the questions you ask donors, to the proposals you put before them, to the way you treat them after they’ve made a gift. All of that will change because most, I’d say, 90% plus of nonprofit fundraising is focused on the mission and program of the nonprofit.

There again, that’s not that is unimportant, because it is important. But it is important in a different way than you think. Because it’s not about you selling them on your mission, it’s about you selling the donors on your ability to fulfill their dreams, which is an entirely flipped paradigm.

You know I heard the other day. I was speaking with someone and then this gal is a major gift officer at a major university, and she was telling me that she was sitting in on the interview of a new dean. And the question was asked about how he would persuade donors to make a gift. And his response was the following, “Well, I would tell them, ‘So consider a world where you haven’t made this gift, what happens then?'”

Now think about that for a minute. You know, if donors don’t flip you off right away, they’re thinking about it. Because I can guarantee you, guilt is a very short-term and ineffective motivator. Now, I said short-term. You might get a minor little blip. You might get what I call a hush and go away gift. But that’s it. And now, that we’re getting into a realm where the small gifts, what we call the impulse gifts, are falling off. That’s not a very productive course of action. It really never was, but it’s becoming more critical now. That’s the first thing. That’s the first sort of different way of looking at it I want you to think about.

And then now, here, coming up for the second one is going to be something that’s going to be even more troubling to you and more pervasive to your whole organization. In fact, pervasive to the world really in many ways. What do you think that picture represents? Anyone want to say anything about that? What does that look like to you?

Okay, all right. Well, I can guarantee you it’s not hope or opportunity. All right? There’s no hope in that picture. If that’s the landscape you’re on, I’m out west. I live in a desert. Without something to sustain you, you’re not going to live in that environment very long. This is what I think represents the whole concept of scarcity. There ain’t enough. If I get mine, you won’t get yours. This, unfortunately, is the way a lot of the world operates.

Now, I can’t speak for everything in the world, but I can certainly speak for philanthropy. This is not the way philanthropy is. For those of you whenever you hear that competition’s becoming more intense for a fewer dollars, I’m just going to say it, Steve, that’s unmitigated bullshit. That is complete falsehood. I couldn’t say it more. Whenever someone says that they don’t know what they’re talking about.

And here’s why. Philanthropy has an econometric quantity, and where econometric is, it’s influence on the economy. It’s an elastic quantity. Actually, it’s about abundance. Paul Schervish of Boston College, a number of years ago, did economic studies of philanthropy. And he demonstrated unequivocally that philanthropy is not fixed, it’s not scarce, it’s abundant. There are hundreds of millions of dollars, maybe billions, that are sitting on the table every year that go unclaimed.

So why is that? He discovered that the driving variable, the determinant variable if you’re a mathematician that raises or lowers philanthropy, is the degree of connectivity of the donor to the organization. That’s it. So, what does that say? How do we think about how we connect with our donors? Are we doing it in a way that is meaningful to them? Them. How many of you out there still think that there’s not enough to go around? Be honest.

Well, most of you say that there is enough or there’s more than enough. Someone said it’s in how you differentiate yourself with the donors. And that’s partly true. Let’s look at it a little closer.

Here are some conclusions we can draw from the data. Impulse giving is declining. And I’m defining impulse gifts as those smaller gifts, gifts that are made because someone just presents you with a proposal, you get something in the mail, someone, you know, buttonholes you at the office, whatever it is, you make a gift.

Donors have not stopped being generous. And for those of you who are younger than a millennial crowd, I have millennials that work with me. They tell me I’m an old man all the time. But you know, hey, we get along pretty well. They’re generous as well despite what the sort of, conventional wisdom may say about that. Eighty-five percent of them make charitable gifts but they don’t make as many impulse gifts as people used to. So those kind of gifts are going away.

And those, by the way, are the ones that are most effective by a change in the tax law. You’re sitting in front of your accountant and he’s saying, “You know, Larry, you got to give some money away real fast. The tax man is going to ding you.” “Oh, so, Carl, what do you think I should be doing?” “Oh, here. Throw some charitable giving out. We’ll even up the numbers.”

