Tag: nonprofits

Neglected, then out the door

~ Sasha ~ 3 Comments

I was a DIRECTV subscriber for about six years, until I wasn’t.  Meaning, over time the ~$65/month (once it was all said and done) started to sting more and more, and while I was generally happy with the service, the volume of alluring communication I got from everyone else pushing me to switch was in marked contrast to the bill and nothing else I’d get from DIRECTV month after month.

In the TV and telecom businesses, customer “churn” is one of the most important metrics to manage.  This is because customer acquisition and setup costs are high: the costs of giving someone a subsidized phone, or of sending a technician to physically install a costly satellite dish in each new customer’s home, are layered on top of all the regular sales and marketing costs everyone takes on.  That makes it especially important to keep customers from leaving once you’ve gotten them on board.

The challenge for DIRECTV and its ilk is that they have no information at all about how happy I am.  As long as I’m paying, I’m paying – until the day I leave, ending what could have been a 10 or 20 year relationship (which, at $65/month is somewhere between $7,800 and $15,600 in lifetime revenues).

The irony in the TV business is that the marginal cost of surprising or delighting a current customer is so low compared to the value that walks out the door when she leaves.  A free month of HBO for every year I’ve been a customer, or getting NFL Sunday Ticket for free one season if you’ve been a customer for five years (just hypothetically, of course!), could pay off in spades.

Because metrics (customer acquisition costs, churn, etc.) are so much harder to come by in nonprofit fundraising, and because each “customer” is so different in terms of how much they pay/give (DIRECTV’s customers might pay $30 or $200 a month, but that’s about as big as the range gets; a donor could give $500 or $5,000,000), we rarely do the math on customer acquisition costs or churn.  And so we hunt for the next donors at the expense of tending to the donors we already have.  It’s so easy to forget to delight those who are already with us – to give our true believers tools to evangelize on our behalf, and to make those who are happy feel proud, delighted, and occasionally surprised at the little gifts we give them to say “thank you.”  (And by “gifts” I don’t mean trinkets, though those are nice too.  I mean helping them see what they have helped accomplish, and showing them true and honest gratitude.)

We all have lurkers in our midst who are about to leave but we don’t know it.  Of course some folks will leave no matter what, and some will be too expensive to retain.  But let’s at least make that a conscious choice.

It’s a shame and a loss when someone who has been supportive, someone who has been a loyal and important customer, walks out of the door for no better reason than low-level neglect.

Bob Dorf – Two customers

~ Sasha ~ 1 Comment

Recently I, together with Acumen’s Global Fellows, had the chance to spend the day in a training session with Bob Dorf. Bob, together with Steve Blank (who writes a must-read blog), is the author of The Startup Owner’s Manual: a step-by-step guide to Building a Great Company.   Steve, in turn, was an investor in Eric Reiss’ (author of Lean Startup) startup IMVU which I blogged about here.

Bob, Steve and Eric have done incredible work in demystifying and breaking down what it really takes to create a startup – yes drive, vision, tireless devotion, but most importantly it’s about finding customers, talking to those customers, figuring out what they really want and how they’ll really behave with your product.  It’s the opposite of sitting in a garage, having a eureka moment, investing time and energy and way too much money in that idea and then figuring out if people want the thing that you’ve built.

I learned a ton from Bob, and am still processing most of it, but there was one piece that really jumped out at me as being hugely important in the nonprofit space, in particular to fundraisers.

One of the stories we tell ourselves is that our work is different and hard(er) because the beneficiary of our work and the customer from whom we are fundraising are rarely one and the same person.  It’s this disconnect that can make everything so tricky, because just because you deliver transformative impact for your beneficiary doesn’t mean your fundraising goes through the roof.

Bob made the simple point that there’s nothing particularly new about this.  Google, for example, is free to you and me and anyone as customers.  We get the best search in the world served up instantly with an ever-improving suite of accompanying products.  The service that pays for it all is Google AdWords which has a completely different customer set.  In Bob’s language, Google needs two separate business model canvases, one for me (user of Google Search) and one for whoever buys Google AdWords.

“But wait!” you protest.  “That’s different!  Google AdWords only works because Google Search works.  Their growth goes hand-in-hand.  Not so in the nonprofit world where I can deliver a world-class product/service and it has no connection to whether or not I can raise another dollar from a funder!”

Perhaps.

But also perhaps not.  True, funding decisions are not typically made as objectively or in a data-driven way, whereas Google Adwords purchases surely are.

