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Philanthropy

Category Archives: Philanthropy

Feb 07
2

We need to talk. It’s about revenue.

By | Philanthropy, Revenue Strategy

Ever notice that nonprofits dedicate many hours (and many dollars) to developing their programmatic strategy?  It’s a big change from 20 years ago – and it is usually time and money well spent.  But, nonprofits rarely do the same for their revenue strategy.  “Their what?”, you might say.  Exactly.

Organizations spend too little time on revenue strategy – what they will raise, how they will raise it and why, with limited time and money. This was our big “ah-ha” towards the end of 2017. We don’t have to tell you revenue is a big issue; you tell us all the time.  Somehow, every conversation comes around to revenue.  It either starts there or it ends there.  It’s inescapable.

Here’s a critical observation that will help us start to crack open the issue of “too little revenue, all the time”:  Nonprofits are in (at least) two businesses.  What does that mean?  Why does it matter?  And what does it have to do with revenue strategy?  We’re so glad you asked.

Two businesses?  What does that mean?
It’s tempting to think of your “business” as your programs.  It’s what you exist to do: feed the hungry, teach the children, provide services to those who need them most.  There is a set of activities (with associated costs) and a set of beneficiaries.  Your program staff and all the people that make their work possible (IT, HR, Finance, Accounting) are part of this “business” that serves your clients.

But look around your organization and there are other people (and costs) that are not directly serving your beneficiaries. They are engaged in different activities: planning galas, developing relationships with donors, submitting grant applications and reports, advocating for public funding, and on and on.  Their “customers” are different, too: individual donors, institutional funders, hosts and guests at your fundraising events.  They aren’t soliciting your clients (unless you are a college, university or hospital); they are engaging with an entirely different population, including individuals, corporations, foundations and public funding sources.

The fact that they are doing different things (costs) for different people (customers) than your program staff means they are in a different business.  Namely, raising money. So, yes, your program is your “business”, but it’s only one of your businesses.  Raising money is also your business – your second business – and it’s an important one!

There is a handy 2×2 from Bain & Company that illustrates this business of two businesses. It is generally used in the for-profit context but it applies to nonprofits just as well.  (Did you think the dawn of 2018 stripped us of our love of 2x2s??) High cost sharing and high customer sharing = one business. Low cost sharing and low customer sharing = two businesses.


Two different customers, two different sets of costs = two businesses.  Why does it matter?
Different businesses have different goals, require different activities and resources.  Knowing what it takes to run your programs and how to do it isn’t the same as knowing what it takes to raise money and how to do it.  (In case you hadn’t noticed, this is why the ED job is so dang hard!)  You’ve probably intuitively known you’re in two businesses for a long time.  Being able to describe your businesses, you can start assessing their needs and results with greater clarity and efficiency.  Instead of a two-headed monster, you can see you actually have two monsters! You can differentiate between an investment in one and an investment in the other and the return on those investments.

What does all this have to do with revenue strategy?
Strategic plans are all about allocating limited resources.  They tell you what to focus on (and what not to).  Organizations with programmatic strategic plans have a clear argument for resource investment on the program side.

Just like your program strategy, your revenue strategy clarifies what you are doing with limited time and resources, how and why – for your revenue business.  Taking the time to develop a plan, including a good hard look at your philanthropic potential compared to your own performance and that of your peers, will help you decide where to invest, which activities to spend your time on and what to say “no” to.  It will help you see if your goals are achievable and make the case for the resources you will need to achieve them.  It gives critical context to your tactics, allowing you to justify the investment required to reach your goals.  Now, doesn’t that sound dreamy?

We’ve been helping clients with organizational strategy for years.  It’s all about programs and operations.  More recently, we’ve been working with organizations on revenue strategy, within the context of growth or program strategy, but increasingly as a standalone issue.  It has been eye-opening for us, and for them. So far, we’ve found investing in revenue strategy with the same diligence and rigor as a program or operating strategy yields a high return… staff, board and funders can more clearly articulate your mission, resources are allocated more efficiently, and oh yea, you raise more money.

If one of your businesses has a strategy and the other doesn’t, it’s not hard to imagine that goal-setting, resource allocation, and decision-making is going to be easier in one than the other – and the one without will suffer.  Our hypothesis:  We can’t escape the land of “too little revenue all the time” without addressing this imbalance – without a revenue strategy.

