“I just don’t want to throw good money after bad.”
Such was a major donor’s comment, minutes before she committed $50,000 to my client’s capital campaign. This smart philanthropist began volunteering for the nonprofit a few months before. She had not yet made her gift.
She continued, “Some charities are bad at managing their finances.” She had been burned before.
I talked her through the steps that are taken every month at our client’s nonprofit to ensure financial responsibility.
- A years’ worth of operating reserves are maintained
- Monthly budget reviews are made, and cuts are made when necessary
- No new program is started without a way to pay for it
She wanted to know more: “How much have you raised for the campaign so far?”
And more: “How will you ensure that you can pay for expanded programs once the campaign is complete?”
My prospect research (all publicly available information) showed that she had a history of giving to larger institutions but rarely to smaller, local charities. Proof of financial resilience is what made her ‘stop and think’ about a gift of significance to our small but growing client.
Sophisticated philanthropists lead with their heart, but their head is also close by.
Bigger gifts come to financially resilient organizations.
Think of your own investments. You will invest more in companies that have sound business practices, great leadership, and good financial management. Donors are the same.
Success attracts success. Money follows money. And smart donors like to give to financially smart institutions.
Could your financial resilience (or building it up) be your secret sauce? A nonprofit best practice is to have reserves up to three times your annual budget.
I welcome your feedback on our blog.
Andrew is LAPA’s Director of Campaigns and Major Gifts and provides strategic fundraising counsel to many of LAPA’s clients.