Most nonprofit leaders don't think of income generation as their top priority. Their purpose is to serve, they reason. Raising money is secondary.
This kind of thinking is one of the biggest mistakes a nonprofit can make.
Without a strong fundraising culture, nonprofits often lurch from one financial crisis to another. Many fail to thrive. In spite of good ideas and sometimes great potential, some simply die.
This year a major study concluded that "many nonprofits are stuck in a vicious cycle that threatens their ability to raise the resources they need to succeed." A joint project of CompassPoint and the Evelyn and Walter Haas, Jr. Fund, UnderDeveloped -- a National Study of Challenges Facing Nonprofit Fundraising surveyed 2700 executive directors and development directors at the nation's nonprofits. The study reported a number of problems, including "a lack of basic fundraising systems and inadequate attention to fund development among key board and staff leaders." The study's statistics are worrying -- 23 percent of nonprofits surveyed had no fundraising plan and 75 percent of executive directors characterize board member engagement in fundraising as insufficient.
This situation can be blamed on a lot of things. In my opinion, it is first and foremost a failure of strategy.
What nonprofits need most is to keep their community-oriented services viable.
To do that, they need to develop an organizational structure that supports financial sustainability. They also have to be ready to embrace change.
I led the design and launch of Annenberg Alchemy, the free nonprofit leadership training program of the Annenberg Foundation. I continue to manage the program, which has trained over 700 nonprofits since 2006. I see how nonprofits create their own financial traps -- how, because of their mission-driven focus, they find themselves delivering more and more services without raising the matching revenue. I see how eye-opening it is for them when, through the course of our training, they start to consider the idea of bringing in the money first.
Of course, doing that is harder than it sounds. Many board members have no training in what it means to be an effective fundraiser at the board level. A 2011 survey of 3,000 nonprofit executives (Daring to Lead) reported fewer than half of the organizations surveyed had board members strongly participating in donor identification and prospecting (48 percent), asking for gifts (42 percent), and donor cultivation (41 percent).
That's where Annenberg Alchemy has found its niche. We mandate the attendance of the board chair as well as the executive director at all sessions of our training because we believe staff and board leaders aligned in common purpose can transform nonprofit organizations.
Here's how Alchemy works. Over three days of intensive learning, participants get practical guidance on fundraising, communication and how to build and keep a strong board of directors. They also get opportunities to learn from other peer nonprofits going through the training. They graduate from the program with agreed-upon goals and a new toolkit to implement them. And there's a carrot to encourage long-term engagement. Successful completion of both phases of the Alchemy training qualifies an organization to receive a capacity building grant up to $10,000. After the training ends, participants get ongoing support to implement the ideas they learned at Alchemy. We connect them to a network of local practitioners, they are eligible for ongoing training (Alchemy Labs) to update their skills, and they receive direct mentorship through our Community Champions program.
Alchemy has already trained more than 1,700 nonprofit leaders in Los Angeles County.
And this month we are expanding our reach to also serve the counties of Ventura, Orange, San Bernardino and Riverside. This will allow an additional 25,000 nonprofits to be eligible for our training.
Wallis Annenberg, Chairman of the Board, President and CEO of the Annenberg Foundation, summed up our collaborative approach this year in a letter to Alchemy graduates:
The ultimate point of Annenberg Alchemy is that none of us -- including those of us who designed these classes -- has any kind of monopoly on nonprofit wisdom. A great organization is one that's always learning, always adapting, always in transformation. True effectiveness -- true excellence -- isn't a destination we can ever reach. It's a journey -- and one that's going to be a lot more fruitful if we all take it together.
The journey to financial sustainability is often very challenging for nonprofits. But sometimes even one piece of information can make all the difference.
According to the Giving USA report, around 72 percent of giving to nonprofits comes from individual contributions -- about $227 billion in 2012. Yet, numerous nonprofits still do not ask for these individual donations, relying instead on grants from foundations and government.
One Alchemy participant -- a small nonprofit heavily dependent on grants- was surprised by the fact that almost three-quarters of all giving came from people not institutions. After the training finished, several board members became very motivated to ask for support from people they knew. As a result, the organization's individual donations nearly tripled, helping it to finish the year in the black.
Nota Bene -- For those nonprofits located in the five counties of the Greater Los Angeles region, applications for the 2014 edition of Leadership Seminar, the first step of Annenberg Alchemy training, are open through October 31.