Niche Organizations (The Community Social Impact Portfolio)

by Josh Jacobson

The alternative title of this post could be “Sustainable Growth – Is It an Oxymoron?” (Answer: No, but it ain’t easy.)

A lesson learned early in my consulting career came in the form of a longtime board member for a stable, no-frills human services organization. As a part of a strategic planning process, board members posited a number of ideas for how the organization could leverage its position in the community to create positive impacts.  Some of the ideas were pretty out there, but most were rooted in the mission.  I felt at the time that my job was to encourage more risk-taking by a nonprofit that was somewhat risk-adverse.

The response of that board member: “That’s just not who we are.”

There is a lot of wisdom in those words.  Knowing when not to explore expansion is as important, or even more important, than the brainstorming that comes up with innovative solutions.  While Next Stage has social innovation as a tenet of its work, we know that the key is to right-size that for individual organizations.

The challenge is that it is difficult for nonprofits to stand still.  There is a built-in expectation of growth that has only become more pronounced in donor audiences over the last ten years.  Whereas the Greatest Generation was satisfied to see stability and “regular returns” as a case for support, each successive generation has tended to seek a dynamic vision of future impact.

And in reality, it’s a somewhat unfair expectation that is unique to nonprofits.

I love the bagels at a certain shop near my home.  We visit often and know the owners fairly well.  Their bagels are delicious and the homemade cream cheese is top-notch. I patronize this bagel shop because I love their product.  My willingness to shop there is not predicated on the bagel shop’s plan for growth and increased impact.  I have self-interest baked (literally) into my reason for visiting.

Nonprofits are different.  For many donors, it is not enough to have built a sustainable business model that serves a set number of people each year, or is focused on one specific outcome.  Constituents expect a dynamic vision that inspires them to be involved, and that vision almost always speaks to how the organization will have even more impact in the future.

Whether we like it or not, this trend is only becoming more pronounced.  And yet with growth comes the challenge of continued sustainability.  Foundations and savvy donors want to see diversified revenue streams that reflect a stability that can weather change.

Such is the challenge of nonprofits, to both grow in impact while also demonstrating sustainable operations.

The Niche Organization

I think often about that board member who educated me about his nonprofit’s identity based on a set of values that inform the creation of guiding principles.  Those principles help an organization’s leadership make decisions about how to move forward.

As I mentioned in the post introducing the Community Social Impact Portfolio, those guiding principles should result in a goal of “leading in our space” for the vast majority of nonprofits.  While there are many large agencies in the Charlotte region that have evolved over time to include a diversity of programming, there are simply too many nonprofit organizations in existence now for any organization to aspire to that level of institutional capacity.

Leading in your space means that no one would even think of creating another nonprofit in your city with a similar mission.  It means “owning” your mission in such a way that you are the go-to organization and considered a thought-leader.  It also typically means narrowing your organization’s focus to ensure that it can continue to claim that mantle as it scales.

An organization seeking niche status must start with evaluating its mission, which is often too expansive.  Missions are not meant to be locked forever in time, but instead should evolve to meet the needs of a community.  Next Stage suggests conducting a needs assessment married with competition analysis to better understand where a nonprofit fits.  Whereas an organization may have claimed a wider berth 20 years ago when there were fewer organizations, the changing environment likely requires making changes to mission to reflect today’s realities.

“What do you want to own?”

It is a question we will ask the leadership of an organization with a murky mix of programming or overly broad ambitions.  I have seen organizations clarifying their pursuit of a niche as the missing ingredient to their success.  That decision is clarifying and provides leadership with a vision platform that greatly informs decision-making.  It allows organizational leaders to have more productive dialogue and unleashes creativity in service to specific goals.

The Checklist: Niche Organizations

Niche organizations (and those that aspire to such a designation) must continually conduct internal and external analysis to stay on track – this is not a “set it and forget it” effort.  Donors and volunteers seeking an organization to engage with can use the following top-five evaluation areas when considering the health and worthiness of a niche nonprofit:

  • Logic Model – According to the W.K. Kellogg Foundation, a program logic model is defined as “a picture of how your organization does its work – the theory and assumptions underlying the program.  A program logic model links outcomes (both short- and long-term) with program activities/processes and the theoretical assumptions/principles of the program.”  The Foundation has a very good development guide available, and it is a framework that not only results in optimization of operations and programming, but also makes for a great case for support.  For niche organizations, creating your own version of “how a bill becomes a law” is critical as the organization zeros in on (and narrows) its value proposition.  As a donor or volunteer, it should be clear how your time and support translates into impact.
  • Theory of Growth & Change – As discussed previously, X-Gens and Millennials crave an understanding of the underlying business model of a nonprofit to better understand its potential for future impact.  Sturdy niche organizations have developed a theory of growth and change that serves as an important messaging platform.  Next Stage champions the development of a ten-year vision with a clear three-year roadmap and optimized one-year action plan.  Ten years is a long time, and no one has a crystal ball.  Still, an organization should have some overarching time-limited “theory of growth and change” that outlines an idea of where it is going.  And that theory should note how the organization intends to lead in its space.
  • Ten-Year Pro Forma – Alongside that ten-year plan should be a pro forma budget that suggests the income and expenses need for that decade-long ambition.  This is the difference between lip service and having an articulated business plan in support of that overarching goal.  Some donors and most funders start their exploration of a nonprofit with the income and expense statement, long before they read a narrative or conduct a site visit.  How you express your current and future impact through the numbers is a differentiator, with strong organizations pursuing niche status able to express financial need not only as a function of today but tomorrow as well.
  • Strong Branding – A common refrain for each of these checklists will be marketing, which is badly needed to ensure any sort of sustainable growth.  This is particularly true for niche organizations (and those pursuing it), which must clearly articulate their reason for being.  Organizations like Crisis Assistance Ministry, Charlotte Toolbank, and Catawba Riverkeepers have strong, clearly-articulated brands that allow them to lead in their space.  That branding is about more than a great logo or informative website.  It is about creating consistency in the mind’s eye of Charlotteans, who understand why a nonprofit exists and what it does to strengthen the community.  If an organization’s brand is poorly formed, the chances of it ever truly owning its space are weak.
  • Pipeline of Individual Giving – Over-reliance on institutional support (government and foundations) is the primary challenge for niche organizations, particularly in Charlotte.  The city’s institutional philanthropy has a bit of a reputation of “shiny penny” funding – supporting new initiatives for several years and then cutting funding before the organization can achieve sustainable support in favor of the next new idea.  Organizations planning to grow programming with grant funding must develop a pipeline of individual giving from a variety of sources since that grant funding is likely to disappear.  That means getting smart about donor acquisition and retention – two terms that should be daily affirmations for the niche organization.

