Due Diligence

There's over 9,000 nonprofits in Dallas County today. More than 3,500 of them filed a 990 tax return so say the smart folks at Urban Institute. With that many working nonprofits in town, chances are that there's someone trying to do the same thing you're doing.

Okay. Let's narrow the field from that 3,500+ and add another filter to look just at your cause: healthcare, poverty, children, environment, aging, the arts, whatever. Chances are that you've still got somewhere between 5 and 25 other nonprofits trying to do something very similar to what you're doing. That makes it a little challenging to raise more money and excite more volunteers year after year.

You may be slightly different or very different from your peers (aka partners .... aka competitors). But to potential donors who want to help fight poverty, for example, all the homeless organizations look the same at first blush. The fact is they are mostly very different.

How do you distinguish yourself??

It's no longer enough that you have a compelling case statement. (Although you can take some comfort in knowing that some of your peers have not reviewed or updated their mission statement or web site in years.) Being current and relevant certainly helps you distinguish yourself.

Each year, donors ask better questions and perform more due diligence about the nonprofits to whom they may give. It's important for the nonprofits to improve their own due diligence.

The keys for many donors are:
- show me the numbers!! (quantities, percentages, benchmarks, results, results, results)
- show me some independent evaluation
- show up (as either a volunteer or a site visitor)

Showing up is not a popular choice for many foundations, donors, and evaluators. It takes time. You might be uncomfortable in the surroundings. You might get dirty. (I'll save this rant for another time.)

GiveWell is a new foundation in NYC with the noble intent of evaluating charities in different fields and making the results public. They began this with big hearts, good business brains, and a real drive to bring efficiency and order to the evaluation process (ahhh....the appeal to my own left brain....). There are other evaluators across the country.

Many nonprofit evaluators are still learning that there's a lot more to evaluations than just cranking the numbers and publishing the results. For one thing, the numbers on true effectiveness are elusive. It's often made more difficult by our mobile society and the fact that many clients just don't stay in touch on a consistent basis.

The best way to distinguish your nonprofit is to show everyone how effective you are. Until you can get the donors and evaluators to show up for site visits or as volunteers (....do you have a really good volunteer coordinator???....), you need to be able to show you're effectiveness. It takes a process to measure your successes. That costs time and money, but it needs to be done.

You may learn something about your organization. It may mean a very critical self examination of what's working and what's not. It may take real guts to change. But you've got to ask yourself, why you do what you do? Who are you really trying to help?

Whether you're new or have been in this business for years, it's absolutely vital that you not only show everyone you are different, but that you make a difference. Due diligence and investments in process, self examination, and change will pay big dividends for everyone involved.

Big Heart, No Plan

This is nonprofit variant to the Texas idiom: "big hat, no cattle." I've worked intimately with a lot of great nonprofits over the last year. A common denominator is a huge heart and passion for making the lives of children better than anyone can reasonably hope. This is not only a big plus for the kids, but a big lift for our communities and even our planet.

But there's a big problem with some of them. They've got no plan. They just grab onto the latest concept or donor or volunteer or foundation and HOPE that will solve solve their problems. They call that their strategy.

Hope is not a strategy.

The most recurrent problem is under funding. Sometimes the "strategy" is to work harder for a home run; or wish for the Hail Mary pass for the touchdown; or just pray more fervently.

Don't get me wrong. Prayer is a very good thing. A necessary thing. But get off the railroad tracks before you start praying for the train to stop. Take that first step (to the side for your safety) then the next step forward. In other words, get a plan. Like my dad always said, "plan your work, and work your plan."

In Brian Hurd's excellent paper, "Growing Ministries the Right Way," he makes the point that successful, sustainable fund raising is not just scheduling a series of events and making a bunch of asks. It's about putting a system in place. Planning a process and sticking with it.

This is not rocket science, but it does take time and persistence. It also means taking the first step. If you think you've run out of time to plan because the bills are due, you're wrong. The bills will always be due. A good way to insure you never catch up is to never plan and never put a system in place to run your organization like a healthy business.

Where do you start?

Peter Drucker, the legendary business consultant, gave us five must answer questions in order to run an effective nonprofit. Do you even know the questions?? Hint: they're about mission, customer, value, results, and plan.

There's that word again. Plan.

If you expect to get funding from big donors, whether sophisticated foundations or individuals, make sure you've got answers to all those questions. The big donors are big because they live in a world that works to the answers from those questions.

Where do you think they got all those funds to donate? From well run, for profit organizations with good answers.

If you're a brand new or very small nonprofit without a 990 or audited financial results, you at least need a good business plan until you get bigger. People want to give to people, especially people who are helping children. It's the easiest of all fund raising.

But savvy individual donors and virtually all foundations want to insure their funds will go to good stewards no matter how good their cause. They will be asking to see the results and understand your plan before they contribute to your great organization.

So take all those strengths that helped you develop a great heart and develop a great plan in order to have a great organization to help those in need. And don't let the ego from the big heart get in the way of what's best for the kids.