See that becomes a transactional element that is really not, in any way, connected to philanthropy. It’s about my taxes. And although I wouldn’t give it to something that I wouldn’t believe in or at least remotely was in concert with, it’s not something that is . . . It is going to be weighing on my mind about fulfilling my life’s goals. That’s impulse giving.

Donors are generous on their own terms, not yours. This is why the urgent appeals of the sky is falling . . . If we don’t get X dollars in the next thirty days, we’re going to fold our doors. That might work once, but that’s it. More often than not, the response of intelligent people is going to be, “Why the hell didn’t you manage your finances? What’s going on here?” The only way that works is if you’re in the disaster remediation business. Because that’s something is truly unexpected.

So, how do we involve donors on their own terms? How do we do that? Anyone want to make some guesses?

Well, I’m hearing some pretty conventional answers. And these aren’t necessarily bad. I see one here that looks pretty interesting. Present multiple opportunities and see what aligns with what their future is. That sounds a little interesting. But I’m seeing a lot of conventional logic out there. And let me tell you a story about conventional wisdom, something that I was presented with a number of years ago, kind of an eye-opener. It’s part of why I do what I do.

Those of you who’ve looked at my LinkedIn profile know that I went to that little Ivy League School in New Haven, otherwise known as Yale. And it’s a great place despite the recent little problem with certain people buying their way in. I can assure you that did not happen in my case.

But one thing that I was able to do while I was there, which is truly, to me, a luxury, to learn is you get an opportunity to do what they call a tutorial with a senior faculty member. And simply stated, that’s you and the faculty member for a whole semester learning and challenging a particular problem together. What a wonderful opportunity if you’re really willing to take advantage of it.

And you have to understand, for those of you who’ve not been there or a place like that, this is strictly a no prisoners place. You know, everyone’s at least as smart as you are. At least it was then. And they didn’t cotton very much to fools. You were called out real quick if you were saying things that were in any way intellectually not respectable. So meaning, it didn’t make sense.

So I was in this tutorial with a man by the name of Derek de Solla Price, who is or was a Nobel Laureate. And he came up with something called the Price’s Law. And you can Google it. In fact, it has relevance for fundraising. It has relevance for business. But that’s not the point of the discussion. The tutorial consisted of giving me about 500 to 700 pages of reading a week, and then I would develop a critical paper to respond to that reading each week. And then, we would have a discussion over it.

And after about the fourth or fifth week in this term, he says to me, he pauses at one point, he says, “You know, Mr. Johnson,” and everyone was strictly Mr. and Ms. then. He said, “I think you’ve done a really admirable job of mastering the conventional wisdom. What I would like to see next week is something original.” Boom. Boy, did he raise the bar on me. That’s sort of what I’m expecting of the audience today. Let’s look at things differently. Let’s don’t just respond in a conventional way. I’m going to be tough on you, all right? So, how do we involve donors on their own terms?

Well, I think the first thing you need to know is your role in the process. And when I say your role, I mean your role as anyone who’s a part of a fundraising equation, whether you’re a board member or a fundraiser or an executive or anybody else, it doesn’t really matter. Your role is not to get these people to make a gift or anything that even sounds like that or looks like that. Your role is you are their guide. You are guiding this individual, just like that young man is holding that young woman’s hand. Because she’s the hero, you’re the guide. You’re the Yoda. You’re going to show this young lady how to be successful in fulfilling her own dreams. That’s exactly what you’re supposed to be doing. Now, this challenges the conventional wisdom of virtually every number of fundraising communication techniques. It inverts it completely.

You know, I was just reading this morning. I get all this stuff in email. There’s just . . . you know, the hot topic this year is storytelling. And you know, if you just say the right words and convince people the right way, hey, the money’s going to flow. Well, I just don’t believe that. In fact, I’m looking at one thing that came in this morning. These things were actually described in this email as magic. What’s the definition of magic? Anyone want to try?

Yeah, mm-hmm. Keep looking. Yeah, mm-hmm. Oh, I love this one. Something beyond normal comprehension. Let’s try, that doesn’t adhere to the laws of nature. There’s a good one for you.

All right, now, I was really surprised that what is apparently a respectable organization is that’s promoting this. And they even say at one point that they’re going to show you, tell you exactly what to say to secure your next five, six, or seven-figure gift. What are they resorting to? Hypnosis? Yeah. Spells? That’s what it sounds like to me.