Then again, when was the last time we really rolled up our sleeves and found a way to monitor how good our nonprofit service delivery really is, how satisfied customers really are.  When was the last time we presented clear compelling metrics from the front lines – metrics that proved out hypotheses, metrics that drove to real insights?  And when was the last time we took those metrics and showed them to our funders and said, “THIS is what we’re doing!”

Sure, it’s not exactly the same, but it’s also not so different.  And it’s nice to know that we’re not so special, that having two (or many) customer sets isn’t novel.  And it’s a helpful reminder that building a value proposition and finding customers (aka “funders”) is just as core to everything we do as whatever service delivery work we do.

More not less

~ Sasha ~ 1 Comment

Recently I had the chance to attend a roundtable discussion on how to scale innovations in global development.

One of the participants, a successful serial entrepreneur, related an important and telling story about why it’s hard to seed innovation in the nonprofit sector. She said she’d raised $200 million in her life, $190M in her four for-profit enterprises and $10M on behalf of nonprofits that had important innovations that needed funding.

With her for-profit ventures, her experience was that when she’d ask a venture capitalist for $1M to fund a new innovation, if they said yes to funding they would typically invest $1.5M or $2M because they knew that she probably needed more money (“runway”) to get it right – that there would be twists and turns in the road, and that the best way to minimize her chance of success was to underfund her.

Her nonprofit fundraising might have the same starting point: asking for $1M to fund a new innovation. In one case she was working on raising $1M from a foundation, and they approved the funding. However, though she asked for $1M they had only approved $750,000 of funding. I wish I’d found this outcome more surprising. If anything I was expecting her to say they gave her $100,000. But the story about VC fundraising was news to me, the idea that a funder would often tell the entrepreneur that they’d asked for too little money.

A big part of what holds us back in the nonprofit sector is that we’re stuck in a program delivery mindset. In that mindset your philanthropy is paying for a set of defined tasks and as a donor your goal is efficiency. And if efficiency is your goal, you might be right in thinking that you could eek out more bang for your buck by giving a little less money than you were asked for.

But new ideas are different – you’re not aiming for efficiency you’re aiming for success. That means that giving less than what’s needed or doing things like challenge grants or other mechanisms designed to “catalyze” other funding are probably a terrible idea. An underfunded innovation cannot get more efficient, it can just have too little cash, which will either suffocate it or force the entrepreneur to spend more time fundraising and less time building the business.

Once we decide a new idea is worth funding, might we take a page from folks whose job is to bet on innovations and write bigger, not smaller, checks?

 

 

Scarcity

~ Sasha ~ 7 Comments

A student at a nonprofit school of management told me that they are learning a lot about how to operate under conditions of scarcity – because that’s what the nonprofit sector is like.

The catch is that if you start with the notion of scarcity and how to cope with it, that’s your mindset.  Money is scarce, it’s a zero sum game, you see constraints all around you.   You’re being taught to operate within a broken system.

Let’s break this system (that includes the schools with this mindset).  Let’s reinforce in our students a mindset of abundance, of possibility, of agency.  And then let’s rip out all the classes and lectures about scarcity and replace them with lectures from the best fundraisers and executive directors and philanthropists we can find – so we can give students the tools to create these conditions of abundance.

20 questions every fundraiser must be able to answer

~ Sasha ~ 12 Comments

(subtitle: this is why I can’t for the life of me understand how “fundraiser” became synonymous with “not totally integrated with the core work of the organization”)

  1. What are your top three priorities right now?
  2. Where will the organization be in 5 years?
  3. What’s your annual operating budget?  Walk me through it.
  4. What does success look like for the organization?
  5. How will my donation make an impact?
  6. How much do you spend on overhead?
  7. What’s your long-term vision for sustainability?
  8. How much cash do you have on hand?  Is it too much or too little?
  9. What is your organization’s theory of change?
  10. What are your biggest challenges?
  11. How much cumulative funding has your organization raised since inception?
  12. Help me understand social impact and how you measure it?
  13. What else can I do to help you – I want to give more than money?
  14. Who are your competitors and how do you compare to them?
  15. Can I meet your CEO?
  16. How much did you grant/fund last year? How and why did that differ from prior years?
  17. If I support you, I’d like your organization to do ___________ [this project/in this geography/with these partners].  Will you?
  18. How can our organizations work together?
  19. Why are you passionate about this work?
  20. [ADD YOURS HERE]

[UPDATE: thanks to a copy-paste slip-up, two of the items on the list were the same.  So #20 is now blank so you can add your “best question” in the comments section!]

What your Board members are thinking

~ Sasha ~ 1 Comment

Here’s what people do in groups: they look around to figure out the normal way to behave.

