Fundraising leaders … ‘consider your exit strategy’

As I sat in the lecture theatre listening to angel investor guru Dr Tom McKaskill present on … ‘Venture capital investment and high value exits’ … I kept thinking about how fundraising leaders might apply a high value exit strategy to benefit their careers and the organisations they serve.

Maybe I was just daydreaming when McKaskill said … business owners, entrepreneurs and investors are locked into an old paradigm about value creation being based on proven profitability… because I was hearing …flawed fundraising cost ratio discussions and damaging short term fundraising budgeting.

Maybe I was just daydreaming when Mckaskill said … but this is not what ‘acquirers’ are evaluating. They are looking to the future and assessing what return they will achieve on their investment … because I heard ‘donors’ in place of ‘aquirers’!

But after McKaskill said … thus it is the future potential of the business which is much more important than its past. As soon as we accept this view, we can be proactive about creating a future which can deliver a much higher value to the buyer than what can be shown from past results … I realised I wasn’t dreaming after all! That’s what fundraising leaders accept too, and that’s what they invest in with donors and with the institutions/causes they serve.

So when should fundraising leaders start planning their next career move? By applying ‘exit strategy’ they should consider when they might leave an organisation before even agreeing to work with an organisation – when considering applying for a new position or when considering providing fundraising counsel for a new client. As McKaskill says they need to be … looking to the future and assessing what return they will achieve on their investment.

If you can’t deliver a strong return on an organisation’s investment in you, don’t invest in them. You need to be able to ensure the ‘right’ organisation makes the ‘right’ investment in you before committing your skills to create new strategies and work practices delivering higher fundraising returns on investment over a prescribed period of time.

You need to be able to assess, prepare and deliver a three to five year fundraising business plan. You need to know the critical timeframe in that plan when the return of investment in you is at its peak – because that’s the point at which you need to apply your exit strategy.

It’s in your best interest that you leave at the point of greatest return and least reputational risk.

It’s in the organisations best interest because part of the fundraising business plan you prepared includes succession planning strategies, team building, fundraising professional development and fundraising corporate culture strategies.

Thanks Dr Tom McKaskill for reminding us that fundraising professionals … need to focus on strategic exits if they are to achieve a high return on their investments.

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Taking a lead role in institutional advancement

At Fundraising Institute Australia’s (FIA) National Conference I ran a masterclass on the role of the fundraising professional and how they can and should play a leading role in their institution’s advancement.

I began by asking what the role of the fundraising professional is.

And if they, as a fundraising professional, played a leading role in their institution’s advancement. Finally I asked what I feel is a key question; just who is setting the fundraising agenda for their institution or cause? Is it primarily the fundraising professional? Is it the CEO and/or board? Or is it a strategic combination of this leadership group led by the fundraising professional?

How do institutions value the respective roles of the professional fundraiser and the institution’s CEO? The consider how you might value their respective roles if you know that 80% of the institution’s annual income is fundraised income?

Professional fundraisers need to understand the quantifiable nature and value of the development function, its institutionally sustaining and  transformational value. Above all, they need to demonstrate that value to their CEO and board – and by doing so they demonstrate the fundraiser’s value.

What is the annual % turnover of fundraising income of your institution now? What could it be, what potentially should it be?!

 There is a measurable difference between ‘good’ and ‘great’ fundraising.

To achieve great fundraising outcomes for your institution or cause, you need to apply best fundraising practice across ALL fundraising programs. To do so you will need to convince your CEO and board to invest in fundraising development … to invest in you and to invest in a bespoke Total Development fundraising Program (TDP) where the fundraising program is aligned to your institutions mission, objectives and ‘strategic’ plans.

And who is best placed to design an institution’s bespoke TDP? Surely not the institution’s board, executive or trustees?

What is a Total Development fundraising Program (TDP)? How does it fit into a fundraiser’s role; especially, into the executive fundraiser’s job specification. And can you really apply best practice to it?

A TDP integrates ‘best fundraising practice’ across the three major areas where an institution benefits from fundraising. These include: budget and recurrent cost needs; special projects such as capital projects; and investment and discretionary income. Sometimes a TDP is likened to a milking stool, an old-fashioned, typical three legged milking stool – and if just one leg breaks while you’re milking the cow, well …..

When designing  a bespoke TDP for an institution or cause, a professional fundraiser needs to first research the institution’s position in the market, agree on the institution’s fundraising ‘brands’, then, for each brand quantify its fundraising market, market reach and market penetration. For each brand, its Unique Selling Propositions (USPs) should be developed and selectively expressed as donor propositions

Once these fundraising brands and their respective market and donor proposition values are agreed with the institution’s leadership, the fundraising professional can plan a ‘bespoke’ TDP. And because a TDP may take 3 to 5 years to implement, the professional fundraiser needs to prepare a TDP Business Plan.

The objectives of a TDP Business Plan are to provide boards, executives or trustees with an indicative plan projecting the total annual fundraising programme cost and income, and cost ratios  for each fundraising programme

A TDP business plan can demonstrate a progressive decrease in the overall TDP cost ratio year by year plus ‘appropriate’ variations to cost ratios year by year for different programmes – increasing TDP gross income should be matched by increasing TDP net income.

A TDP Business Plan provides opportunities for the CEO, fundraising professional and all appropriate stakeholders, to critically assess fundraising priorities and identify what resources are needed to achieve agreed fundraising plans; including development staff roles and resourcing

Professor Adrian Sargeant who, amongst other roles, is Adjunct Professor of Fundraising at the Australian Centre for Philanthropic and Nonprofit Studies, Queensland University of Technology, states that …..“The successful quantification in monetary terms of the value of a donor can be a valuable aid to subsequent development of fundraising strategy.”

A TDP Business Plan needs to address donor Life Time Value (LTV). Simply defined, this is a measure of the total net worth to an organisation of its relationship with a particular donor. To calculate LTV one has to estimate the costs and revenues that will be associated with managing the communication with that donor during each year of his or her relationship

Each fundraising Programme can be assessed under a RATING criteria. The rating system criteria can include the level of cultivation and solicitation of the 20% (approx.) of donors who give 80% of an institutions income – the 80/20 (Major Donors); Friend Raising (LTV) – the program’s overall contribution to LTV; and, Fund Raising (ROI+) – the program’s contribution to both gross income plus the cost effectiveness of the programme.

Each programme in the TDP can then be rated 1, 2 or 3 against each of the 80/20, Friend Raising and Fundraising ROI measures, with 1 being the highest. By adding the three measures, 3 is the highest program rating and 9 is the lowest. Priority resourcing therefore may be directed to programs rated as a 3, and so on, to programs rated up to 9.

The objective of implementing a TDP Business Plan is to delineate fundraising best practice and resourcing efficiencies utilising quantifiable measures which demonstrate individual fundraising programmes contribution to gross return, net return and donor Life Time Value, over a minimum 3 year cycle.

A bespoke TDP Business Plan guides the professional fundraiser, their board, executive and trustees, on how to increase donor acquisition opportunities and add LTV to acquired donors from all sources, through progressive cultivation and sight setting enhancements across ALL programmes.

To sum up, the professional fundraiser can and should play a leading role in institutional advancement by delineating the institution’s fundraising objectives and TDP program in partnership with the institution’s board and executive. As a consequence, the professional fundraiser will inspire transformational fundraising for the institution and cause; and potentially, transform the institution itself.


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