So, there you have it.  Our ah-ha from 2017 and our early thinking about revenue in 2018.  Next week, we’ll ask for your perspective.  What do you think?  Do you agree revenue strategy is important?  Do you think we’re just plain crazy?  Keep an eye out for a survey.  This is too important to be a one-post topic!

Yours in pursuit of revenue,

The Room40 Group

May 30
1

Show me the money!

By | Cool Analysis, Philanthropy, Room40 News

Yes!  We will show you the money!  The Map of Opportunity: A Practical Guide to Philanthropy in the U.S. is for sale!  Get your very own copy for $495 (individual) or $995 (organization).  Click here to buy it now.

The Map of Opportunity reveals:

  • The distribution of philanthropy across the U.S.
  • How much money is in each of the Top 50 markets
  • Practical advice for raising more money

The Map of Opportunity is an 180-page report presenting never-before-seen data on philanthropy in the U.S.  You will see how philanthropy is distributed across the U.S.  You will get detailed information about philanthropy in the Top 50 markets, from NY, NY to Providence, RI, including:

  • How much philanthropy is from Foundations, Corporations and Individuals in each market
  • How philanthropy is distributed across the counties in each market
  • The top 10 Foundations, Corporations and Zip Codes for individual giving in each market

The Map of Opportunity pairs this critical data with easy to follow how-to guides to help your organization use the data to raise more money.  We show you how to:

  • Create a shared understanding of your philanthropic market(s) within your organization
  • Assess the long-term potential of your market(s) and others
  • Set revenue target(s) for the coming year

Get your copy today.  You won’t be disappointed.

The Map of Opportunity:  Philanthropy in the 381 Metropolitan Statistical Areas in the U.S.

Yours in data and insights,

Anna, Ben, George, and Harleen
The Room40 Group

[Psst…  not convinced yet?  Check out a free download of the Executive Summary and a couple pages of each section.  Take a peek and then buy the other 160 pages with confidence.]

Who is the Room40 Group?
A consulting and advisory group, we work with the leadership of nonprofits to help their organizations improve, grow and change.  We created the Room40 Group to help nonprofits combine data and learning from peers in pursuit of better decisions, faster.

May 08
1

“Where is the Money?”

By | Cool Analysis, Philanthropy, Room40 News

“The need for our services feels endless. We must find the dollars to do more, but WHERE’s the money??”

We asked ourselves this question time and again as nonprofit executives.  It was so pressing – and so hard to answer – that we decided to dedicate ourselves to the data collection and analysis that would help us answer it.  After 2+ years of collecting, analyzing, sharing, testing, head-scratching and validating, we have some data and insights to share.  Data and insights that, we believe, will help nonprofits answer the question: “where can we raise more money?”

In May, we will release these insights as The Map of Opportunity: A practical Guide to Philanthropy in the U.S.  The Map, for the first time, reveals the distribution of the $333B in philanthropy in the U.S., showing the 381 metro areas from which 90% of it originates.  (Just look at all that space without dots — that’s the other 10%.  Yikes.)

The Map of Opportunity:  Philanthropy in the 381 Metropolitan Statistical Areas in the U.S.

The Map is a practical guide to using the data to generate insights and take action, answering these critical questions:

  1. How much philanthropy is in my market?
  2. How much can I raise in my market over time?
  3. What revenue target should I set for next year?

The Map includes data on individual, corporate and foundation giving by county for the top 50 philanthropic markets in the U.S.

Sample Market Overview: Boston, Massachusetts

Three “Insight to Action” sections show you how to put the data to use:

  • Orient Leadership to Markets: Learn how to use The Map to create a shared understanding within your leadership team of the markets in which you raise money – a prerequisite for making better decisions faster.
  • Assess the Potential of Your Markets (and others):  One-third of what you raise can be explained by where you are.  We show you how to combine The Map with peer data to assess the potential of a market.
  • Set Your Annual Revenue Targets:  Now we get tactical and show you how to combine what you’ve learned about market potential with what you know about your internal pipeline, competence and capacity to help you set revenue targets for the next year.

Of course, there is no silver bullet; The Map alone won’t solve all our problems. However, it CAN inform and improve decision-making, helping you raise more money.

Keep an eye out for the big release in the coming weeks.  For $495, you can have your very own copy.  If you want to be sure not to miss it, drop us a line and we’ll put you on the pre-release list for an extra special note when it’s up for sale.  We’re excited to share it with you!