We love niche organizations at Next Stage – we believe strongly that a robust community of nonprofits that lead in their space has a much better opportunity of actually moving the needle than a hodge-podge of groups chasing funding.  Do you agree?  Please share your thoughts on Facebook: www.facebook.com/NextStageConsultingNC/

Next week, Caylin Viales will tackle Imported Nonprofits.  Stay tuned!

Just starting this series? Read the other installments here:

Overview: The Community Social Impact Portfolio
Emerging Organizations
Niche Organizations
Imported Organizations
Blue Chip Organizations


JoshJosh Jacobson is Managing Director of Next Stage Consulting, a Charlotte-based firm focused on organizational development and fund development for the nonprofit sector. Next Stage Consulting provides organizations access to affordable, high-quality consulting services to help them “get to the next level.” Josh is a Certified Fundraising Executive (CFRE) and is President Elect for the Charlotte Chapter of the Association of Fundraising Professionals.

Image Copyright : Mike Nellums

Emerging Organizations (The Community Social Impact Portfolio)

by Josh Jacobson

Last year, I overheard a conversation at work.  A friend of mine was asked by someone I didn’t know to name some of the prominent social entrepreneurs working in Charlotte. Without hesitation, a list of names were rattled out.  The people mentioned were all stellar folks and worthy of inclusion.

But my name wasn’t mentioned.  Perplexed, I asked my friend why that was.

“Well, I guess I think that you work with social entrepreneurs, but that you’re a consultant. You’re just… different.”

I’ll admit, I was a bit wounded.  In my mind, the work of Next Stage has always had purpose and meaning with social benefit at its heart.  The firm was founded to be an alternative to “for hire” consulting that was more interested in collecting fees than ensuring client success. But as I settled down later, I realized that there was some real truth to what was said.  While Next Stage had a mission and a set of defined values, we were missing two elements that every social entrepreneurship company needs: long-term vision and an organizing philosophy. These must-have elements, which Next Stage had preached to its clients, were unexamined in our own business model.

Earlier this year, I made an important decision about the direction of Next Stage and set about making it happen. A critical piece was the hiring of Caylin Viales, who has brought her tremendous talent and passion for social impact to the redefinition of what Next Stage could be.  Last week, another important component was launched – the public announcement of our philosophy regarding the Community Social Impact Portfolio.  Located near the end of that post, Next Stage commits to “orienting all of its work toward these five classifications” and “reorganizing its service lines to align with this philosophy.”

We do this because we see the role Next Stage plays in the community differently now.  We are making a commitment to the overall health of Charlotte’s industry of social impact.  In working individually with 501c3 nonprofit organizations directly, our commitment is not only to the client that hires us but also to the broader community that has a vested interest in the success of all nonprofits.  We feel a big part of our role is about “playing the orchestra, and not just the instrument.”

Because Next Stage is a social entrepreneurship company, and we are just as committed to improving our community as the nonprofits that trust us to help them achieve success.  The difference is that our mission isn’t focused on one positive social outcome – it is focused on all of them.

The Emerging Organization

It is perhaps because of how we perceive our identity as social entrepreneurs that we have been so attracted to helping emerging nonprofits.  Organizations thrive or die in their first ten years of existence, and much of that is related to the existence of a passionate founder.

I am unabashed in my love of nonprofit founders. They are the “special sauce” in the emerging nonprofit business model, capable of defying odds to make the impossible possible.  Through their eyes, every mission is brought to life and is emotionally captivating.  They will their nonprofits into being, imbue it with their personal brand, and then… what?  What happens next? Happily ever after?

Unfortunately, no. Too often, exhaustion gives way to frustration, and before long someone who could have been a game-changer is not even involved anymore. The nonprofit that had so much promise just a few years before is a shell of its former self.  Or not even in business anymore.

It is a sad fact that many start-up nonprofits don’t see their tenth year. Statistics proving this are difficult to come by since nonprofits don’t have to tell the IRS when they’ve “gone belly up.”  But evidence abounds. While there are many great success stories, there are perhaps just as many examples of new nonprofits sputtering as the decade anniversary approaches.

My firm is typically contacted when an organization has begun to understand that it needs some help to achieve a degree of sustainability.  We are often very successful, and the organization is placed on a pathway to ensuring long-term success.  But sometimes the challenges are too great or the organization too resistant to change.

We believe passionately that emerging nonprofit are badly needed to challenge the status quo.  Start-ups are typically less risk adverse and are able to pilot new strategies that contribute positively to the industry.  As an organization matures, it can lose that “special sauce” of the nonprofit founder, who stays up late until the job is done and knows the background of every person served.  They are often very open to volunteer engagement and encourage the community to come alongside their programming to help ensure success.  There are lots of reasons start-up nonprofits should be a dynamic component of the Community Social Impact Portfolio.

At the same time, remember the statistics from the last post about the proliferation of nonprofits in Charlotte (e.g. 3,600 public charities)?  As a community, we need to be smart about how we encourage social entrepreneurs, and more mindful of what a successful start-up business model looks like.  As I heard a donor say once, “I’d rather give my money to an organization with somewhat less impact that I know will still be around ten years from now, than an organization with tremendous impact that flames out from a poor business model.” In this way, nonprofits should view their donors (especially Millennial and X-Gen donors) as less “buying services” than “stewarding long-term solutions.”

