managing donor rela onships: what do nonproﬁts …...managing donor rela onships: what do...

Managing Donor Rela onships: What Do Nonprofits Need to Know?

Spring 2015 Authors

Bridget Hartne , CPA, PSA Ron Matan, CPA, CGMA, PSA

Synopsis This white paper will emphasize the challenge facing nonprofit leaders as they establish an effec ve and efficient process for donor management and will focus on the cri cal issue of managing donor rela onships

CERT IF IED PUBL IC ACCOUNTANTS & ADVISORS

Managing Donor Relationships: What Do Nonprofits Need to Know?

Table of Contents

1. Understand Why it is Cri cal to Maintain Good Donor

Rela onships 2. Discuss Best Prac ces for Building a Loyal Donor Base 3. Know How to Use Technology to Manage the Process

4. Case Study: An Interview with Marty Johnson, Founder and

President ‐ Isles

5. Conclusion

6. References, Cita ons and Resources 7. About the Authors

8. About Sobel & Co.


As grants, public funding and corporate contribu ons con nue to shrink, nonprofit leaders are being called on to be more crea ve in their outreach as well as being consistent and strategic in their development ini a ves. According to the Na onal Center for Charitable Sta s cs there is a clear trend indica ng that at 72%, individual giving makes up the vast majority of contribu ons received by nonprofits as compared to 6% from corpora ons and 15% from founda ons. Bequests round out the research at 7%. Leading organiza ons have “read the tea leaves” and are now focusing much of their a en on and resources on cul va ng individual donors. This requires both pa ence and a commitment to building strong and sustainable rela onships over me. Acknowledging that strong donor rela onships are essen al, it is the role of every nonprofit leader to iden fy and priori ze revenue‐genera ng strategies for their own organiza on based on its own culture, its current and prospec ve donor base, its available resources and the compe ve landscape. Now is the me for every group, regardless of size, to roll up its collec ve sleeves and get to work!

1. Understand Why it is Cri cal to Maintain Good Donor Rela onships


Nonprofit leaders, whether they are paid staff or board members and volunteers, have a responsibility to iden fy and cul vate poten al donors for their organiza ons. In addi on, as important as it is to a ract new donors, it is equally as important to retain exis ng and established rela onships, understanding that just because a donor supported a program or an event once does not ensure that they will con nue their support in future funding. According to the Associa on of Fundraising Professionals a ri on rates can be up to 90% for new contributors. But when loyalty is earned over me through con nuous communica on and personal interac ons, donor reten on can rise to 70%. The lesson is clear: it is important to engage quickly and successfully with new donors while aggressively nurturing exis ng rela onships. Iden fy Prospec ve Donors One of the major obstacles for fundraisers and other nonprofit leaders is ge ng the a en on of new donors. The field is crowded and there is an endless stream of ‘noise’ in the nonprofit community with every organiza on clamoring for a chance to share their mission and tell their story. Dis nguishing your organiza on is increasingly more complicated but there are some technology tools and personal insights that can help make it a li le easier. Collect names for your database of quality prospec ve donors. Think of:

Neighbors Friends Business colleagues Board members Volunteers Current donors

Are you building a presence with them – and with their personal contacts? People who have a strong loyalty are most likely to be champions for the organiza on, so do not ignore their value. Even if you have asked them before, ask again. Things change and new rela onships are formed daily. Make sure you capture new names on a regular basis. Invite volunteers to par cipate in, helping the organiza on achieve its

goals. Once they become embedded in the group and commi ed to its mission, they will be happy to tell everyone about their experiences. Whether they are short term volunteers working on a specific project or

2. Discuss Best Prac ces for Building a Loyal Donor Base


volunteers who want to remain connected for the long haul, volunteers can open doors that would otherwise remain closed.

Have tes monials and video clips on your website that feature volunteers sharing

their passion; ask them to tell their Facebook friends and LinkedIn connec ons. When other people spread the word for you, your message travels farther and faster.

Get people’s a en on by doing something different. Honor a well‐known local

hero, consider crowd funding, think about that recent ice bucket challenge and the way its viral popularity took the social media world by storm and have fun.

Be proud of what you do – and tell everyone why you do it.

Cul va ng Donors The first thing to remember is that cul va on is for everyone in the organiza on. Each of the staff, from the administra ve team to the Execu ve Director, has a

role in nurturing possible donors a er they have been iden fied as quality candidates.

