Why Water Isn’t Always the Answer to Fire

I was recently give a speech to a local civic organization and the topic was philanthropy.  I was asked a very important question afterwards.  “Why are recurring sources of income important to for-profit organizations, but critical for nonprofits?”

What a great question.  The answer can be quite complex, but let’s think about it in the simplest of terms.  First of all, let’s think about the picture above.  When there is a fire, the most important part of your response includes finding something to extinguish the fire.  That isn’t difficult to determine.  If I told you this location had a fire at least once a month, would you view this as a problem?

How many of you have ever talked with those associated with nonprofit organizations who are so focused on funding this year’s budget they can’t even entertain thoughts about support for next year?  They say things like, “If we don’t get through this year, we won’t have to worry about next year.”  While this is true, it is extremely short sighted.

Back to the fire scenario.  Organizations so focused on meeting the needs of this year’s budget, they will find themselves having the same focus next year…and the year after that…and the year after that…  I think you get my point.  The organization’s building is on fire and they are very good at finding a bucket of water to put it out.  Hooray!  The fire is out and now we can get back to work.  The next month, the organization’s building is on fire again.  A bucket of water is found and the fire is extinguished again.

Nobody ever stops long enough to determine what started the fire.  An investigation is never performed to see how the fire can be prevented in the future.  These organizations are very good at finding the bucket of water, but very bad at determining what caused the fire.

2 Ways to Prevent an Organizational Fire

1.  Multi-year gift commitments – Consider asking donors if they would consider making a commitment to give each year at the level they are currently giving.  Another way to think about this would be to ask if they would be willing to commit to a monthly giving plan.  This will provide some baseline revenue for the organization year over year.

2.  Endowment funding – Does your organization have an endowment?  If so, are you raising funds to grow it every year?  This is a gift that keeps giving each year.  Most endowments have a spending policy which distributes a certain percentage of value, typically between 3%-6% annually.

Sustainability is the key to fulfilling your mission.

More information on sustainability can be found at www.501c3u.com.

What are you doing to be sustainable?  Comment below.

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