The Checklist: Emerging Organizations

As a part of this series, Caylin and I will be suggesting a five-point checklist for each of the five areas highlighted in the Community Social Impact Portfolio. This checklist will roll into a tool that will be made available at the end of this series for donors and funders, along with worksheets for organizations to use when considering organizational strengthening.  This week, we look at the top-five evaluation areas when considering the health and worthiness of an emerging nonprofit for support:

  • Differentiated Mission – An emerging organization with an expansive mission statement is very likely biting off more than it can chew.  Successful start-up organizations are razor sharp on what they do and how they fit in to the already-established network of community organizations. To know that a mission is differentiated, a needs assessment should be conducted that documents the problem as well as the other organizations and supports in the marketplace.  People interested in getting involved with a nonprofit should start with its mission, and if it is poorly formed or not well stated, the likelihood for success is greatly diminished.
  • Distributed Leadership – The potential for burnout in the nonprofit sector is a constant companion, and nowhere more so than with the nonprofit founder.  Many start-up organizations are setup with what is called “heroic leadership,” where a handful of people are doing all of the heavy lifting.  While that may be necessary in the very early stages, the organization needs to be shifting as soon as possible to a “distributed leadership” model, where volunteers (and later contractors and staff) are owning defined responsibilities. An organization that is overly dependent on a handful of individuals is at risk, and its leadership should at the very least have a long-term succession plan in place.
  • Documented Policies & Procedures – This may seem like a boring checklist item, but our experience suggests that an organization without documented policies and procedures is highly unlikely to “get to the next level.”  There are many reasons why this is missing, and most of them end with “…and who has the time to do any of that?”  A model of distributed leadership can never be fully implemented if the organization lacks a framework for how work gets done.  As consultants, we always ask to see the Organizational Handbook (or Board Handbook) at the start of an engagement.  It is one of the top predictors of future success.
  • Evidence/Documented Results – The fact is that anecdotal evidence doesn’t cut it in an increasingly competitive nonprofit marketplace.  Emerging organizations push back on the idea that they can have documented evidence “with so little budget,” and we would argue that this excuse is not sufficient. It means the programming was not designed with a way to measure the impact to begin with, and a start-up organization cannot afford to run programming that has no defined assessment criteria.  Program fidelity is a must.
  • Quality Marketing Efforts – A certain local marketing professional and I share the belief that one of the biggest reasons nonprofit organizations fail is that they spend so little on marketing.  No other business model could possibly expect to be successful spending as little as nonprofits do.  For the emerging nonprofit, we look more at the savviness in the marketing effort than the dollars spent on it. Does the nonprofit understand segmentation?  Is their messaging human-centered, and are they creative in how they tell their story?  An all-volunteer effort is fine in the early years, but it has to be done well otherwise future success is not a given.

We could come up with another dozen or so, but the goal here is to provide readers with a way to quickly assess start-ups, less as a way to evaluate the impact of their current efforts and more toward the long-term likelihood for sustainability and growth.

Next time, we’ll tackle Niche Organizations.  In the meantime, please share your thoughts on Facebook: www.facebook.com/NextStageConsultingNC/

Just starting this series? Read the other installments here:

Overview: The Community Social Impact Portfolio
Emerging Organizations
Niche Organizations
Imported Organizations
Blue Chip Organizations


JoshJosh Jacobson is Managing Director of Next Stage Consulting, a Charlotte-based firm focused on organizational development and fund development for the nonprofit sector. Next Stage Consulting provides organizations access to affordable, high-quality consulting services to help them “get to the next level.” Josh is a Certified Fundraising Executive (CFRE) and is President Elect for the Charlotte Chapter of the Association of Fundraising Professionals.

Image Copyright : Thuansak Srilao

The Community Social Impact Portfolio

by Josh Jacobson

This post launches a weekly series through mid-September outlining a new way to think about stewarding nonprofits in the Charlotte region – the Community Social Impact Portfolio.


A couple years ago, I decided to try my hand at investing. My wife and I had been utilizing a financial advisor who was primarily passively managing a system of 401ks and IRAs. I thought, why pay someone to do what I could do for myself?

I’m glad I did it, but it required me to become far more knowledgeable about concepts with which I was only partially familiar. The majority of our holdings were in mutual funds, and with a little bit of research, I was able to better understand how best to create a balanced, diversified portfolio that was responsive to the market. And on a semi-annual basis, I do a bit more research to rebalance the portfolio. We’re long-term investors so I tend not to pay it daily or weekly attention. But I rest easy at night knowing that my investments are optimized.

That notion of a diversified portfolio got me thinking – could the same principles be applied to optimize the nonprofit sector?  How can donors have a similarly good feeling knowing that their social investments are producing positive returns for the community in which they live?

This concept has been a moment of inspiration for our consulting firm, which has taken a hard look at what makes a healthy social impact ecosystem, and as importantly, what we all can do to make it a reality.

The following blog post kicks off a six-part weekly series that will outline a way of thinking about the many nonprofits that serve our community and a call-to-action for all of us to get more strategic in how we foster what I like to call a “Community Social Impact Portfolio.”

Understanding the 501c3

To get started, we first have to all be on the same page with what it means to be a nonprofit organization. Believe it or not, board members for a large percentage of Next Stage’s client base have pretty profound misconceptions about the nonprofit they are charged with governing. The ah-ha moment typically comes when I share the following at the beginning of a board retreat:

This nonprofit is owned by me, it is owned by you, it is owned by everyone. A 501c3 charitable organization is a public entity that is charged with doing that which is in the best interest of the community it serves. Just like government. And you are its board members who have elected to take on its governance responsibility, ensuring that the organization serves the best interests of the broader public. And you don’t even get paid for it. What you have chosen to do on my behalf, on everyone’s behalf, is pretty exceptional. Thank you. Thank you for all you do and for being here this morning.

You can imagine the faces of these unsuspecting board members at this point, who are suddenly very present in the Saturday morning retreat they signed up for but did not fully understand. Excuse me, what?

It is generally not very well understood (particularly by nonprofit founders) that once an organization receives its 501c3 status, it has thus been given over to all people to “own.” In exchange, the US Internal Revenue Code allows for federal tax exemption for gifts to support its mission. It is a pretty decent trade off, but only if one truly understands what it means to give up control to the public.