There should be a wri en, structured plan appropriate for each possible donor,

outlining a strategy for nurturing the rela onship. This can include invita ons to events, personal mee ngs, special programs, and other one‐of‐a‐kind ini a ves integrated with tradi onal outreach.

Educate your donors. Provide them with detailed reports that demonstrate the

value of their support, the financial impact of the organiza on on the community, and the an cipated ROI based on costs‐versus‐benefits analysis.

Above all else, the process should be systema c, coordinated and consistent in

order for the organiza on to gain the most benefit and for the prospec ve donors to become familiar with the organiza on and its poten al.

Retain Exis ng Donors While each donor has a personal perspec ve and an individual expecta on, there are common prac ces that resonate with all donors. When pursuing and maintaining donor rela onships it is important to consider how your organiza on is: Demonstra ng, with honesty and transparency, how it is using donor funds


Measuring the breadth of the impact of the organiza on on the

community it serves and sharing its achievements. Know what good you are accomplishing; promote your success; and point out key performance indicators.

Reinforcing its powerful brand and reputa on for excellence by

establishing a consistent, structured, ongoing process for communica ng with donors and poten al donors using an integrated combina on of tac cs that include social media, personal phone calls and mee ngs, emails, thank you notes, annual reports, website content and more.

Donors have many choices of where to invest their resources and which nonprofits they believe deserve their financial support. In fact, in New Jersey alone, there are more than 35,000 registered nonprofits according to the state’s Center for Nonprofits records, and millions na onwide. And since technology has made giving so easy, many local nonprofits o en find themselves compe ng not only with organiza ons that are around the corner but around the world. Given the challenges, nonprofits who want to a ract and retain donors must be very serious in their approach to the process. This includes being direct and honest in all conversa ons, refraining from over promising, being consistent, and making it personal. People want to support people they know, respect and trust, so the en re process is personal! It is also important to leverage a reasonable mix of tac cs. While it is very temp ng to use social media, because of its broad reach and because it is quick, efficient and cost effec ve, it cannot, and should not, replace real face me and personal interac on. Used together, these are the collec ve tools

that help build strong rela onships, but each on its own is much less effec ve.


“A er people, data is your most important resource” says John Kenyon, technology consultant to nonprofits. Current Data Many nonprofits today have turned to database management systems to help them keep be er track of their donors and poten al donors, using technology to boost efficiency and strengthen es. One of the obstacles to any data‐tracking process is having updated, clean data. Because informa on changes so rapidly, there needs to be someone with responsibility for keeping the data current. Collect New Data Current technology also provides an excellent pla orm for researching poten al donors. Lists of high net worth individuals, sorted in a variety of useful segments, i.e., zip code, can help jump‐start a new campaign or enhance ongoing ini a ves. LinkedIn is also a great resource. This website can help nonprofits track rela onships and ferret out new possibili es based on exis ng connec ons. Many of LinkedIn’s special features are offered at no addi onal cost to the nonprofit sector as a unique accommoda on to their valuable role in our communi es. Sort Data The next issue is segmen ng the data into meaningful categories so you can use the list strategically. If you can easily access all donors who have gi ed more than $1000, for example, or who prefer to contribute to specific types of ac vi es, then you can target them with specific messages that they are most likely to find relevant. Rather than bombard every donor with details that are meaningless to them, try drilling down into the informa on you have and storing it in a way that provides insights for you that improve your donor cul va on efforts.

Whether you have opted for a sophis cated so ware product or you are u lizing a simple Excel spreadsheet, the key is to have an efficient way to gather meaningful data that is easily accessed and leveraged when connec ng with your cons tuents.