Your Board members do it too.  They are looking around the Board room to figure out what’s normal – especially around giving and really especially around fundraising, since fundraising makes most people hugely uncomfortable.

So, unless yours is one of the 1% of Boards that is totally committed to giving and to fundraising, what you need to do is change what is normal when Board members look around the room.

Each and every dollar

~ Sasha ~ 8 Comments

If you work at a nonprofit, as I do, you might pause and consider: each and every dollar for your organization comes from a gift.

Obvious at some level, but if you stop to think about this for a second your perspective changes.  Think of the seriousness and the intention of every donor, the dreams – small or big – they attach to the donation they have made.

I’m not at all advocating for penury for nonprofit staff; in fact I firmly believe that we need the best people to create massive change.  The problems we are working on are so important, so challenging, so complex, and pay is part of the equation in getting and keeping the best folks.

But there’s a certain humility that comes with remembering that you are working on someone else’s dime, that no matter where you are and what you are doing, you are engaged in service work thanks to the trust that someone has placed in you and in your organization.

It never ceases to amaze me that the nonprofit sector has a reputation for being less rigorous, less focused, less fast-paced, less strategic than the private sector.  First, because all the people I know who work at nonprofits put their hearts and souls into their work every day.  Second because once we’ve made the decision to do this work we have no choice but to be completely committed and to do our best work every day.

The minimum bar is to treat the money your organization spends like your own.

The higher bar is to remember that it is a gift from someone else, entrusted to you to make a change in the world.

It’s a huge responsibility.

What I care about, what you care about

~ Sasha ~ 1 Comment

Having beat up on the MTA once before for its ads, it only seems right now to sing their praises.

I liked this subway ad a lot.

3.2 million minutes saved every day (80,000 riders x 40 minutes saved) seems like the kind of thing sensible people would be in favor of.

The typical nonprofit message here would have been: $6 billion project approved!

Why?

What I care about (if I work at the MTA): declaring victory on is budget approvals, the size of the project, contractors getting hired, etc.  The $6 billion budget.

What you care about, as a citizen: 40 minutes saved a day for 80,000 people.

Simple, but easy to forget.

 

Too big

~ Sasha ~ Leave a comment

Of all the reasons cited to give or not to give a philanthropic donation, “you’re too big” is the one that I have the hardest time digesting.

First, a clarification.  In my experience, most people who say that they want the size of their donation to be significant relative to the size of the organization they’re supporting rarely say “I am really good at spotting great startups but don’t feel like my expertise extends to bigger organizations.”  Rather, the underlying message seems to be, “when you were smaller, I knew my gift made a difference.  Now that you’re bigger, I’m not so sure.”

Analytically, we can agree that size is a poor predictor of effectiveness (you can be big and effective or big and ineffective; small and effective and small and ineffective).  Yet the concern, more often than not, seems to be size itself.  There’s rarely any overt assertion that through growing the organization became less effective (to wit, often one would imagine that size provides some scope for efficiencies).

In the face of this critique, rather than take the question at face value and conclude that we are not as good as we could be at communicating our own effectiveness (read: we need better metrics), instead we slice and dice ourselves up programmatically to create a closer approximation of transparency and accountability.  We make the big black box of “what we do” smaller – so we communicate a sense of “this is where your money is going” – as a proxy for answering the real question – “how effective have you been?”

It’s true, we won’t persuade all the people all of the time.  Smaller just feels right to some people, and that’s going to be their (appropriate) choice no matter what we are able to show them.  Nevertheless, our job is to be able to answer, in a convincing and rigorous fashion, how much change we created with the money we were given.

I’m not talking about “for $20 you can ________” (fill in the blank).  I’m talking about real change at a big scale, shared with an educated, interested philanthropist who is open to a real conversation.

When have you seen this work best?  Worst?

To give (at all) or where to give?

~ Sasha ~ 1 Comment

When you’re talking to a philanthropist about giving to your organization, you’d better know what question they’re answering for themselves.

Are they deciding whether to give above and beyond what they had planned to give (…this year …in their lifetimes) or are they deciding where to give money that they’ve already (psychologically) pre-allocated as philanthropic money?

Because a conversation about a philanthropic allocation is very different than a conversation about overall level of giving: the allocation conversation is more straightforward, but also a lot more bounded; the conversation around total giving is much deeper, more profound, more personal and protracted, and potentially much more powerful.

Your organization is probably much better at one of these than at the other.  Both can work, you can excel at both, but first you have to know which conversation you’re having and which conversation you’d like to have.