Too Many Cooks

If we accept that nonprofits are owned by all of us as taxpayers, and are effectively doing the work government would do on our behalf if it had the interest in doing so, then surely we must have some form of control over how nonprofits are formed, right? I mean, if I encounter long lines at the DMV, it isn’t like I can just go down the road and set up my own DMV. There must be some form of checks and balances?

The answer is: nope. Technically, the IRS is the gatekeeper, but it isn’t a very discriminating arbiter. According the 2016 IRS Data Book, more than 86,000 new tax-exempt organizations came online in 2016 with just over 1,000 denied tax exempt-status. That means that more than 98% of organizations that apply for tax-exempt status receive it. And you and I don’t have very much control over that.

So what does that look like in practice?  Charlotte is a great example of the explosion of nonprofit sector over the last twenty years. There are nearly 5,000 registered charities in Mecklenburg County alone (including roughly 3,600 public charities). While Mecklenburg County’s population has nearly doubled in the past 20 years, the number of public charities has increased three-fold.

Needless to say, this is an unsustainable trend. It creates duplication of services and unneeded competition for donor dollars. It creates backlash for founders of new nonprofits with truly game-changing strategies. And it reinforces a nonprofit culture that avoids taking risks for fear of losing ground.

It simply isn’t all that strategic.

Strategy is My… Middle Name

As a consultant to nonprofits in the Charlotte area for almost a decade, I’ve had the opportunity to work with more than 160 organizations of all shapes and sizes. My firm focuses on leveraging internal assets to meet external need. It requires being a student of our community.

This work has informed a philosophy that a healthy city must feature a variety of nonprofit organizations working in concert to address community needs. And just as a healthy stock portfolio should be diversified, a region’s nonprofit sector should include a carefully curated portfolio of community resources.

In fact, I’d suggest that all nonprofit organizations in the Charlotte region should fall into one of five categories:

  • Emerging Startups – Not every new nonprofit contributes to the bloat described above. The nonprofit sector is ripe for disruption, and social entrepreneurs with new and different ways to achieve success are needed now more than ever.  Sometimes these individuals should be encouraged to align with already-developed nonprofits, but other times there are good reasons to launch a new 501c3 endeavor. Just as your investment portfolio should have some early-growth companies, a community should come together to champion dynamic new efforts.
  • Niche Organizations – The vast majority of nonprofits should be in pursuit of niche status – that is, “owning their space.”  This requires identifying an organization’s core value proposition and striving to lead in that space. That may mean getting narrower in focus to differentiate, or expanding operations to meet community need. A niche organization must have a plan for maintaining its role as a leader and adapting to a changing community. After all, companies only stay in your investment strategy if they demonstrate a capacity for adaptability.
  • Imported Nonprofits – Organizations that demonstrate fidelity and have built an evidence-base should be encouraged to scale.  Communities must be willing to embrace organizations with demonstrated impact that can scale to provide programming that is locally informed and delivered. Charlotte needn’t re-create the wheel if a program has proven successful in another comparable city. For our investment analogy, consider these organizations like investing in foreign markets. When our own community lacks bandwidth or successful strategies, other communities may hold the answer.
  • Blue-Chip Institutions – In Charlotte, the vast majority of financial resources are generated by the top 100 nonprofit organizations with budgets topping $4 million. These organizations should be encouraged to collaborate with organizations in the preceding three categories, leveraging their revenue and assets in service to increased community impact. Since these organizations control the majority of resources, they should also be expected to drive innovation through an R&D function.
  • Foundations – It can be easy to forget, but private foundations are nonprofits as well and they play an incredibly important role in providing resources to fuel social impact. Working with individual donors, foundations should strive to curate a community portfolio of nonprofit resources to ensure a healthy and vibrant community. This means working together and understanding community challenges at the ground level.

Going forward, Next Stage is orienting all of its work toward these five classifications of nonprofits, and is committing to work on behalf of the greater good to help organizations be the best representation of where they are in these categories. The firm is reorganizing its service lines to align with this philosophy, and will be stumping on this topic to actualize a community that is knowledgeable and bought-in to the road ahead.

In the weeks to come, this series will explore each of these five categories, making suggestions for how nonprofits, donors and volunteers can optimize their organizations to create a dynamic Community Social Impact Portfolio.  I will be joined in this effort by Next Stage’s Caylin Viales, who will collaborate on the series and is a big part of helping to create our firm’s response to this new way of seeing our charge.

As always, we hope you will digest this content (we know its wordy – these are big ideas!) and engage us on it.

Because these nonprofits belong to all of us. And it’s about time we acted like it.

Just starting this series? Read the other installments here:

Overview: The Community Social Impact Portfolio
Emerging Organizations
Niche Organizations
Imported Organizations
Blue Chip Organizations


JoshJosh Jacobson is Managing Director of Next Stage Consulting, a Charlotte-based firm focused on organizational development and fund development for the nonprofit sector. Next Stage Consulting provides organizations access to affordable, high-quality consulting services to help them “get to the next level.” Josh is a Certified Fundraising Executive (CFRE) and is President Elect for the Charlotte Chapter of the Association of Fundraising Professionals.

Crowdfunding Backlash: Reading Rainbow

So, did you hear LeVar Burton raised a whole bunch of money on Kickstarter last week to relaunch Reading Rainbow?

The original goal was to raise $1 million in just over a month, with donations used to expand the Reading Rainbow app Burton has already developed (he bought the rights in 2009) into a web-based destination. In less than a day, the project reached its initial goal amount. The campaign has raised more than $3.2 million and climbing.

If you’re famous and can leverage nostalgia, crowdfunding can be very lucrative, but not without some criticism. The Veronica Mars Kickstarter Campaign raised $5.7 million for a movie based on the television show, and Zach Braff built upon affinity for his first film with a $3.1 million campaign to finance his new film. Both efforts were roundly denounced in the media, with Kickstarter’s founders forced to go on record with their reasoning.

