Beating the NPO starvation cycle!
Financing a non-profit organisation has always been one of the most significant challenges faced by such ventures. However, leveraging technology to secure recurring donations and automate tedious administration, means that in this day and age, sustainable funding is no secret.
“Non-profit leaders are much more sophisticated about creating programmes than they are about funding their organisations.” These are the words of Stanford Social Innovation Review writer William Landes Foster, and if you’re a key player in the operation of any non-profit organisation they might sting a little, however, while Foster’s comment is undoubtedly a generalisation, it is one grounded very much in the real world.
The harsh reality for the vast majority of non-profit organisations, is that they are not only faced with the herculean challenge of impacting socioeconomic change in line with their core purpose, but they have to simultaneously take on the arguably even greater challenge of generating the funding necessary to drive their programmes.
Solving the world’s problems and constantly chasing donors is like fighting a war on two fronts – something that history has shown us time and time again rarely ends well…
There is good news though. It’s a war you don’t have to fight.
See, the financial challenges that nonprofits face are not the result of any kind of ineffectual leadership or lack of ability amongst those running the organisations. In fact, one could say that the core of the issue is simply an inherent problem in the way things have always been done. Contributing to this, is the fact that innovative products, services and funding models are very seldom created with NPO’s in mind.
Figure A – Cyclical Funding
Figure A illustrates the ‘historical model’ of how non-profit organisations have gone about financing their operations – essentially a cyclical process consisting of, firstly, fundraising drives to generate donations, and secondly, the implementation of projects, which drains the funds that have been generated.
It doesn’t take financial expert to realise that, although this cyclical funding method may have kept some non-profits running for decades, it only takes one spending cycle that empties the organisation’s coffers a little too much, or one unforeseen event (a global pandemic, perhaps?) that doesn’t fill those coffers quite enough, to spell the end – and not simply the end for the organisation, but the end of all the positive impact it could make, too. The Stanford Social Innovation Review refers to this as the nonprofit starvation cycle, and that is perhaps the most succinct way to say that it is simply not a sustainable funding method.
The most successful organisations in any field are those that leverage new developments and new technologies to best execute their mandates, and this kind of agility is an absolute must for non-profits looking to find sustainable funding methods. A prime example of this is monthly giving campaigns, whereby a non-profit can receive monthly contributions from donors (through either a recurring credit card charge or a monthly debit order) and effectively eliminate the highly risky trough between spending and fundraising in the illustration above.
Figure B – Recurring Funding
What is illustrated in Figure B is an upward trend in cash flow that nonprofits can look forward to thanks to the recurring donations associated with monthly giving. Although some months may see more intensive spending than others, the steady flow of donations means that, on the whole, an organisation need never find itself in a position where there isn’t enough money in the coffers to drive another round of fundraising. Rather than a task to achieve prior to executing projects, fundraising becomes an almost effortless, ongoing process, which in turn, means that driving change can be ongoing too. What’s more, once secured, donations become entirely automated – freeing up much time and effort for nonprofits to focus on their cause and amplifying their impact.
The best type of donor is a donor for life!
The traditional approach to funding does not form a consistent income model that makes growth easy – let alone covering the fixed monthly expenses NPO’s need to keep the lights on. In business the best sales strategy is how to get repeat customers effortlessly so that the organisation does not require the same resource and energy investment for repeat sales that it needs for acquiring new customers. The best customer is a customer for life.
The same type of strategy needs to be built into the funding models of NPO’s. NPO’s should be focusing their energy on “donors for life” so that they can grow a steadily increasing monthly income that benefits from compounding funds being raised.
As far as recurring donations are concerned, they are generally implemented through one of two methods, namely recurring credit card charges or monthly debit orders. It’s important to note here that credit cards have a finite lifespan, and owing to the cards themselves being lost, stolen or expiring, that lifespan averages out to 2.2 years. For non-profits able to secure monthly debit orders, the lifespan of the recurring donations is, essentially, indefinite.
Moreover, in this connected world, the rise of FinTech services means processing monthly debit orders need not be bewildering or financially exclusionary to the Social Impact sector. The tools to secure sustainability are here, now – and they’re affordable, accessible and available to all.
Thrivepay is committed to it’s vision and mission of providing automated recurring payment solutions to the NPO sector.