Return On Investment – A new age of business-mindedness dawns for nonprofit enterprises

Tom Ahern

Suddenly it seems like everyone’s talking about it.

Or maybe “finally” is better than suddenly.

The Chronicle of Philanthropy has gotten weighty on the subject. On June 7, it featured a scathing article by Amanda Pearce, CFRE, under the headline, “Nonprofit is a Tax Status, NOT a Business Model.”

Even US charity watchdogs have admitted they got it wrong.

In case no one at your office got the memo, that once-impenetrable ceiling of 20% spent on overhead?

Serious watchdogs now confess it’s naive, passé, fabulously inadequate and can stunt your nonprofit’s growth. Charity Navigator made its revised position official in 2016.

Tweet: “They’re NOT risks if they raise more money, bring in gobs more new donors, keep active donors longer and lead to bequests. Then they’re wise investments.”

Next up for defeat? the “ignorance ceiling.”

It’s like the “glass ceiling,” only it frustrates all genders.

What is it? The chewed-gum ignorance of second-guessing bosses and boards: the people who say “I don’t like it” and just plain “no.”

It’s also the fundamental lack of understanding inside nonprofits of key business metrics like Longterm Value (LTV) and Return on Investment (ROI).

Pretend you’re a mid-sized nonprofit. You’re not rich. But you’re not poor.

You ask your board to invest $100,000 over three years in a bequest-marketing program.

Would they do it?

What if they knew what the ROI would be?

What if you had a time machine and could leap forward to PROVE to your board that their $100,000 investment would … within just three years … start a pipeline flowing of charitable bequests that would average (conservatively) a quarter-million dollars apiece each … and that within 10 years, your organization would see dozens of new people joining your Legacy Society every year?

Would they invest the $100,000?

Probably not.

Because we don’t have time machines (paging Elon Musk). So no one can make those kinds of guarantees. You have to take risk … as a basic business principle, even in Nonprofit Land, where unicorns roam. You invest money to make money.

By the way, that’s a true story. That really happened. A nonprofit board invested $100,000 in a professionally competent bequest marketing effort … and it paid off as stated.

Invest? Absolutely.

In people. In expertise. In donor-centricity. In new ideas well-executed.

Heck: in executing old ideas BETTER. I promise you, if you do your existing donor communications at a higher, more #donorlovinglevel, you will make more money from the very same base of support.

Yet most nonprofit “leaders” don’t and won’t.

And so it goes, as the great sage, Kurt Vonnegut, observed.