All the best,

Anna, Ben, George and Harleen
The Room40 Group

Dec 06
1

Had enough revenue Russian Roulette?

By | Cool Analysis, Philanthropy

A New Perspective on Philanthropy and Fundraising
Post #4: Had Enough Revenue Russian Roulette?
Setting Revenue Targets in a Complex World

Oh boy, it’s that time of year: You’re working with your staff to set revenue targets. A third of your folks are setting targets that feel too high, a third too low, and the rest are in the middle… but no one agrees on which third is which! You do your best by looking at past history (10% higher make sense?), current pipeline (80% of target ok?), and team (they look burnt out, reduce by 5%?) but it can feel like voodoo and chicken entrails.

I may be exaggerating a little, but I think only a little. First, let’s acknowledge that setting revenue targets is hard. You often have a mix of public and private dollars from different sources and dynamics; even when we focus on philanthropy we’ve seen local markets are not equal in terms of size, there are lots of local idiosyncrasies and nuances; and your teams likely vary in tenure, ability, and capacity.

This means you are constantly trying to triangulate philanthropic potential (what’s possible), fundraising competency (how strong is the team), and capacity (how big is the team), all of which can swing performance significantly. As a result, making decisions on how much you can raise, and where feels at best like expensive trial and error, and at worst like Russian Roulette: spin the chamber, pull the trigger, pray.

So let’s talk about how we can start to reduce that uncertainty and danger, starting with philanthropic potential. We will continue with our fictional “Nonprofit A” to explore how we might put this data to work… though purely for my entertainment we shall redesignate said fictional example “The George Chu Center for Folks Who Can’t Decide Good and Wanna Get Better Data Too”*, or GCC for short.

GCC operates in and raises money from five metropolitan areas including New York, Chicago, San Francisco, Boston, and Durham. The five sites range in age from one year old (Chicago) to ten years old (Boston). We are in the midst of our planning for next year, and also revising our five year plans. Here’s how we did it.

Understanding market size is a really helpful start — it explains about one-third of what you’ll raise if you recall from our third post — but it is also necessary to look at what folks are actually raising within each market. To do so, we gathered philanthropic data from a set of peer organizations who raise money from, and for use within each of GCC’s metropolitan areas.

By plotting these points for each market, we were able to create a distribution of philanthropic revenue by market. In Figure 1 you can see this distribution for each of GCC’s markets. Each blue dot represents philanthropic revenue of a peer nonprofit; the red dot is GCC; and the “box” is the middle two quartiles; the line in the middle is the median; and the “whiskers” a measure of standard deviation.

Figure 1: Distribution of Philanthropy by Organization for GCC’s Market

 

A rough gauge of potential is the median, or “typical” for the peer group. If you are above or below that line, that would indicate higher or lower performance, respectively, all else equal (note, obviously not all else is equal as these organizations range in size, capacity, strategy, mission, etc., but we find this to be a solid starting point).

Now, as always, this data is useful to inform judgement, but not good enough to replace it. So we need to overlay the story. For example, we might find that Chicago, which looks like a gross underperformer, is in fact in year 1 of operation. Perhaps San Francisco had an unfilled Executive Director position for half the year so performance below the median actually represents heroic efforts by the team. Maybe Boston was highly focused on building out public funding streams and divided their focus accordingly. Durham turns out to be a largely a programmatic outpost with minimal development staff. Context always matters!

Caveats aside, if we add up the red dots, we’ll find GCC is raising about $10.3M across all five markets. If we use the median or typical as a proxy for potential, we can add up these up and see GCC can raise up to $14.7M in these same markets. Perhaps an initial ballpark estimate for our five year revenue goals? Maybe a starting point for next year’s goal as we can see where we might increase a lot (Chicago?), or not at all (Durham?).

Hopefully you said “yes”, and then added “but we need to refine our ballpark estimate a lot before I feel comfortable committing my team to these as five year goals.” I hope you also said “knowing what is possible over time is a helpful, but our immediate need is to set targets for next year… this helps a little but don’t we need to take it further?”

Yes, the answer is yes. But I’m in the midst of an “Agents of Shield” binge, so we’ll save some for later. Stay tuned next week, same Bat Time same Bat Channel, for our next post where we will zero in on GCC’s annual and five year revenue goals!
* Inspired by The Derek Zoolander Center For Kids Who Can’t Read Good And Wanna Learn To Do Other Stuff Good.

Nov 02
1

Yes, market size really does matter!