So that is absolutely antithetical to what I’m suggesting here. And what it requires is something really, really tough, getting outside of yourself. And that’s perhaps the most difficult thing that people who are well-motivated have to do. Oh, we’re doing all this wonderful work and we’re saving the world, and I don’t mean that patronizingly. You’re doing great work. You want to see good outcomes. And so it’s really, really, really tough. When I tell you that doesn’t matter, not as far as getting the interest of a meaningful donor.

Question here, is there a way to see other people’s answers? I don’t know, Steve. You’ll have to handle that one. But the key is you’re the guide, not the hero. They’re the hero. Just think about what that means.

So then, once you’ve got that firmly in your head, you have to help them find their way. Well, how do you do that? We have what I call “create a path” for them. And the path is for them, not you. All right. We’ve all heard stuff like moves management. That is a tracking tool. That’s all it is. And so, you know, some of the people imagine that we actually sort of moving this donor along on a chessboard or on a track, and they’re just going to fall into the hopper at the appropriate moment. But this doesn’t work.

Now, that doesn’t mean that those tools have no value. They have value, but they don’t control what’s going on. They’re simply tracking what’s happening. That’s it. And sometimes, they don’t even do a very good job of those, depending on who’s filling them out. I know. I ran a major gift program at SUNY for a while. And I got a lot of different varying qualities of officers who would fill these reports out. Some of them didn’t like to fill them out at all. And we can talk about that later so that you know what I’m talking about.

So, how do you create that path? Well, the first thing had to do is invite them to be a part of who you are. You invite them to be interested. You invite them. Now, I can’t get into too much detail here, but the technology is now existing that allows what is known as permission marketing where you’re seeking permission to get to know them better and to learn what they’re really about. And there are several platforms that do this in both the for-profit and nonprofit world.

They’re probably one of your best investments if you’re looking to grow your base, unless you don’t like, unless you have . . . and even if you aren’t looking, if you have a relatively closed base like an educational institution where you’re appealing primarily to the alumni and/or parents, they still can be useful. And see, that’s the good news for the small groups is that used to, it took, you know, armies of people to do this kind of thing, flying all over the universe, writing letters, you know, doing all that sort of thing. With the new technologies that are there, it’s much easier.

So then, from that, you begin to draw them closer. And as you draw them closer, you will learn where their interests lie. And this is where you may find out that they really not that interested in you at all. And that’s when I say to people, “You know, there are lots of wonderful, generous people that will never give you a dime.” Well, that’s okay. Don’t worry about it.

And yet, so many people, organizations, when they seek to raise the level or the number, either the amount or the number of donors, what do they do? What’s the saying, spray-and-pray? You just mail everybody, you just call everybody and see who comes through the door. That is such a waste. It’s expensive, it doesn’t really accomplish anything because all it gets are one-time low gifts. You know, those $250 gifts that are going away, those, that’s what it generates. And maybe, every once in a while, the right person will fall into that.

And that’s where a lot of organizations are. That’s why so many of them struggle. Well, it’s one of the reasons why so many of them struggle, not the only ones is that they’re not directing their resources in a proper way. And part of that is because organizations, for the most part, are fixed on . . . they are addicted to short-term cash. We’re going to talk about that in a minute. And I call that the cocaine of fundraising because so many nonprofits are in such tenuous financial condition.

And even if you are right now and right today, there’s a way to correct that. You don’t have to stay in that situation. It will require thinking differently. It will require making some adjustments that may be painful. But there’s a way to adjust that. So as you draw people closer and you begin to sort of refine that group into people with which you truly have a kindred spirit, you begin to develop emotional ties, emotional here. Okay?

I see a comment. Hoping we get to the impact of tax reform. I’ve already covered that. I’m explaining how to get around it. All right. It’s not about the numbers, it’s about your point of view. Because the numbers are the numbers of the numbers. They only matter if you’re willing to look at them and see what the implications of those numbers are. That’s the key.

If you’re looking for, sort of, a pat recipe on how to deal with it, you’ve come to the wrong place, all right. If you’re looking for a way to make sense of what’s happening and use that in a productive way to improve your fundraising, then you’re in the right place. All right.

