By Sean Triner
First published by Fundraising and Philanthropy Magazine in July 2011
According to Givewell of those charities that declare their assets, 65 have more than $500,000 in their bank account, with a total of $3,722,530,136 between them.
Why do charities have these assets? $3.75bn is a lot of money. Much of it is tied up in property.
There is no doubt that owning a building outright is going to save money on an annual basis. Basically, no mortgage or rent.
Several reasons are given for why charities have large assets other than property. According to a recent article in the Age, the McGrath Foundation banks all three years salary for each nurse it takes on, ensuring that the service will be provided independent of the charities’ performance.
But often the reason many charities keep large reserves are for a ‘rainy day’. Reserves give a charity security.
What many boards don’t understand is that good fundraising can also offer stability. Of the top 50 charities by fundraised income, 26 have assets less than one year’s worth of fundraising income. These low asset charities are unsurprisingly dominated by INGOs (international non government organisations) – charities like Oxfam and World Vision whose work is carried out predominantly abroad.
Boards are usually populated by great volunteers with diverse backgrounds, but very rarely are they from a strategic fundraising background. Some may have been involved in fundraisers – balls, events or making donations themselves – but they are rarely acquainted with fundraising mathematics.
The bottom line is that the most stable, ongoing growth driver that outstrips property values, rent savings and classic investment strategies is a well managed individual fundraising strategy with classic direct mail and phone donors, regular givers (recruited by face to face and other means – don’t rely just on face to face donors) and bequest management.
Your classic donors, as well as providing income, are more important to you as a pool for bequests, major donations and regular givers. Your regular givers should be recruited using multiple techniques – at least face to face and mail/ phone conversion of classic donors.
Here is an index based on benchmarking data plus estimated returns over the past five years. It is easy for you to adjust the returns to reflect your own investments.
Your job as a fundraiser is not just to fundraise, it is also to give your bosses the tools they need to help your do your job. That main tool is data.
Seven steps to convince your board that releasing assets for fundraising investment – before a rainy day – is usually a good idea
1. Make sure that you know and understand what you want funds for – do you really want to have an income two or three times your current income in five years. What would you spend it on?
2. Think long term. More non-emergency money has been donated to charities in Australia through bequests than regular giving or appeals in the past. But the best bequest prospects come from your giving database.
3. Make a choice. Either fundraise, or don’t. But don’t meddle in the middle it is pointless.
4. Get the data. Look at Pareto benchmarking and research on asset bases and fundraising income from Givewell. Every time they have a query or barrier, answer it with data, not opinion. Demonstrate that solid, stable income growth comes from solid, stable investment in fundraising.
5. Show that during times of stress such as an economic crisis, corporate and events fundraising are very vulnerable, normal donor approaches are stable but regular giving keeps on growing.
6. Model your potential. Build proper models, based on real data and factored by how ‘sexy’ your organisation is; what is it’s appeal to the public?
7. Get someone from outside to speak with your board, someone from a charity that has taken the leap and gone for big investment or someone with access to the data – or both. I have spent a serious part of my life this year presenting alongside CEOs, CFOs and fundraising bosses to boards and finance committees. They really need to be informed with the truth.
Keep plugging away. It could take a year or two to convince them.
If you do want me to have a chat with your board, CEO or finance committee then of course I would love to, though it does need arranging well in advance – I am doing a lot of it at the moment.