3. Know How to Use Technology to Manage the Process


The good news is that even though corporate support and government funding is shrinking, individual donors are giving more than ever to nonprofit groups. This year, gi s will reach strong pre‐recession levels. The bad news for many nonprofit leaders is that donors are increasingly placing restric ons on those dona ons. Many donors believe that a heavier hand in decision making increases accountability. In some ways, it can. It may challenge organiza ons to improve their measures of success. But in many ways, it can do the opposite. It can restrict the capacity of organiza ons to learn, adjust, and con nually improve their work. Marty Johnson, Founder and President of Isles, a 34 year‐old sustainable development group in Trenton, understands this trend in funding restric on firsthand. Since 2011, Isles has experienced a clear decline, not in overall funding, but in unrestricted grant funding. From 2011 to 2012, unrestricted founda on and corporate grant funding dropped nearly 70%, from $269,425 to $84,928. It dropped another 26% in 2013 and roughly 30% in 2014. Corporate founda ons, in par cular, have reduced unrestricted funding by 80% since 2011. Marty notes, “While we retain a lean 18% overhead rate, we take great pride in building a ‘learning organiza on’ that con nually improves its processes and impact. As more funding becomes restricted, we can’t use it to research, to learn, to build informa on technology, or to help other leaders or policymakers learn from our experience. This trend towards restricted funds undermines Isles’ work, and it’s important to have this dialogue with funders.” The Starva on Cycle and Overhead Myth Organiza ons with robust infrastructure are more likely to succeed, yet nonprofits are hesitant to increase their overhead or indirect costs, crea ng “The Nonprofit Starva on Cycle.” Nonprofits are forced to go without essen als, including sturdy informa on technology systems, financial systems, skills training, fundraising processes, and more. Individual donors’ expecta ons are also skewed:

4. A Case Study: “The Care, Feeding and Educa on of Donors” An Interview with Marty Johnson, Founder and President, Isles


A Be er Business Bureau’s Wise Giving Alliance found that […] those [American adults] surveyed ranked overhead ra o and financial transparency to be important a ributes in determining their willingness to give to an organiza on than the success of the organiza on’s programs.¹

In 2013, GuideStar, BBB Wise Giving Alliance, and Charity Navigator launched a campaign to end the “Overhead Myth,” or false concep on that financial ra os are the sole indicator of nonprofit performance. What Happened?

With nearly two million nonprofit groups na onwide (and growing), donors are becoming more wary, and concerned about inefficiencies or the inability of organiza ons to fulfill their promises. Too few groups, even where mission overlap occurs, collaborate or merge. As such, donors too o en expect wastefulness, and respond with more funding restric ons. Listening to Johnson, it is obvious that funders, beneficiaries, and mangers themselves want be er ways to calculate one core equa on: the overall cost of a nonprofit’s work versus the value of the benefits they deliver. To paraphrase Jerry McGuire, the current mantra is, “Show me the ROI!”

Unfortunately, most small and midsize nonprofits (the majority of the sector) rarely have the resources or capacity to produce the informa on that could prove their real impact. Where are the control groups? What is the counterfactual (in other words, what would happen) if the organiza on did not exist?. Donors are restric ng the use of revenue and challenging the nonprofits for be er repor ng, but the majority of the organiza ons lack the capacity needed to reply adequately and accurately to the community. Is there a solu on? During the interview, Marty offered some cri cal insights. For him, donor management is synonymous with donor educa on. He suggests educa ng, and where possible, challenging donors’ assump ons. “My message usually goes like this: treat us nonprofit managers the same way you would want to be treated in your business. How would you manage if your revenues had lots of strings a ached, or if you had no funding for R & D? Without flexible revenue, no for‐profit corpora on could succeed. Nonprofits deserve the same la tude. To func on


effec vely, nonprofits need to invest in process improvement, efficient procedures, human resources, marke ng, board governance and training, infrastructure, and the research and development of new pla orms, skills and exper se. Otherwise, too many organiza ons are le opera ng on a shoe string with li le opportunity to think long‐term or to deeply impact those they serve.”

Johnson went on to suggest that smart nonprofit leaders are already embracing technology to gather the evidence they need to highlight their influence and impact. They are establishing their value and sharing their successes to gain the confidence of their supporters. Understanding what their donors are interested in, and matching that to the organiza on’s purpose, can help to begin building strong and las ng connec ons. ¹ Stanford Social Innova on Review, h p://www.ssireview.org/ar cles/entry/the_nonprofit_starva on_cycle/ ² http://overheadmyth.com/