So then, once you have emotional ties, the next thing is to think assets, not income. Does everyone out there know what an asset is? Okay, yes and no. All right. Assets are things that donors hold that may or may not be immediately liquid. They could be. But the point is they’re not income because you’re not spending these things. It could be a 401k, it could be a piece of real estate, it could be a small little mutual fund. When I say small, I mean a couple of thousand dollars. It could be a piece of art. Anything that is tangible or intangible that has intrinsic value that they’re not using to live on, that’s an asset.

Most people make gifts out of their income. You know, whether it’s a salary or retirement, whatever it is, they’re making gifts out of income even at high levels. For instance, you can get a gift of $50,000 out of income. And that’s great. Take it, say thank you. But here’s the news. That gift has a lot less value, long-term, in your fundraising program than if that same $50,000 was given to you in the form of an asset. Seriously, I’m going to show you just how much in a minute. Where are we here? Come on. Okay, I’m having trouble. Ah, got it to work.

Assets, the very fact that some donors in your pool have made a gift of asset at some point, they can continue to give you gifts out of income. That very fact, if it’s managed appropriately, and that’s a big gift, that is the growth driver, the growth lever in your program. Let me show you exactly how much.

Steve, I’m having difficulty here. There we go. Okay, I’m having difficulty with my mouse, okay.

This is research that was done over 200,000 organizations, and it’s a 5-year comparison of those organizations who focus on cash versus those who build a program that is honed on assets. They also cash, it’s both. And those bars are arranged there at the bottom as to the size of the organization. For instance, at the far left end, you’re going to see that if you have an annual philanthropic receipt of between $100,000 and 500,000, that’s the growth you can look at. If you’re at the other end and you can look at $5 to $10 million a year, that’s the growth.

So to give you an example, at the far left end, if you’re looking only at cash receipts over a five-year period, your increase will be a little over 50%. The same organization that devotes time and effort to build a program that focuses on assets, which means that the donor has to be very close to you. Because asset gifts are not made casually, they’re not made simply out of programming, they’re made because the donor is emotionally connected. All right. Then you can look at a $400,000, excuse me, 400% increase. Wow, in five years.

Now, the trick is those increases are not linear. It will be the second or third year before it really kicks in. There’s the key. At the other end, you have an organization that’s currently raising between $5 and $10 million, they’re not really going to have any increase in 5 years, especially when you consider inflation. It’s all wiped out. They’re just kind of treading water. They’re raising a lot of money, but they’re treading water. And they can have a 50% increase if they focused on assets. There you go.

So really, you know, that’s what you can think about. And I’m not kidding. I’m really not. It’s possible. But in order for that to happen, you must have the right thinking, the right paradigm in place. And then on top of that, you must execute the techniques that support it. It’s both [end 00:39:44]. This is why I tell people, “I can give you ‘The Eight Principles’ and you can read them all day long.” And that’s the right thinking. But if you don’t execute them with the right techniques, it’s just so much waste.

So, you may be saying to yourself, “You know, so now, what? What do I do?” How many of you, when you think about how to plan your fundraising for the next year, have had the experience that that young man seems to be having?”

Mm-hmm. Okay. I want to go back. There has been a question asked about the chart. And I’m going to go back to the chart for a second here so that everyone understands this. There are two bars here, there’s a red bar and a blue bar. And the red bar shows the growth that is possible by adopting a fundraising program that builds on assets. Of course, I own “The Eight Principles,” I’m going to tell you it’s my approach. You can do it, but it’s not branded, but that’s what it is.

The blue bar shows you what an organization will raise based on a straight cash model. And this research was done over 200,000 organizations. So, this data is solid. There’s nothing that’s going to rock this. It was done by an independent agency, all right. And then the various pairs of red and blue bars are depending on what your organization currently raises in a year.

For instance, on the left-hand side, if your organization’s raising’s in between $100,000 and $500,000 a year right now, then in the next 5 years, this is a 5-year increase, this is what you can expect. Either a little over 50% of your cash or 400% if you’re focusing on an asset program. And so down the line. That’s what that means. I hope that was explanatory enough.

I got to get back, I got to finish this before the end of the hour. So, there’s something called cognitive load here. That’s just a fancy term for the fact that we’re overloaded with information all the time. And there are so many different options. And of course, you know, the world kind of revolves between that and fear and greed and curiosity and generosity. All those things are rolling around. But the point is we are overwhelmed. We are overwhelmed.

