When the Ax-Man Cometh: What to cut out of your budget
- Tue, January 13 2009
- Filed under: Fundraising essentials
Jeff Brooks is not only one of my favorite bloggers and fundraising experts, he’s my personal hero for giving his time today to speak on our Network for Good Nonprofit 911 call on the topic of where to cut if you’ve got to cut your budget. He is still talking (this is live blogging, folks) and I’m happy to say he is wise, helpful, insightful and provocative, my favorite combination in a speaker. You can see his slides here and access the MP3 file at this same link in another day or so.
Here are some gems from his talk:
1.) DO NOT CUT net-positive donor cultivation programs. To be wise enough to keep those programs, though, you have to know which are NET positive (not gross positive). How much did you NET from your gala (as opposed to raise)? Figure out net present value of a donor: what money do you expect in projected lifetime giving from that donor (take their first gift and multiply by ten), then subtract the cost of acquisition and the ongoing cultivation cost. Measuring net present value can tell you where you’re spending too much and where you can spend more to get more.
2.) KEEP ACQUIRING DONORS. Cutting donor acquisition is the quick path to long-term pain. Donors are worth more every year (he suggested two times the second year and exponential growth from there, for example) so if you get far fewer donors this year, you’re going to feel bad pain next year and far worse pain the following year.
3.) CUT WHAT’S UNCLEAR. If you’ve got less money to spend, don’t spend it on things that have unmeasurable or questionable impact. In hard times, stick to things that have demonstrable impact, not things like your warm fuzzy brand awareness effort. Direct response fundraising is a better investment now than general “branding” campaigns. PR and media relations are a relative bargain - positive impact for very few dollars - but non-response advertising (with no measurable response vehicle) is not. Kill the “we exist and we’re really cool” ads if you’re short on dough. Leave that to people who can do it on a scale where it’s effective - like Coca-Cola.
I completely agree with the last point. And it’s going to make some people nuts. Really nuts. I like how Jeff put it—
What would you rather do with your limited budget:
• Move 100 people 10% of the way toward giving?
• Move 10 people 100% of the way toward giving?
He added a positive note that I’d also like to second: In hard times, innovation doesn’t happen because people are afraid of risk. New ideas often don’t work out, but you can’t let these times cut off innovation or let fear rule you. Be wise, but also be bold.
Comments
Katya
This was excellent! I really like the pratical yet boldly positive moves that are advocated in this post. Jeff is right always review what is not net positive (it takes some work and thinking) but boldly continue to secure new donors as well as cultivate those that got you here.
I have seen my share of doom and gloom. Thanks for highlighting the positive and pratical in this years budget Jeff!
I agree completely with Jeff’s points and would also add as a tactic that organizations should take a long look at what works online (the NET results with messaging and results) and see how an offline acquisition or cultivation package can be moved entirely online (Two would be even better). Using this time to experiment with online fundraising could allow for some savings and take the more reticent online fundraisers into new territories, maybe even make them more aware of their online efforts.
Great points, Scott and Garth.
Being able to measure marketing campaign effectiveness is definitely something we see organizations struggling to handle at NPower PA. I see most of it being done anecdotally, which is far from ideal. Hopefully this will change once organizations have the thought process of CRMs ingrained into them over the years.