Which brings us to Reading Rainbow. Despite a tremendous outpouring of support from donors and largely positive media notices, there was this from The Washington Post’s Caitlin Dewey:

Crowdfunding is theoretically supposed to bolster charities, start-ups, independent artists, small-business owners  and other projects that actually need the financial support of the masses to succeed. It’s not supposed to be co-opted by companies with profit motives and private investors of their own…”

As someone who has dedicated his life to helping nonprofits, a part of me understands this criticism. But I’ve come to accept that the world is changing, that technology has created a way to connect people with projects they want to see happen, and they aren’t digging up 990s on Guidestar to make their decisions. More than 72,000 people have supported the Reading Rainbow project, and despite sour grapes from the traditional press, folks are wearing their support like a badge of honor on social media.

Rather than see this as a challenge to the charitable sector, I suggest nonprofits study it and look to replicate it themselves. So what are the ingredients to a really good Kickstarter campaign?

  • Name Recognition: Millions have been generated for Reading Rainbow because many remember it as children.  If your nonprofit doesn’t evoke similar nostalgia or recognition, try securing a spokesperson who does. Bringing a recognizable face to your crowdfunding project helps it get early traction and shares on social media.
  • Marketing: A common mistake is to launch a crowdfunding campaign too early, assuming the site itself will market your campaign. In reality, a crowdfunding campaign is just like any other fundraising campaign – it needs a solid marketing plan to support it. Social and traditional media coupled with person-to-person outreach lights the spark of awareness that helps get the campaign off the ground, and can give it a boost if it lags.
  • Personal Requests: The dream of every fundraiser is that their message will hit a tipping point, and the dollars will start pouring in from people who are completely new to the organization. But the reality is that a base of support is needed first, and that is most likely to come from friends of friends. Your organization’s stakeholders have to be willing to leverage their networks to get that first 10-25% of support. 
  • Rewards: Those who support a crowdfunded campaign are typically different than your annual fund donors. They are more likely to skew younger, are impulsive in their investment, and are definitely wooed by perks. LeVar Burton offered donors of $10,000 or more the opportunity to wear his famous Star Trek visor (so far no takers), but that benefit has been reported by nearly every reporter who has covered the story. What can your organization offer that might get you some ink?

In the future, we are likely to support artists, writers, directors, musicians and yes, corporations by voting with our credit cards at the R&D stage, mitigating the risk of new ventures. For now, the morality police are keeping the space clear for the little guys – don’t let this opportunity pass you by!

Cultivation: Step Two to Stronger Grant Submissions

In the second entry in the firm’s five part series on creating stronger grant submissions, Next Stage Consulting explores the do’s and don’ts of grantmaker cultivation, investigating what works and what doesn’t, and how to walk the fine line between forthright and pushy.

No Matter What, Don’t Break Her Heart

“Am I on a blind date?”

The thought occurred to me as I was handed a glass of wine by the daughter of a trustee of my organization’s largest foundation donor. Perhaps it was in the way she handed it to me, or the way her family was watching us out of the corner of their eyes, but it suddenly occurred to me that I was sweating profusely.

I had accepted the invitation to the private party with excitement – a chance to spend time at an intimate party seemed like a great opportunity for donor cultivation.  I had come to know the family fairly well and I truly enjoyed their company. This was also a chance to meet other members of the extended family, who I learned had their own donor advised funds as well. I’d arrived fashionably late only to find myself the lone non-family member . It wasn’t long until my Spidey sense began to tingle.

On the surface, it made good sense. I was single at the time, and the young lady was perfectly lovely. But rather than “just go with it,” the advice I received from my colleagues later on, I felt the weight of an ethical quandary – what if this turns into something romantic only to end sourly? Am I risking my organization’s relationship with this very important donor? Further, what if I am completely reading this the wrong way and I end up offending her?

The stress was too much to bear – I politely thanked my hosts and exited stage right at the first available moment, very likely offending everyone in the process anyway.

“I Just Sent Grant Requests to 27 Foundations”

One of the biggest misconceptions about grant development is that it is all about writing grant proposals, developing tomes of wordy material and sending it off to people you’ve never met who will pass judgment on the merits of your mission. The fact is, sending in the grant proposal or application is typically the last step in a much longer process that begins with identification and leads to cultivation. If you fill out grant applications and send them in unannounced to a laundry list of potential donors, success is very unlikely.

Unlike communication, which is typically one-way directional, cultivation is two-way directional. Sending newsletters and other material to a prospective donor is not cultivation – it’s communication. For real cultivation to take place, two or more people need to be speaking to each other either by phone, written communication via mail or e-mail, or face-to-face.

The tricky part of grantmaker cultivation is that each funder has different rules of engagement. Some do not want you to contact them at all, while others require a letter of inquiry be submitted before first voice contact.  Some will follow you on your social media and save every newsletter you send, while others throw away any correspondence that appears to be marketing in nature. Some want to be very hands on, while others prefer to be slightly aloof.

In this way, it is hard to create hard and fast rules. Still, after years of doing this work, it is clear there are some unwritten rules of the road that are universal in nature.

The Do’s and Don’ts of Grantmaker Cultivation

  • DO follow the rules on the grantmaker’s website regarding the process for communication and requests. If it states that you shouldn’t call or contact staff, be sure to follow that advice!
  • DON’T miss an opportunity to leverage a personal relationship with a stakeholder or gatekeeper, even if the public communication discourages direct contact. But before you do anything, do some digging to make sure that it won’t damage your relationship with the staff of the funder.
  • DO invite the staff and trustees of prospective grant sources to tour your facility, meet your staff and volunteers, and learn more about the impact of your organization’s mission.
  • DON’T put a grantmaker who doesn’t know you on a mailing list to receive every invitation and piece of marketing material you will produce in the next year – it is more likely to injure than help your potential relationship.
  • DO attend public seminars hosted by grantmakers to provide insight into the application process, but be sure to sit near the front of the room so when it is over you are close enough to be first in line to ask follow-up questions.
  • DON’T raise your hand and ask very technical questions that apply only to your organization in a room full of your peers – it wastes everyone’s time, and makes a poor impression on the staff of the grantmaker.
  • DO remain vigilant in your pursuit of a meeting or phone discussion, particularly with the staff of a grantmaking institution. These are often extremely busy people who need to be reminded several times, and may even acknowledge your persistence positively.
  • DON’T make a nuisance of yourself, hectoring the staff of a grantmaker where the mission isn’t a very good fit anyways. It is a fine line, and while it is important to push, tact is incredibly important.
  • DO engage gatekeepers and decision makers should you see them informally out in the world. They are people, just like you, and a friendly hello with a brief conversation to follow is acceptable.
  • DON’T stalk someone, follow them to the parking garage, or otherwise create an awkward scenario where you ask repeatedly for a determination on your recent grant submission. This may seem obvious, but I’ve heard some real horror stories.
  • DO accept invitations to meet informally with the staff and trustees of grantmakers, have a glass of wine (one glass only!) and engage in conversation about topics that have nothing to do with your organization. Relationships with grantmakers are not much different than other types of donors – they are people and they have lives. Be more than a walking grant proposal.
  • DON’T break anyone’s heart, or otherwise compromise your organization’s current or prospective relationship with a grantmaker. Your organization is likely to exist for a long time after you are no longer around, and job one is to leave it stronger than it was when you started.

