The National Council of Nonprofits describes a sustainable nonprofit as one that can raise enough money to cover its costs and invest in its own infrastructure.
If you are a savvy donor, it may be important to you to give to organizations that will successfully carry out their missions for years to come (or to completion). So, how can you tell, from the outside, if a nonprofit is financially sustainable?
Here are five indicators I recommend looking into if you are considering a gift of $5,000 or more.
This is the most obvious. If the organization doesn’t post its financials on its website as WARM does, look them up on Guidestar and review the last few tax returns (IRS Form 990). A summary is on the first page of the 990 and includes the year founded, size of staff, number of volunteers, and last two years of revenue and expenses. Part VIII gives a rough breakdown of revenue sources so you can get an idea of the diversity in their funding stream. Of course, don’t expect to see their typical fundraising event revenue for 2020; go back to earlier tax returns for that.
Give a smaller gift first and see how the organization thanks you. If they take time to treat donors with respect and appreciation, donors are 40% more likely to give again. Repeat donors are critical to creating financial sustainability. They are easily overlooked by nonprofit leaders that are reacting to the urgent issues of the day rather than focusing on long-term goals.
WARM has become known for our thank-you calls from board members. Many donors are surprised at the end of the conversation when they realize we truly just called to thank them and didn’t ask them for more money. We’ve also produced short videos for our monthly donors and created other fun ways to share the impact of their faithful giving.
Ask for a copy of the most recent strategic plan or have a conversation about how they evaluate the success of their mission and measure progress toward fundraising goals. Nonprofit leaders who value transparency and know you are considering a major gift should have no problem sharing this information.
Look for quantifiable measurements for short-term productivity goals such as number of households served, dollars raised, or volunteer hours. Make sure they have committed to clearly defined, ambitious, and meaningful long-term outcomes such as improving respiratory health or increasing neighborhood stability.
Don’t overlook the second feature of sustainability: investing in infrastructure. Funds for computers, facilities, vehicles, staff training, and other infrastructure are essential for an efficient and sustainable organization. However, not many grant opportunities exist for infrastructure. So, an organization’s capability to invest is a great indicator of its priorities, fundraising success, and money management skills.
Ask about recent and upcoming infrastructure investments; leaders of sustainable organizations will always have this on their minds. For some real fun, tell the executive director you don’t want to pay for direct service; you want to help them serve more effectively with a new truck. Then, stand back and watch the tears of joy!
Making a major gift is a big decision and most nonprofit executives and board members will be excited to have these conversations. We want to build real relationships with you. Look for openness to questions and eagerness to hear your vision for the impact of your charitable dollars.
If you are interested enough to read this entire column, I am grateful for your sophisticated approach to philanthropy. Know that you are a part of the movement that will make all nonprofits more sustainable and ultimately make our communities stronger.
WARM’s construction staff enjoyed an early Christmas when a generous donation of tools and equipment arrived from Lowe’s Home Improvement, September 2019.
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