Fundraising is the life blood of every nonprofit. Without revenue no organiza on can survive. As such, the rela onships created between the organiza on and its financial supporters are essen al to its short‐and‐long term sustainability. Seeking out donors who are likely to be passionate about the mission and nurturing them, building strong es to them and ul mately conver ng them to ac ve funders, is one of the most cri cal roles for any nonprofit. It is ge ng a li le easier to find possible funders using technology such as LinkedIn and other available lists, but the tradi onal “word‐of‐mouth” referral is s ll the most popular method for a rac ng interest among new donors. Finding a possible donor who has some interest in the organiza on’s mission is the star ng place for a strategic cul va on campaign which focuses on the unique aspect of the donor, understanding what is most valued and building a las ng rela onship between the donor and the organiza on which will prove to be mutually beneficial. However, along with technological advances comes a more sophis cated and educated donor – one who demands metrics and measurements that substan ate the organiza on’s validity and relevance. Watchdog groups and donors themselves expect nonprofits to demonstrate the ROI that can be an cipated from contribu ons. Once the purview of the corporate world, accurate financial repor ng, budgets, cash flow analysis and impact sta s cs are quickly becoming buzz words in the nonprofit community as well. More o en, donors are restric ng funds, making it increasingly difficult for the nonprofit to accomplish its mission. By pu ng constraints on how funds can be used while giving li le a en on to the ongoing costs of opera ons and other general administra ve expenses, the donors are crea ng a very difficult situa on for nonprofits. Being sensi ve to the needs of today’s funders means embracing diversity, recognizing the need for new communica ons pla orms for different genera ons which results in your drawing on a variety of communica on tools, and lastly, proudly promo ng your values – displaying integrity, honesty and transparency in every ini a ve. This concern and though ulness can smooth the way for engaging and connec ng with new donors, as well as reigni ng exis ng rela onships that might be growing stale over me.

5. Conclusion


The process is too important to leave to chance. Drawing on technology, including simple office so ware tools, can help the organiza on manage the data and use it to be more efficient when communica ng with the community. Track and Segment Your Data for Annual Giving Campaigns. http://www.jcampl180.org How CRM can help nonprofits manage donors, volunteers and clients. April 18, 2011. http://blogs.microsoft.com/firehose Do you need a new donor management system? March 15, 2011. TechSoup Managing Your Relationships with Donors. NGOConnect enews. September 2011. Building Relationships with Donors. GuideStar. July 2011. Top 10 Tips for World Class Donor Relations. Joanne Fritz. http://nonprofit.about.com Are You Keeping Good Donor Records? A.C. Fitzgerald & Associates. Michelle Taylor. January 31, 2013. The Art and Science of Maintaining Donor Relationships. http://www.communityforce.com How Do Donors Pick Which Charity to Support? Joanne Fritz. http://nonprofit.about.com How to Find New Major Donors and Get Them to Give to Your Nonprofit. http://www.thefundraisingauthority.com Getting New Charitable Donors for Your Nonprofit. http://www.nolo.com Charitable Giving in America: Some Facts and Figures. National Center for Charitable Giving. http://nccs.urban.org Top 10 Tips for Cultivating Potential Donors. Joanne Fritz. http://www.nonprofit.about.com/fundraising

6. References, Cita ons and Resources


Bridget Hartne , CPA Bridget Hartne , CPA, a Member of the Firm at Sobel & Co., has more than fi een years of experience in public accoun ng, which she draws on to provide high level services for clients. Experience in the Nonprofit Niche Bridget spends most of her me working closely with clients in the social services and nonprofit areas, including educa onal ins tu ons. As Co‐

Member in Charge of the firm’s Nonprofit and Social Services Prac ce, Bridget supervises the audit engagements conducted by Sobel & Co. for the Cerebral Palsy Associa on of Middlesex County, the Youth Development Clinic of Newark, Catholic Chari es of the Trenton, Metuchen and Newark dioceses, Freedom House, and C.J. Founda on. In addi on, she handles all of the firm’s educa on audits and holds a Public School Auditor’s license. Bridget is also responsible for reviewing and overseeing the prepara on of nonprofit tax returns. Philanthropic and Social Service Commitment Bridget carries her commitment to social services beyond the work place to include her personal involvement in several areas, such as at St. Benedict's school in Holmdel where she is always available to volunteer for projects and special events as needed, as well as to give her resources and me to various children’s chari es, such as the New Jersey Chapter of Make‐A‐Wish and others. She volunteers with professional business groups in the New Jersey community, including Monmouth Ocean County Nonprofit Commi ee and the Western Monmouth Chamber of Commerce where she is Treasurer and helped to found the successful Young Professionals’ Group. She currently serves as Co‐Chair and founder of their newly formed Nonprofit Commi ee. Bridget is also an ac ve member of the New Jersey CPA Society’s Nonprofit Interest Group. Professional Creden als As a licensed Cer fied Public Accountant in New Jersey, Bridget is a member of both the American Ins tute of Cer fied Public Accountants (AICPA) and the New Jersey Society of Cer fied Public Accountants (NJSCPA). Educa onal Background Bridget graduated with a Bachelor of Science degree from Montclair State University.