At some point, I’ll share my tips for sitting shiva with the trustees of your other most important foundation grantmaker. But for now, please check out #GrantChat on Twitter at Noon EST on Tuesday April 29, when I will serve as guest for a lively discussion of this very topic of grantmaker cultivation!

Yikes! Falling Behind on Social Media…

Neglecting the organization’s social media when times get busy is one of the classic mistakes made by so many nonprofits – consistent messaging is the goal. And yet here I am, having given that advice before, now a full month behind on my own firm’s blog posts. Shame on me.

“Oh, but I have really good excuses!” Of course I do. Doesn’t everyone? My excuses are that I have been very successful of late in new business development, securing several new clients over the past month. I also went on vacation, hosted guests for a weekend, and generally have been a very busy guy about town.

At this point, the classic Price Is Right “fail sound” should chime, and I should be escorted off the stage. There are no good excuses, only determination to ensure it doesn’t happen again. I’ve blogged previously about the importance of time management as an accountability tool. I’m currently working with a client on setting up a metric-based fund development platform, and I have been reminded of the importance of public accountability.

Over the next few weeks, I look forward to writing about the following subjects:

  • April 21 – The Downside of Social Media – Have you heard about the woman in Cleveland who ran an online job board and was publicly humiliated when a nasty e-mail she wrote a job seeker went viral? I look forward to exploring the darker side of social media in a post focused on ways to ensure you don’t make front page news just because you were having a bad day.
  • April 28 – Cultivating Gatekeepers and Decision-makers – In part two of a five part series, we’ll explore the important role cultivation plays in grant seeking.  This post will be well timed, as I am pleased to serve as Guest for the April 29 #GrantChat Tweetup focused on this very topic. Hope to see you on Twitter at noon EST that day.
  • May 5 – Making BIG Topics Local – A U.N. Science Panel just published a pretty dire report on the state of global climate change, with in-depth recommendations regarding action steps that need to be taken immediately. So, how do nonprofits in your town take a pressing global need like this and make it stick?

There, I just staked myself out and created public accountability. Have a great week everybody!

Too Risk-Adverse To Fail (Nonprofit Edition)

by Josh Jacobson

“Eight out of 10 businesses fail. Are you sure you want to do this?”

Not exactly the sort of thing you want to hear when you’re contemplating launching a new business.  Now almost three months into my own new consulting venture (76 days to be exact, but who’s counting?), the knowledge that it is far more likely that Next Stage Consulting will fail than succeed is actually a tremendous motivator.  I’m a guy who likes to know my odds, long as they may be.

upsideAs a rule, no one sets out to fail, but a new book suggests that falling on your face may not be as bad as one might think. In her book, The Up Side of Down: Why Failing Well is the Key to Success, author Megan McArdle suggests that failing, and even being encouraged to fail, is a critical component of future success.  In fact, McArdle suggests that what sets America apart is an underlying tolerance for failure, with a lenient bankruptcy policy that allows for forgiveness and growth.

For everyone but the nonprofit sector, that is.  In a country that prizes entrepreneurs as champions of innovation and change that in turn drives our economy, Americans are reluctant to give the same leeway to community-serving nonprofits.

If “failure is how businesses learn,” as McArdle suggests, what does it mean that we refuse to let our social good organizations take similar risks?

A few causes of risk-aversion are below, and thankfully, the news isn’t all bad:

  • Over-Reliance on Government Support
    As noted seven years ago in a study by the Stanford Social Innovation Review, “government is by far the most important source of funding for the high-growth nonprofits in our study.” The Urban Institute reported that “in 2009, governments contracted with human service nonprofits for over $100-billion worth of contracts and grants. For organizations with government contracts and grants, government funding amounts to 65 percent of total revenue.”

While there is no doubt that government sources of support are critical to sustainability for many nonprofits, the increased accountability standards and outcome measurements expected post-Recession effectively overwhelm nonprofits, swallowing up the time and energy of leaders.  It is a system badly in needed of reform.

There are some signs that governments are thinking outside the box.  Depending on whom you ask, Social Impact Bonds may be some of the most important/exciting/unexpected tools created to inspire new ways of tackling social issues. By encouraging private investment, Social Impact Bonds create a market where one did not exist previously and keeps the focus where it should be – on rewarding positive outcomes.

  • Vilification of Overhead
    By now, I hope you’ve had a chance to watch Dan Pallotta’s game-changing TED talk about the double standard that penalizes nonprofits for how much they spend on supposedly non-mission serving expenses. The dreaded 15% overhead ratio expectation, which states that no more than 15% of a nonprofit’s budget should be spent on administrative costs, is a huge drag.  It is an expectation utterly unique in the business world – no other industry is held to such a standard, laughable in for-profit enterprise, and hardly the expectation of our own government.  And yet it is something that continually comes up in conversation with would-be donors to local nonprofit clients, as if such costs were evil and to be largely avoided.