Two examples. How many have ever been into, let’s say, either Best Buy or the auto parts store and you knew you needed something but you didn’t know exactly what and you get in there, and you meet up with a salesperson who knows maybe 10% more than you do, and they sell you something or several somethings and you get into your car in the parking lot and you go, “What the hell did I just buy?” How many have had that experience? Oh, yeah, yeah.

Well, translate that into the fundraising world. People get inundated with techniques, magic potions, technology, software, this, that, the other do this, this, this, this, and you will have a total success. You’re just overloaded. Well, I will tell you it’s not the place to start, but that’s why you’re feeling overloaded. It’s just way too complicated. There is a way to make it quite simple to get this thing to work. Here we go.

Make it simple. Here’s the secret, all right, if there is a secret. It’s not a secret. But here’s the simple proposal I’m going to make to you today, principle first, then technique. You’ve got to know the principles first, know them, not just be able to repeat them. And then, choose the techniques that support those principles that work in your particular setting. Not every technique works in every setting to the same effect. You all are somewhat different.

Ralph Waldo Emerson, the 19th-century philosopher said, “If you get the principles right first, choosing the techniques is easy.” And I’m paraphrasing obviously. But if you choose your techniques first, you’re going to have trouble. Well, that’s where most fundraising is. They’re mired in the techniques wondering why they can’t get where they need to go.

You know, I had someone say to me when I presented this to them, “Well, that’s just common sense, Larry.” And my response was, “Okay, if it’s so darn common, why aren’t you doing it?” Well, you know, I have a way of confronting people. You know, don’t mess with me unless you want to hear the truth.

So, how do you do this in some sort of reasonable . . . ? We’ve been getting a lot of questions about that. Well, I want to show you this. This is something that we just recently put together. We have something we call The Eight Principles Way. And what it is is you see at the top there, we’re preparing you by telling you where you are right now. It’s called the “Four Corners Profile.” We do some interactive, media-related workshops that begin to change the way you mentally think about this. We’re not teaching technique there, we’re teaching how do you think about this problem. Because thinking is the problem. All right. And then you got to be accountable to plans to make those changes.

And then ultimately, you know, you can take this material and do it for yourself. And below all, that is where you start executing your practices. As you change the way you’re thinking, you begin to do practices that make more sense and you get better outcomes consistently. And this is something that everyone in the organization needs to be responsible for. It’s not just the fundraiser, it’s the executive, it’s the board member, it’s staff, it’s the person who doggone answers the phone and sweeps the floor.

And so, we’ve created this in a way so that everyone can understand it. We’re not using any jargon or any other terms like that, you know. And yes, it may seem simple to you but simple things aren’t necessarily easy to execute. It may be simple to say, but that doesn’t mean it’s simple to do, all right. So that you’ve got to make that change.

And the reason for the embed piece down there at the end is, you know, someone can come in and train you how to think all day long. And then in two years, when that person is gone and you’ve made a couple of changes in your staff, guess what, it’s back to the same old same old. And so, that’s why, you know, you eventually bring the material inside and that becomes your guide. And that’s the way we’ve constructed this. And I can tell you more about this later if you’d like if you have interest in it. But this is the way we do it. We teach thinking in the top so that you can do the doing in the bottom. Thinking, doing, thinking, doing.

If you learn nothing else, know that success is not a one-time effort. It’s a way of living. And that’s the reason you have to have the right point of view, the right thing, the right look, the right understanding. That’s the hard part. If you can get that, then you’re going to be able to figure out, “Oh, that doesn’t work for me, this will work for me.” Because I know how that principle influences my own situation. That’s the key.

I encourage all of you to think what is it you want to accomplish. You know, do you want just to make a flash in the pan and go on to a bigger, better job? A lot of development people do that. It’s not for me to judge that. I wouldn’t do it. But I encourage you to think about what it is you really want to accomplish. And once you’ve made that decision and you know, then you’ll be able to appreciate what I’ve just been telling you.

