Building Revenue Streams

sustainable fundraising, social investment and impact reporting built into your DNA

Clive Pedley, CFRE, FFINZManaging Director, Giving Architects Ltd

An overview of our presentation

• Revenue for the NFP sector• What does sustainable fundraising look like?• The growth and emergence of social investment and

social enterprise• Future proofing through establishment of impact reporting

Revenue in the sector

• Approximately $16.7 billion sector– Registered charities represent 6.7% of GDP

• Approximately $2.8 billion of annual revenue is from giving– The rest is Government contract funding – static/decreasing globally

• 90% of 27,000 charities have revenue <$500k• The top 22 charities earned 30% of all revenue

– But working capital of only 9% - running lean• For the top 10 fundraising charities, revenue is rising• Over 200,000 Trustees, 200,000 paid staff, 400,000 volunteers

Why do we fundraise in the first place?

• Because your reason for existence has not yet been fulfilled and needs money to do so

Why do we fundraise in the first place?

Because the perfect endowment solution doesn’t exist

Why do we fundraise in the first place?

Because giving to connected causes when asked, is natural

Why do we fundraise in the first place?

Because the ROI from fundraising is compelling compared to all other options available to the sector

• Acquisition• Events• Cold calling• Repeat donors• Regular giving• Direct engagement• Funding• Major gifts• Legacy gifts

• Lists• Social media• Face to Face• Telemarketing• Direct mail• Personal asks• Grant applications• Specific requests• Peer advocacy

$0.03 - $1.50 : $1.00

Overall $0.25:$1.00

What does sustainable fundraising look like?

Government funding aside, needs to be reflective of the facts1. Over-emphasis on seeking Corporate dollars?2. Growing donor relationships for optimum outcomes

• Acquisition through to legacy• Donor-centric engagement• Partners in Mission, more than financial contributions to costs

3. Understanding funding dynamics (public, private, criteria) and your qualified opportunities

Remember, everyone is different

Values &

Beliefs

Dynast

Socialite

Altruist

RepayerInvestor

Devout

Communitarian

What does sustainable fundraising look like?

Like all financial truths, the numbers tell the story! Do you know your numbers that really matter?1. Net Annual Growth in Active Donors2. Net Cost per Donor Acquired3. Attrition Rate by Channel4. Renewal Rate by Channel5. Second Gift Conversion Rate6. Lifetime Donor Value by Channel

What does sustainable fundraising look like?

Growing conversations with a broad Mission-linked audience

What does sustainable fundraising look like?

A donor-centric relationship will involve compelling asks

What does sustainable fundraising look like?

Relationship focussed fundraising, as opposed to transactional focussed fundraising, will always raise more in time. Transactional pressure fundraising’s time is over.

What does sustainable fundraising look like?

Effective management of a critical mass of variable changing relationships that collectively underpin your growth

A sustainability-enabling case for support?

DONOR CENTRIC (Meeting needs, not having needs)

Sufficient to inform and introduce (organisation and/or project)

• Compelling• Urgent• Rational• Emotive

• Problem• Solution• Transformational impact

Accountable, Transparent

What does sustainable fundraising look like?

The spectrum in action requires multi-channel management

What does sustainable fundraising look like?

Application of the fundraising spectrum changes

Build revenue through investment in hard work

Is traditional philanthropy banging its head against a brick wall?

US Giving as % GDP static for 30+ years –the home of giving!

Giving & funding in New Zealand is static but it seems every NFP wants to grow

Being terrible at asking and nurturing leaves giving under done

Legislating donor engagement has an air of inevitability

Emergence of socially conscious equity?Family Foundations recycling money through social investment tools like SIB’s – but not new money to the sector

Pay For Success models by Govt to encourage private sector investment. Working?

No investor-centric models to attract socially conscious private equity

Retail investor demands for SRI options from Fund Managers

The emergence of social investment

New Zealand Treasury says:• Social Investment is about improving the lives of New

Zealanders by applying rigorous and evidence-based investment practices to social services.

• The social investment approach involves answering two key questions:– Who do we need to get better long-term results for?– What is the best way to get those results?

• Misunderstood – only part of the picture

The emergence of social investment

Big Society Capital (great resource) glossary:• The provision and use of capital to generate social

as well as financial returns

Why? Because giving is not enough

The emergence of social investment

The spectrum of social investment

Social EnterprisePrivate Foundations

Impact InvestmentCorporate Foundations

Endowment unlockedGovernment

Responsible InvestmentPrivate equity

International benchmarks?

US – “Pay for Success: The First Generation” May ‘16

“The market is too young for us to draw conclusions,” said Dana Archer-Rosenthal, NFF’s Pay for Success program manager and lead author of the report. “The challenge – and opportunity – in the next phase of the PFS market’s development is not to advance a particular financial innovation but to collectively improve our ability to deliver better results,” she said.

The NZ social investment landscape

Comparable social enterprise landscape

Social Enterprise development

• Hard, not for everyone and doesn’t always work. But it is worth asking the question

• Mission first. It is commercially oriented trading with social / environmental purpose

• Not new, but a new energy and need is emerging• Typically, social enterprise is focused on:

– Employment / training– Service in response to need– Income generating

Social Enterprise development

• Legal structures are various, typically company or charity or a version of. Not the primary consideration

• Focus first on:– Know your purpose– Business and financial model (mission embedded)– Funding need (typically from grants, equity, debt – move the dial)

• Best online resources – Social Enterprise UK

Impact reporting

Impact reporting is NOT outcomes or outputs reporting

Impact reporting allows the investor to understand the transformational impact of their investment

It reports against the Financial Terms Sheet AND the Social Term Sheet established at the outset

International resource & benchmarks – GIIN & IRIS

Impact reporting

How to make a start:1. Determine the purpose. This is an investment of time

and money that requires clarity2. Hang your hat on a small number of fundamentals that

demonstrate transformational change3. Prepare to invest in the process that secures successful

performance as an investment vehicle4. Determine the most effective financial model that serves

both your beneficiaries needs and investor demands

Conclusion

• Build revenue from evidence-based sources• Invest in processes and relationships,

understanding variable channel truths and ROI• Social investment in its various forms will inevitably

increase. Private equity is largely untapped. Look, watch, listen, share, discuss and learn

• Incorporate impact reporting principles and processes into planning for revenue growth

Questions & Answers