Thankfully, there is a move afoot to refocus donors on demonstrated success over fiscal conservatism.  In an unprecedented move, the leadership of Guidestar, Charity Navigator and the Better Business Bureau released a joint statement in 2013 denouncing the overhead ratio as imprecise and inaccurate.  Further, the trio acknowledged that “organizations that build robust infrastructure—which includes sturdy information technology systems, financial systems, skills training, fundraising processes, and other essential overhead—are more likely to succeed than those that do not.”

I mean, duh, right? But the fact remains that as long as organizations feel squeezed by their donors to demonstrate extreme frugality, the likelihood of nonprofits embracing risk-taking opportunities remains low.  Accountability standards like these were meant to protect us from fraud, but have also taken all the wind out of the sails of social entrepreneurs.

  • Reluctant Volunteer Boards
    I am personally a big fan of local leaders who believe so strongly in a nonprofit’s mission that they are willing to take on a role that pays nothing and yet is likely to take up a big chunk of their time.  As a board member of the Charlotte Chapter of the Association of Fundraising Professionals, I know from experience.  Volunteer board members are mostly deserving our praise.

Note that I said mostly.  That’s because the system of serving as a board member for a nonprofit is wholly different from serving in the same role for a for-profit corporation.  Without a profit motive, nonprofit board members are identified based on their own passion and interest in the cause.  And that isn’t always so reliable.  “Let’s all remember that we already have full-time jobs,” is typically not the preface to a board member signing-up for risk-taking opportunities.

For some volunteer leaders, it is enough to simply steward the nonprofit to ensure no crises arise on their watch.  When it comes time to consider high-risk, high-reward opportunities to advance mission, some board members use a different set of priorities in assessment than the population that organization is called to serve.  Not all, but some. Thankfully, board training has never been more plentiful, and offerings like the Arts & Science Council’s Cultural Leadership Training Program are helping nonprofits secure volunteer leaders who understand their roles well.

McArdle suggests that the key failing well is to recognize mistakes early enough to allow one to channel setbacks into future success.  But if we never let our nonprofits have that same opportunity, we’re apt to see the entire system fail as organizations cling to doing things the way they’ve always done them.  

Three Questions to Consider This Week:

  1. What do you consider your biggest professional failure?  What did you learn from it?
  2. If you’re a manager, do you encourage your employees to take risks?  If so, how do you handle potential failures?
  3. What is the one thing you wish your organization or department would try that leadership has been reluctant to embrace?  How might you mitigate the negative impacts of failing?

Image credits: Featured Image (123RF – tomwang), Book (goodreads.com)

What Can Bill Gates Teach Us in the Carolinas About Philanthropy?

By Josh Jacobson

The Next Stage Consulting blog is committed to covering topics related to life in the Carolinas.  So, what can a billionaire like Bill Gates teach us about what is happening in our own backyards?

First, a refresher on Bill Gates – most likely know him as the founder of Microsoft, the maker of Windows and the Office suite of software products that dominate the business landscape. But if you haven’t been paying attention, you may not know that he and his wife Melinda are the world’s leading philanthropists, having pledged to give away the vast majority of their estimated $78+ billion fortune to charity.

It is an amazing commitment, and one that has inspired more than 100 billionaires to make a similar commitment of donating more than half of their fortunes.  The Giving Pledge now counts high-profile billionaires like financier Warren Buffett, former New York City Mayor Michael Bloomberg, and recently Virgin Group-founder Richard Branson.

Since 2000, the Bill and Melinda Gates Foundation has done some extraordinary things, including the near-eradication of polio from poverty-stricken countries across the world.  In fact, much of the foundation’s work has been on the global stage, so it shouldn’t be surprising that the Gates Foundation’s recent annual report focuses on debunking three myths that block progress for the poor throughout the world.

Reading through the 2014 Gates Letter, written by Bill Gates himself, I couldn’t help but draw connections to life in the Carolinas:

MYTH #1: POOR COUNTRIES ARE DOOMED TO STAY POOR
This is a pervasive sentiment for many, that these countries are beyond saving and are systemically damaged.  The letter does a good job of demonstrating that this isn’t true.  Over the last couple generations, global poverty has changed measurably, with the disparity between rich and poor greatly narrowed.  In fact, “there is a class of nations in the middle that barely existed 50 years ago, and it includes more than half of the world’s population.”  Mr. Gates is so confident as to declare that by 2035, “there will be almost no poor countries left in the world.”

The larger point is a good one – real change takes time. It takes a commitment that benchmarks not on a 90-day, annual or even multi-year continuum, but on a decades-long one.  It also requires a right-sized measuring stick.  Goals should be set that are meaningful to the communities served, not as compared to western world assumptions about what should be possible based on personal experiences.

There is much wisdom here that can be applied to the challenges facing our own Carolina communities.  Quick fixes are not likely work. Philanthropists and giving entities are too often interested in narrowly-defined annual returns on investment, wanting to be able prove statistically that their giving has made a difference.  That in turn forces nonprofit organizations to develop evaluation criteria to ensure continued support.

As much as I feel passionately that this is wrongheaded, it is hard to beat up on what few sources of charitable support do exist.  For too many, there is likely an assumption that poverty in our own cities and towns is a given, a fact to accept rather than fight.  For leaders across the Carolinas, it may be useful to debunk this myth for their own communities – how important have public, private and nonprofit interventions been to improving life in the Carolinas?

MYTH #2: FOREIGN AID IS A BIG WASTE
The second myth debunked by Mr. Gates is tied directly to the first – if you think that change is impossible or unlikely, you are also apt to believe spending money on it is a waste of resources that could be put to a better purpose.  The existence of corruption in those countries makes it easy to dismiss efforts – “I mean, how much of foreign aid is really getting to the people it is meant to serve anyways?”

As a fundraiser for much of my professional life, I have encountered this argument time and again – “But what will my small contribution mean in the grand scheme of things?” The problem is that we tend to see things compartmentalized rather than as a big picture.

This is particular true as it relates to compensation of nonprofit employees, which garners more headlines than it deserves.  By focusing on perceived wasteful spending, it becomes easier to throw one’s hands in the air and declare it all a “big waste.” The tendency to view nonprofits and NGOs in the same negative light as “bloated government” has been a slowly developing trend that threatens to undermine the entire sector.