By | Cool Analysis, Philanthropy

Peer Performance Insights: A New Perspective on Philanthropy and Fundraising
Post #3: Understand Your Markets, Part Deux:
Yes, Market Size Really Does #@$#@ Matter

In our first post we told you why we believe we need a new perspective on philanthropy and fundraising. In the second post we showed you that philanthropy is local, and all markets are not equal. “So what?”, you said. “Does it really matter?”, you said.

“Yes, Market Size Really Does #@$#@ Matter,” we say. Here’s why:

One-third of what you raise is determined by where you are, or where you plan to go.

Think about that for a moment…  one-third for market size ALONE. We aren’t (yet) looking at other market factors such as demographics, socioeconomics, culture, ratio of Red Sox to Yankees fans, and the implications of deflategate on local philanthropic giving. Nor are we (yet) looking at important organizational factors like, I don’t know, your mission, strategy, how many fundraisers you have, or how good they are! That’s a little crazy, no?

Crazy but true and we’ll show you how we arrived here… but a few notes before we do:

  • We are about to seriously geek out a bit, so brace yourself. If you love scatter plots and regressions, get ready to have some fun. If you are a normal human being and just want the bottom line before the Walking Dead comes on, bear with us… this is important. If you are busy and/or overconfident in our abilities, skip the steps and go to the “so what”.
  • For those of you who are serious geeks, know we recognize we are using incomplete, imperfect data of variable quality and comparability; and we are playing a little fast and loose with the laws of statistics. Below we make the case this is ok – we are helping folks make the best possible decisions based on available data, not proving the existence of the Higgs boson, but welcome your feedback and thoughts to the contrary!

Let the geeking begin!

Step 1: First we take the data we showed in our last post – Philanthropic market size by metropolitan statistical area. See Figure 1 for a snapshot of the top 50 markets from big to small (note, we have this for all 381 metropolitan areas, but that makes for a tough graph to read). This data is going to become our X-axis in a moment, so hold it in your head.

 

Figure 1: Local Markets are Not Equal

Step 2: We collected philanthropic revenue data for a set of 13 multi-site organizations raising money in multiple metropolitan areas. Specifically, we obtained philanthropic revenue raised by each organization within each metropolitan area. For example, Nonprofit A raised $11.4 M across 8 metropolitan areas in the following amounts: $4.3 M in New York, $0.6 M in Chicago, so on and so forth. Keep this in your head as it will become our Y-Axis in a moment.

Step 3: The moment is here! We create a scatter plot with each of Nonprofit A’s sites becoming a “dot”. For example, Nonprofit A’s New York office would be ($27.4 B, $4.3 M), and their Chicago office would be ($10.9 B, $0.6 M), so on and so forth for the remaining six markets. This gives us Figure 2, a plot of Nonprofit A’s revenue by market for each of its 8 offices.

 

Figure 2: Philanthropic Revenue by Philanthropic Market for Nonprofit A (Observed)

 

Step 4: We performed a linear regression analysis to quantify the relationship between revenue and market size as you can see represented as the line in Figure 3. We’ve included two stats in the label, r-squared and p-value. The former, r-squared is a measure of “fit” between the observations (dots) and the predicted values (line) and indicates, for this example, market size “explains” 69% of the variation in revenue for Nonprofit A. The latter, p-value, is a measure of significance, and suffice it to say anything below 0.05 is solid, so we are fine at 0.01.

Here’s where I will again highlight the limits of this data and analysis… I wouldn’t call this capital “S” science. Data on philanthropy can be sketchy, compiled from various sources over various time periods, and we’ve made assumptions to fill in the gaps. Our approach is empirical in nature, but we also rely upon our judgment and experience to make some analytical leaps that might make some cringe.

For example, we need to be careful in how we think about correlation and causation. We know the world isn’t so simple as to say “big” automatically equals “raise more”. That said, this feels mostly true or at least highly related, matches our intuition, and that of a dozen or so nonprofit leaders with whom we’ve road tested our thinking. So, we make the case “Good Enough!”

 

Figure 3: Philanthropic Revenue by Philanthropic Market for Nonprofit A (Predicted)

 

Step 5: Rinse, wash, and repeat steps 1 through 4 for the other dozen organizations.

So What?

Once we’ve done this for our entire sample, we find the following:

  • All thirteen organizations have a significant correlation between revenue and market size
  • The correlation or r-squared for the sample ranges from 10% to 75% — a big range!
  • The mean and median r-squared of the sample are both ~33%

It is from this last bullet that we derive our rule of thumb:

One-third of what you raise is determined by where you are, or where you plan to go.