If you’re looking to make a legacy difference, if you’re looking to make a permanent difference in the lives of other people, this is the way to do it. Because here’s what happens, not only does your organization benefit and prosper, but you’re giving donors the chance of a lifetime. Why would someone give you $100,000? Because they think it’s a bargain. They think it’s worth $150,000 to them. It’s not about the money. It’s about what it means to them to invest in you. That’s the key.

All right, we’re going to get ready for our questions. We have a full-blown video program that begins to teach these. It’s an individual subscription model. It’s available anytime. If you sign up today, it’s $1 for the first month. You just go to TheOracleLeague.com and sign up, and you’ll see it for yourself. It’s a month-to-month thing. As you open everything, it stays open as long as you’re a member.

In terms of organizational transformation, we start with what’s called the Four Corners Profile. That’s a very simple, you know, 20-minute kind of thing that tells you exactly where you are. It’s perfect for boards. It’s perfect for executives. There’s no fundraising speak in it. And then, for those who want to understand more about how we completely transform an organization, there’s The Eight Principles Way. Email [email protected]. Hey, the first time you talk to us is free. We’ll be glad to tell you more about this.

I really want you to think of . . . Oh, and there are some free downloads we can send you to if you’re interested. But I really want you to think about what it is you want to accomplish. You see that walkway out there, you know. Why do you think it’s not a couple of steps to the other side? Anyone want to make a comment? Because it takes a while.

I just got a particular question. Yeah, transformation is not linear or short. Hey, I love that. I love that. You must be a mathematician. You know it’s not linear. But someone asked about the cost. I presume it’s The Oracle League. It is an individual subscription platform. It is email-based. It is intended to be individual. I mean, if you want to share it to everybody in your organization, that’s up to you. I mean, technically, that’s piracy, but I’m not going to come at you. It’s really up to you. It’s pretty inexpensive, and that’s the reason we do . . . because it’s intended to be an individual learning thing. You go at your own pace. That’s the reason it’s set up that way.

Someone asked about the studies on donor motivation. They are conducted every year by U.S. Trust. You google U.S. Trust Donor Surveys, they’ll come up.

Okay, let’s have some questions in the very few minutes that are left. I didn’t mean to take quite so much time. Okay. How do I bring you back in?

Steven: I’m back, Larry. That was awesome thank you, Sir.

Larry: All right.

Steven: Yeah, we do have some time for questions. So if you haven’t asked a question, now is the time. We got about seven or eight minutes. Some good ones have already come in. I’m kind of cherry-picking here, Larry, if you don’t mind. But here’s one from Hope. Hope’s wondering your take on donor-advised funds, either in the context of this presentation or maybe in just kind of your philosophy of how you do things. What’s kind of your take on donor-advised funds given tax reform or otherwise?

Larry: Well, I think it’s important to understand what donor-advised funds are. Presuming that everyone understands the basic definition of a fund, I think the question is why. Why do donors do them? There are a couple of reasons, but the predominant reason is they would like to do something philanthropic now but they’re undecided as to what they want to do in specifics, so they established some guidelines. So then they have the ability with the trustee to draw on that.

There’s a darker side to that. There has been an explosion of donor-advised funds in the last 10, 12, 15 years. And unfortunately, some well-meaning people in the nonprofit community want to point their finger at the for-profit organizations that manage these. Principally, an organization like Fidelity or others. And they sort of, kind of, want to ascribe this sort of dark capitalists profit motive to them.

I beg to differ. Many, many donors make these gifts because they simply can’t get the attention of a nonprofit. And you may disbelieve that, but it’s true. I’ll give you a perfect example. I have a client in Colorado to which I was speaking to one of their major donors. And he said to me, “You know, Larry, it’s really hard to give money away these days.”

Well, what I thought he meant was there are so many demands on the money he couldn’t decide. But that isn’t it at all. He made several inquiries to an organization about making a major gift. He was brushed off every single time and told to come to the damn gala. And this is a man who’s known in this small community. It’s a wealthy skiing community in western Colorado.

This is the kind of thing I’m talking about. Donors don’t have any time for that anymore. They don’t like to be browbeaten. They don’t like to be pushed. And this is a lot of it. And so, when you’ve got an organization like Fidelity, they cut into the community foundation business, because they’re offering bigger returns and lower costs. I mean, we have a community foundation in this state. Their return is low and their costs are high, and they wonder why they’re being beat in the marketplace by the likes of Fidelity. That’s why. That’s why. So I hope that answers your question.