7. About the Authors


Ron Matan, CPA, PSA, CGMA

Ron Matan, a Member of the Firm, brings a unique blend of public accoun ng and business acumen to every nonprofit engagement. A key member of Sobel & Co.’s Leadership Team and Co‐Partner in Charge of the Nonprofit Group, Ron works primarily with nonprofit organiza ons, including United States Department of Housing and Urban Development (“HUD”) projects, A‐133 engagements, and low income housing tax credit programs (“LIHTC”).

Experience in the Nonprofit Niche As a Member in the firm’s Nonprofit and Social Services Prac ce (A‐133 and

HUD audits and LIHTC programs), Ron is responsible for the firm‐wide quality of this prac ce area and is the firm liaison for the American Ins tute of Cer fied Public Accountants’ (AICPA) Government (Nonprofit) Audit Quality Center. With over 35 years of experience in public and private industry and accoun ng experience with all types of nonprofit and social service organiza ons, Ron brings a unique blend of knowledge and insight to these specialized engagements. Ron is a Cer fied Tax Credit Compliance Professional and is listed in the guide which is circulated to all State Agencies Alloca ng Tax Credits as well as the Internal Revenue Service. He has also taken courses in advanced training for peer reviews and performs peer reviews of other accoun ng firms.

Philanthropic and Social Service Commitment Ron is a member of the Board of Directors of the Neighborhood Health Services Corpora on, headquartered in Plainfield, New Jersey, where he serves as Treasurer and Chairman of the Finance and Audit Commi ees. Ron also serves on the Union County Educa onal Services Founda on Board. Ron was the former Treasurer and Board Member of Kids Peace Treatment Centers for emo onally disturbed children, located in Bethlehem, Pennsylvania.

Professional Creden als Ron is a Cer fied Public Accountant licensed to prac ce in New Jersey, New York and Pennsylvania. He is a member of the American Ins tute of Cer fied Public Accountants (AICPA) and the New Jersey Society of Cer fied Public Accountants (NJSCPA). Ron has been elected to PKF North America’s Nonprofit Commi ee, and in June 2004, Ron was appointed to the New Jersey Society of Cer fied Public Accountants (NJSCPA) Peer Review Execu ve Commi ee. He is also a member of the NJSCPA’s Nonprofit Interest Group.

Educa onal Background Ron is a graduate of Kings College in Wilkes‐Barre, Pennsylvania, where he received a Bachelor of Science degree in Accoun ng.


Sobel & Co. is a regional accoun ng and consul ng firm located in Livingston, New Jersey, that has been providing nonprofit and social service organiza ons in the New Jersey/New York metropolitan area with audit, accoun ng, tax and advisory services since its incep on in 1956. The firm is dis nc ve in its approach to the nonprofit community because of its sincere passion for serving this sector. As it says on the Sobel & Co. website, “We work with the nonprofit sector because we feel good helping those who do good; we have a passion for helping nonprofit organiza ons achieve their mission of helping the world's most vulnerable.” The firm currently works with more than 200 nonprofit organiza ons with revenues ranging from $100,000 to over $75,000,000. Based on this depth of experience, the professionals in the nonprofit group are keenly familiar with the issues facing nonprofits and they will apply this knowledge to bring added value to every engagement. As a further demonstra on of the firm’s commitment to the nonprofit community, several complimentary programs are offered throughout the year. These include quarterly webinars, roundtable discussions and an annual symposium on mely and relevant topics. We also encourage you to visit our website at www.sobel‐cpa.com and click on the Not‐For‐Profit niche page. Once there please browse our resource library where you will find published white papers along with a variety of ar cles. We provide a Desk Reference Manual for Nonprofits, a Survey of Nonprofit Organiza ons that contains interes ng insights on nonprofits, a wide range of tools and benchmarking data, a monthly e‐mail newsle er that offers relevant informa on to organiza ons like yours and links to other key sites that are valuable for the nonprofit community.

8. About Sobel & Co., LLC

CERT IF IED PUBL IC ACCOUNTANTS & ADVISORS

managing donor rela onships: what do nonproﬁts …...managing donor rela onships: what do...

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