This insight can shine a powerful light on philanthropic potential and performance for markets in which you currently operate, and new markets to which you are considering expansion; particularly when you combine market data with benchmarking data from local peers.

We’ll start to explore the “how to” of using this data to make expansion and growth decisions for all your markets, and to set and assess revenue targets within individual markets in the next set of posts, coming next week, same Bat Time same Bat Channel.

Oct 26
1

A New Perspective on Philanthropy and Fundraising

By | Cool Analysis, Philanthropy

We have been hard at work developing groundbreaking analysis and insights on philanthropy and fundraising. We are authoring a series of Linkedin posts to walk you through our work to date, some of our initial insights, and how you can access this information, knowhow, and better practices should you so desire. We thought we would also deliver them directly to your inbox so you don’t miss out.

 

Oh, for the Love… There MUST be a Better Way

“Oh, for the love…” I can’t tell you the number of times in my I’ve said those words in

my nonprofit executive life. While they have been uttered for a variety of reasons, a consistent focus of my expletives was fundraising, expansion, growth, oh my!

Deciding where to go, what to do, and how to resource are fundamental duties of any nonprofit executive, yet as nonprofit executives, Ben, Anna and I always felt underwhelmed by the available data and struggled to make effective, timely decisions across our organizations and markets.  We decided there MUST be a Better Way…except when we looked around, there wasn’t.  There were analogues like Forrester Research, Corporate Executive Board, Advisory Board where we saw glimpses of what we wanted for the nonprofit sector, so we knew it was possible, but it didn’t exist… yet. It was up to us to make it happen.

And so that’s what we’re doing:  for the past two years, we’ve been developing Peer Performance Insights (PPI) on philanthropy and fundraising, a data-driven approach to answering the questions we struggled with:

  • How much philanthropy can I raise in my existing markets?
  • What if I expand to new markets? How do I evaluate my team’s fundraising targets across geographies?
  • How does my fundraising performance stack up against peers, and what can I learn and improve?

We’re excited to start sharing “the Better Way”: how the PPI helps answer these questions.

Philanthropy is Local, Local Markets are not Equal

Our first step in building the PPI was to size the philanthropic market for the 381 metropolitan statistical areas in the United States. We know, thanks to Giving USA, that $373B in corporate, foundation, individual philanthropy originates in the United States, but now we know from where!

Below in Figure #1 you can see a map of the United States and 381 “dots”, each representing a metropolitan statistical area. The size of the dot represents the size of the philanthropic dollars originating from those markets. Blue are the top 15 biggest (YUGE); adding in the orange brings us to the top 30 (way smaller); the green brings us to the top 50 (significantly smaller still), and the brown rounds out the remainder (chicken pox).

Insight #1: Philanthropy is local, and highly concentrated in a small number of large markets. Not earth shattering, I know, but stick with us. Plus, maps and dots are fun.

Figure 1: Philanthropy is Local

Figure #2 takes a closer look at those top 50 markets (blue, orange, green) in snazzy bar chart form. Here we can see even among the top 50 there is a strong concentration towards the left, and holy New York, Batman! This chart starts to explain why most of our national multisite nonprofits tend to cluster in the blue markets… high concentrations of need in urban areas coincident with high concentrations of wealth. This both makes a ton of sense, and makes me a little sad when you consider how much need exists in suburban and rural areas.

Insight #2: Not all philanthropy that originates in a market stays in a market – and how much stays depends on the size of the market.  For the largest markets, we estimate ⅔ stays in market, and ⅓ goes elsewhere. For the middle of the pack, about ¾ stays in and ¼ goes elsewhere, and as you get smaller the in-market dollars approach 100%. Who cares you ask? Well this has some interesting implications for how you might construct your ask, particularly if you are raising money for multiple geographies. Finally, note there are, of course, exceptions to these general rules of thumb… Hi Seattle and Mr. Gates!

Figure 2: Local Markets are not Equal

We’ll stop there for today. Hopefully we’ve captured your attention and interest. If I’m you, I’m thinking “cool charts”, but where’s the “so what?” How does this actually help me make any decisions?

No worries friend, we’ll get there. Stay tuned next week, same Bat Time same Bat Channel, for our next post “Yes, Market Size Really Does #@$#@ Matter”.