Steven: Cool. Here’s another coming from Robert. Robert says he’s a general counselor for his nonprofit. And he’s wondering what’s maybe your advice is, Larry, for how he can support his development team with his legal skills, specifically any traps he can help them avoid, any support. What do you think for maybe some of the legal background?

Larry: Wow. Well, that’s a big topic. I guess it’s depends on which part of the law he is knowledgeable in. One of the things that I think you can definitely do . . . What’s this man’s name?

Steven: This is from Robert.

Larry: Robert. Okay, Robert. I have a friend who’s Robert. You must be a good guy, okay? Well, Robert, one thing you could definitely do is, of course, you’re not financial primarily but you should insist upon financial guidelines that make sense for the organization. You should insist upon dotting all the Ts . . . dotting all the Is, crossing all the Ts. I’m dyslexic, I guess.

And then the other piece of it that you can do if you have any experience in working with high net-worth individuals, this is something that you can be of great value too. Because a lot of these people really don’t understand the options that are open to them. A lot of financial . . . Attorneys and financial advisors, generally speaking, and accountants as well, are trained on tax avoidance. All right. That’s not a bad thing. I don’t want to pay any more than I have to, but that’s not the number one thing I’m focused on. And that’s the same case with other donors. You need to listen to what they’re telling you and not just respond with the packaged response. That’s the key.

But I think, certainly, if you had experience in that area, that’s a place you can do it. You know you want total legal compliance, making sure they’re filing everything correctly, making sure their giving is properly documented. That’s sort of a financial function. But those are things that immediately . . . that really come to mind. But you can be the face of the organization by being the good guy in the sense that think about how you can say yes rather than saying no. And that’s hard for attorneys. I know. I know several of them. They’re good guys, though, good gals. What else?

Steven: Well, we’re coming up on 3:00 o’clock. I know there’s . . . we have lots of questions. Probably don’t have time to get to all them. I’m so sorry about that. No malice intended, I promise. But there’s one in here that will be . . .

Larry: Well, Steve . . .

Steven: . . . kind of a nice way to end on. Oh, yeah?

Larry: Steve, Steve, if you have time, I’ll give it another five minutes.

Steven: Okay. All right.

Larry: Yeah, let’s keep going.

Steven: Okay, good. There’s a couple here . . .

Larry: Because I see a lot of questions coming through.

Steve: Yes. Here’s one from Juliana. Juliana’s wondering, do you have any tips on developing emotional ties with maybe current donors and prospective donors. So I think that’s kind of an underlying philosophy of what you’ve been talking about for the last hour or so, Larry. How do you suggest people do that? And I know that’s kind of a tough question for just a few seconds.

Larry: All right, well, let’s go back here. Let’s see, where do I want to look here? Hold on, hold on. Okay. Let me go back to this slide right here.

The second and third ones, they’re pretty general obviously. The key there is that you are learning about the donor and you know what is important to them. And that’s what I mean when I said that you can use the softwares that are there. Google the term “permission marketing” made famous by none other than Seth Godin. All right. His techniques are what we have embodied in what we call The Eight Principles Way. That’s the way we do it, all right.

It’s a broad topic I know. I can’t give you just specific, sort of, you know, onesie-twosie tips. I’m focusing on the way you think about things. But what you’re trying to do is to get to know the donor intimately enough that you’re appealing to their emotions. And that will differ depending on the person. And simply trying to you know guilt them into making a gift by showing a photograph of a starving child or something else like that, that’s an example. It’s not the way you do it. What else, Steve?

Steven: Makes sense. Here’s one from Deborah. So you talked a lot about asset-based gifts, Larry. Other examples of those besides just maybe stocks and donor-advised funds? Were you maybe referring to a larger gifts in kind, like actual physical assets? Could you maybe unpack that one a little bit for us?

Larry: Yes. Tangible assets would include precious metals, jewelry, art, real estate, anything that has intrinsic value. Now, there rules for accepting all of these. And that by the way, for the attorney friend, Robert, that’s where you come in, right there. Make sure things are done appropriately so that you don’t get, you know, cross-eyed with that wonderful organization called the IRS. So, the whole range of tangible assets as well as those that are either liquid or illiquid in the intangible area. For instance, CDs are somewhat illiquid depending on when their maturation day is. And the other things that go with that.

