When a nonprofit is started, the founder and the founding board often think, “the funding will come.” For faith-based organizations, the thought goes a little further, “God will provide.” Once tax exempt status from the IRS is received, the founding board usually discovers that obtaining funding is not going to be so simple. Over the next few weeks, we will focus on funding basics to help nonprofit leaders understand how best to position the organization for success. Today, we will focus on the reasons why funding is not so easy.
According to the National Center for Charitable Statistics, there are more than 1.5 million nonprofits in the United States. Of course, not all of these organizations have 501(c)(3) tax exempt status, which means that they are not all eligible to receive tax deductible gifts. In addition, this number does not include those organizations whose revenues are under $25,000; so in actuality, the number is much larger than reported. However you slice it, these numbers tell us that there are a lot of organizations seeking funding.
When I share these numbers with people, one of their first responses is always, “but there is no one doing exactly what we are doing,” or “but we have a really good program.” Unfortunately, these reasons alone will not automatically guarantee that you will have all of the funding that you need. Another comment that I hear from faith based organizations is that people should understand and contribute because “I am doing the Lord’s work.” Still, not enough!
Indeed, Americans are generous people. In 2014, Americans gave more than $358 billion to nonprofit organizations.
- The annual household “giving” budget is $2,974.
- The largest source of giving came from individuals…not foundations, corporations or the government.
- The majority of dollars given went to religious organizations.
- In 2014, the greatest percentage of high net worth households gave to educational (85%) and basic needs (81%) organizations, followed by 70% to the arts, 67% to health related organizations, and 67% to religious organizations.
- Sources of revenue for tax-exempt organizations in 2012 were program service revenues, including government contracts and fees (73%), contributions, gifts, & government grants (21%) and lastly, dues, special event income, rental income and net sales from goods (6%).
With these types of figures, you might think, “well, certainly there is enough money for my organization,” or “my organization is better than the organization down the street or across the county, so I should be receiving the funds.” However, let’s go beyond the funding to look at the organization. Below is a list of questions that you may find helpful as you seek to understand the reasons why funding is not coming easily to the organization.
- Can you clearly communicate the story of the organization? Ideally, you will have a short version (90 seconds or less) and a longer version.
- Are you doing good work? Many people become frustrated with faith based organizations that use their faith as excuses for why they took a short-cut, why they don’t have enough money, or why someone should give them a discount. Remember, holy shoddy is still shoddy. Your organization needs to be providing high quality services and operating at the highest standards.
- What has the organization accomplished? Donors expect that the organization will have outcomes…in other words, it is making a difference in the lives of those you serve.
- Is the organization realistic in its mission? Many organizations have a big vision…and I love big visions. However, if you are sharing your big vision before accomplishing even the immediate goals, people will question whether or not you are too idealistic. For instance, suppose you have started a nonprofit to provide services in your local community; your ultimate goal is to expand to serve several states. Prior to discussing the expansion outside of the boardroom, build a strong, effective organization in the local community.
- Do you have systems in place to demonstrate that you can be trusted with a donor’s funds? In other words, are you prepared to send out acknowledgement letters and thank you notes within 48 hours of receiving the gift? Do you have an accounting system to keep track of donations? Are all board members contributing…remember board members should be contributing time, talent and treasure (if they are not, then why should anyone else?)
- Can you express why you need funding that does not talk about the needs of the organization? This may sound harsh, but no one really cares that you need funding so that you can be paid by the organization or that you need funding so that you can buy a vehicle. Instead, talk about how you can serve your target audience. Many organizations go for years without having a paid Executive Director. That’s where passion for the mission comes in….it keeps you going and allows you to work tirelessly in a labor of love.
So, the next question becomes how to position the organization for funding. Join us next week as we begin outlining strategies for success as you raise money to support the nonprofit or ministry. In the meantime, review the questions above…what do your responses say about the organization?
Feel free to contact us if you have questions.