The axe is falling – but how will you cope with the cuts?

Posted on 12 Oct 2011 by ACEVO Consulting
Categories: Fundraising

As a consultant, this is one of my most difficult times. In theory I, or rather we as I run an agency, should be inundated with clients who believe that a steep reduction in their funds may be on the way, and are keen to develop a fundraising strategy based on investing in building new income streams; but in practice the governing bodies seem paralysed, waiting for the axe to fall and hoping it won’t fall on them. We have seen in the past that once funds are cut trustees they attempt to slash budgets to keep down costs, and all chance of investing in growing alternative sources of income flies out of the window.

Fortunately, we are already working with some smart charities which are taking precautions and have invested in new fundraising programmes. Indeed, these often turn out not to be new at all, but the kind of fundraising the institution undertook before they became dependent on government grants. In our experience, colleges and other educational establishments are often guilty of this behaviour and have even failed to keep up their Old Boys and Girls networks, neglected to move card index files into their databases (I have crawled through more than one attic) and generally ignored their alumni, some of whom are now rich and great potential donors.

Hospitals and hospices alike have often avoided developing relationships with their patients and patients’ families – especially when it comes to legacies. I’m sure no one needs reminding that a strong legacy programme can transform organisations, usually gifts often arriving unexpectedly and of a size that sometimes belies the donor’s apparent wealth.

So what is to be done? The place we start first is known as the ‘case for support’. This sets out clearly why someone should give a financial donation to your organisation. It is both emotionally moving and intellectually convincing. We give because our emotions prompt us, but we need to be rationally convinced that the beneficially will really be helped; and we all like to know the company we are keeping, which is why patrons and other influential supporters are a great help to reassure potential donors. There is, of course, much more to a professional case for support but at its heart are the key phrases, which set out the essence of your prime purpose.

The key income streams for civil society organisations are: individual donations, grants (from trusts and foundations as well as government and the lottery), legacies, major donor gifts, community and company fundraising and ‘trading income’ such as fees for services.

Of these the most cost effect and quickest to realise on any scale can be both grant-making agencies and major donors’ gifts. As it happens, these are probably the income 1 2 streams with the best ratio of expenditure to income apart from legacies. That does not mean you should neglect the other areas because the synergy between fundraising programmes is so strong. Individual giving creates the mass of donors from which many major donors grow, and legacy programmes too are often highly dependent on building a large number of supporters, who understand your work and whom you have kept informed and happy over the years; though, peculiar as they are, legacies also come from rather unexpected sources.

For example, the Medical Foundations runs a regular legacy campaign every three years and notes a burst of legacy income on a similar pattern showing the effectiveness of that programme. On the major donor side, St Mungos has built up a strong income stream, over the past few years, by identifying existing affluent supporters capable of making large gifts and taking the time to build personal relationships with them.

Through the recession we have helped several organisations to develop excellent applications for grants, and despite the general fall in trust income and highly competitive nature of these bids, these organisations have often been successful in an area they were sometimes reluctant to enter.

Indeed, my top tip is to ensure that in presenting ideas to your governing body that require investment they are first fully worked through with advisers and based on a sound strategy, which in turn is based on research into potential. When we engage in very large scale fundraising, such as a capital appeal, the first step is a feasibility study to ensure the appeal is likely to succeed before it is launched. In the same way a move to create any new fundraising programme requires an investment of both scarce funds and a leader’s political capital. Fortunately, we have often seen both replenished and greatly exceeded by a successful campaign.

On the other hand, those who delay change until it is too late, or refuse to commit sufficient funds risk their programme work stopping, key staff leaving and the organisation contracting making it harder than ever to rebuild the work.

In seeking to rebuild an organisation there is a very important point to be made, which is that donors are deeply reluctant to merely to replace government funds. The key message cannot be “we have just lost our funding” it has to be about the need of your beneficiaries; which, by the way, is often best expressed through their individual stories and in this multi-media age through video.

Let us not, however, become lost in detail. Our sector is about to go through one of its most turbulent times, and those who survive and thrive will be those with the foresight to plan and then implement those plans. Implementation is sometimes where change comes unstuck, as it requires dynamic and entrepreneurial leaders prepare to face the risks inherent in all change and governance that knows when to let go the reigns and allow organisations to reset their finances onto a new and ultimately safer basis.

Written by an Expert Fundraising Consultant from ACEVO Consulting

To speak to an advisor about the matters raised in this article please call 020 7280 4933 referencing the article.

This article is also available in PDF format, click here to download the article.

1. Name: Enter your name
2. Email: Enter you email
3. Twitter (Optional):
4. Comment: Enter your comment
5. Please enter the code you see in the image