It’s anything that the donor is holding other than cash in the bank, all right. They’re sitting in an account really or that they’re getting as a result of an income. And where if you look at their tax returns, it would be everything that’s not on that regular income list, even capital gains would be considered regular income. So, you’re looking for things that they’d have to make a deliberate decision to liquidate for whatever reasons.

That covers a lot. It doesn’t have to be a lot. It doesn’t have to be a big number. That’s the key. It does not have to be seven figures.

Steven: Makes sense. There’s been a couple of people asking about kind of pipeline because you mentioned small donors versus larger donors earlier on the session. Why do you think it’s kind of a healthy ratio of those sort of major donor prospects versus, you know, maybe those mid-level to lower-level donors in terms of your entire pipeline? What do you think? Is there like magic? I don’t want to use the word magic considering what we just heard before but . . . that maybe a good ratio there.

Larry: A respectable ratio.

Steven: Yeah. That [unique 01:00:44] ratio.

Larry: Respectable ratio. Well, first of all, you need to understand, even though I made most of my career in “major gifts,” I do not use that term anymore. Because it implies the level and amount of the gift that’s a relative number. It is driven by the organization.

Here’s what I would suggest instead. In order to have a program that’s going to experience the kind of growth that I’ve been describing, you need to have a program that maintains approximately a 20% ratio of asset donors. In other words, of all the people that give to you every year, 20% of those donors have made, at one point, a gift out of assets. That is where I would focus my attention. At least 20%. That’s a healthy number.

Steven: Makes sense.

Larry: In fact, that’s what we teach people. And we teach them how to track that too. It’s not hard. It’s hard. I mean, this is not a layer of complexity on top of what you’re already doing. It actually makes things a lot simpler. I’m into simple, Steve.

Steven: I like it. I like simple. Well, we’re a little over time. I want to be respectful for everyone else’s schedule. I’m thankful lots of people stick around for Q&A. That’s always often. I love the interactivity. But Larry, any final thoughts before we part ways here?

Larry: Well, I just encourage you to email me if you want to talk to me. I’ll talk to you once for free. I do have to pay my groceries and pay my bills, but after that, hey, I’ll surely talk to you. I’ll tell you more about what we do. And I would encourage you to go to TheOracleLeague.com and take a look at The Oracle League. I mean, I’m really proud of that. It’s fantastic. It’s full of video. It mobily adapts. You can do it on your phone. It’s downloadable exercises. It’s the whole ball of wax. Really nothing else there quite like it. And it goes into depth into this whole concept of teaching principles, not techniques. And I just want to say thank you for the opportunity.

Steven: Awesome. This was fun, Larry. Thanks for joining us again, and thanks to all of you for taking an hour or so out of your day to join us. It’s always good to see a full house here. We’ve got some great sessions coming up here in the future. We’re back on our every single week schedule.

And next week’s going to be a fun one. A topic near and dear to my heart. I happen to be married to a nonprofit publicist, so I have been looking forward to this session for a long time, media relations for nonprofits. If you maybe struggle with something as simple as writing a press release to something as complicated as getting, you know, maybe a reporter to answer your calls, we do want those eyeballs after all. So join us. We’ve got Antionette Kerr joining us to talk all about earned media and your media relations strategy. She’s really good. She is an expert on that. Someone I’ve gotten to know a lot over the years. Going to be a fun one. Same place, same time next Thursday, 2:00 p.m. Eastern.

If you’re not quite into earned media, that’s okay. There are lots of other sessions you can register for coming out into the future over the next few weeks or so. So hopefully, we’ll see you again some other Thursday, if not this coming Thursday. So we’ll call it a day there. Thank you for being here. I’ll be sending out the slides and the recording later on this afternoon, so be on the lookout for that. And definitely reach out to Larry. Obviously, a wealth of knowledge there.

So thank you all. We’ll call it a day. Have a good rest of your Thursday. Have a safe weekend. I know there’s some bad weather out there. Hopefully, you’re staying safe and warm. And we will talk to you again next week. Bye now.