As Next Stage Consulting tells its clients, the key to sustainability is to demonstrate ROI.  But if we’re only measuring in annual increments, as noted in the previous section, are nonprofits actually their own worst enemies?  More should be done by nonprofits to educate stakeholders on the true cost of progress, particularly those who have the capacity to make the biggest impact.

MYTH #3: SAVING LIVES LEADS TO OVERPOPULATION
Admittedly, this myth is less directly applied to life in the Carolinas.  Most folks reading this are unlikely to fear that large scale interventions in poverty-stricken areas of the Carolinas will lead to a scarcity of resources.

But Mr. Gates makes a great case for the damage misinformation can do. This myth only exists because of scientific theories that were misheard, misinterpreted and accepted as fact. Saving lives has not led to overpopulation – in fact, the reverse has been true.  Education leads to more sustainable infrastructures and social progress.

Searching for connection to the Carolinas, the key may be the important role education plays in fighting social causes.  And not just the education of those directly impacted by poverty, but those community leaders called upon by society to do something about it.

CALL TO ACTION
So what can Bill Gates teach us in the Carolinas? Certainly more than one might think, but nothing more so than the commitment to improving the world through making a charitable commitment.  The message of the Gates Foundation is simple – we can all do more to make the world a better place.  And while his foundation’s focus may be on the global stage, consider making yours in neighborhoods across the Carolinas, where progress is indeed measurable and donations most definitely meaningful.

Photo Credit: Featured Image (Modified – Sebastian Derungs, World Economic Forum)

Bull Market: What Does It Mean for Nonprofits?

Happy New Year!

If you’re like me, you found yourself on January 1 surfing the Internet without much on the agenda. News of the stock market’s incredible 2013 was being heralded seemingly everywhere I looked:

  • Investors Cheer Record-Setting Year on Wall Street (USA Today)
  • Stock Market Notches Its Best Year Since 1995 (Los Angeles Times)
  • Stock Markets Count $6 Trillion in Gains (Forbes)

But not all was joyous to start 2014, for with the good news came the inevitable questions about the sustainability of such good fortune. Could the good time last?

Which just goes to show, if you look hard enough, there is always someone willing to take the wind out of your sails.

So what does the stock market’s performance in 2013 have to do with nonprofit organizations? If you’re asking that question, you aren’t likely a development professional.  Fundraising and the performance of the stock market are directly linked in many ways. Let’s take a look at the three areas of potential support – individual giving, foundation grant making and corporate support.

Individual Giving
WritingCheck
One of the first bits of advice I would give new interns during my time with NYC’s Manhattan Theatre Club was to read the Wall Street Journal every day (or at least the cover) to have some idea of how the market was performing. To learn this lesson, try calling a would-be donor, particularly one in the financial industry, on a day when the market has dropped precipitously and asking that person to not only renew, but INCREASE support. Once you’ve gotten an earful, you are likely to avoid making that mistake again.

The stock market’s effect on individual giving is largely psychological. Unless you are sitting down to talk to a donor prospect about a multi-year gift, the exact performance of the market on the day or week you are making your ask is likely inconsequential. What does matter is the state of mind of the prospective donor. Is the individual in a good mood? Does that person feel confident in the future performance of his/her portfolio? In my experience, a person is likely to feel more generous during a time when that individual’s financial portfolio is on the rise.

Impact on Individual Giving in 2014: My hope is that many organizations in the Carolinas benefited this past holiday season from end-of-year appeals. With such sizable investment returns, some individuals were likely looking to offset the tax impact through charitable write-offs. But even if your organization only saw modest gains from those appeals, Q1 of 2014 represents an opportunity to continue building on those good feelings… before the other shoe drops on that potential market correction.

Foundation Grant Making
FoundationBoard
Perhaps no other charitable vehicle is as affected by the stock market as foundations, which typically consist of a mixture of financial assets heavily reliant on the stock market. Best practices call for foundations to allocate 5% of their assets annually based on a three-year rolling average of total assets at year end. That way, foundations can mitigate years with big losses against years with substantial gains.

Using the Dow as an example, 2013 represented the fifth year in a row of positive annual gains after that monster of a loss in 2008. If a foundation were to be invested entirely in assets represented by the Dow (however unlikely), that 33.84% loss in 2008 really hurt  the three-year average in 2009, 2010 and 2011. In fact, 2012 was the first year foundations were finally free and clear of 2008 in allocation calculations, and with two big years of double-digit returns in 2010 and 2011, it was a very good year for foundation giving in 2012. However, modest returns in 2011 (Dow finished at 5.5%+) and 2012 (7.26%+) would mean 2013 would need to be a big year to see that giving sustained. And luckily, it was.

Impact on Foundation Giving in 2014: It is going to be an even better year for foundation grant making in 2014. Even with the relatively modest returns in 2011 and 2012, the double-digit returns more than offset previous years in the three-year rolling average.  2014 promises to be the best year for foundation grant making since 2000.

Corporate Support/Sponsorship
CorporateWall
When working with nonprofits, I am often surprised by the lack of connection some staff members make between corporate support and the performance of those companies.  As if a corporation exists principally to fund nonprofit programming, and whether or not the company is making money is less important than the artfully communicated case for support.

Corporate support is dependent on a number of factors, and one can reasonably assume that if that company is publicly traded on the stock market, it likely had a pretty great 2013. Stock performance is linked to profits, and companies that saw 20%+ growth in 2013 probably posted some pretty significant profits at various points throughout last year.

When companies profit, nonprofits benefit in two ways. Corporations with foundations are more likely to pump increased dollars in, and unlike private/family foundations, they typically don’t use a three-year average and give it all away on a yearly basis. Those companies are also good targets for sponsorship requests. Under-funded marketing efforts in previous years are likely given new budget after a year like 2013, and nonprofits may hold the key to reaching target audiences.

Impact on Corporate Giving in 2014: Without a doubt, 2014 is a great year to submit requests to corporate foundations and submit thoughtful sponsorship proposals.  Most companies have some sort of funding focus in both areas, and the 2013 market performance isn’t likely to change that. However, with the future still unknown, striking while the iron is hot is essential.