business development, fundraising industry

Stop Being Interchangeable

Too many businesses, consultants, professionals, and organizations exist just to exist. They’re the same as everyone else. “We really listen to our customers.” “We take a data-driven approach to your marketing.” “We are driven and willing to do what it takes to get the job done.”

Blah, blah, blah.

Do you think anyone doesn’t listen to their customers? Do you think marketing firms don’t have data? Do you think that companies just exist to do a half-assed job and leave you unsatisfied?

Those aren’t differentiators.

Those aren’t anything special. If you’re writing something like that, I have to tell you, you’re not doing what you think you are with that kind of posturing.

Ultimately, you’re no different than anyone else. I can see it when I read your blog posts, or your website. Most importantly, I see it in your actions.

I know, because you all say the same things over and over and over. Just like everyone else in your sector.

You’re nothing special for that. Instead, you’re just like the rest. Interchangeable.

And that’s a problem.

Because when you’re interchangeable, you’re competing on price. When the results are the same no matter where you go, you go where those results are cheapest.

Don’t do that.

Don’t let your customers do that. Don’t let your donors do that (don’t let them “shop” your nonprofit for a better “fit” for their donation dollars next year).

Set your value, and let others come to you for the value you bring.

Be different.

Be unexchangeable.

You’re interchangeable if there’s nothing special about you.

If you are (or I am) “just another copywriter”.

Or “just another life coach”.

Or “just another animal shelter”.

Or if you’re doing work that others have already defined, have already scoped out, and all you are doing is filling in gaps they have identified.

That may be okay.

But it’s not really interesting.

More important, it’s not really lucrative.

Most important, it’s not really make a difference.

It’s the generic work, the things “anyone” can do.

Those are the 85% – the 90% – the 95%.

In order to move the needle – in order to really change something – you’ve got to stand out.

You’ve got to be different.

You need to be in the top 5%, to be something that exists nowhere else, to bring ideas that exist nowhere else.

And to do that, you probably need to create some of your own opinion material.

Rather than collating everyone else’s work, just summarizing, you probably need to stake out a position that’s different from everyone else.

You need, in the terms of the Army, to “take that hill”, then defend it with everything you have.

Be unique. Demonstrate that uniqueness. Celebrate it. Promote it.

If you’re not unique, find a way to be unique.

Sales calls this the “unique selling proposition”. It exists for a reason.

When I’m writing about nonprofits, I don’t have a pedigree of a degree and decades of working in the sector.

All I have is my observations, and my opinion.

But they’re mine.

I’m not simply regurgitating results from the Giving USA report (though I did review it). I’m not just collating a bunch of statistics from online researchers and presenting them as if they represent my own original thought process.

I’m actually creating a new position – a new set of opinions – on how nonprofits should work.

I believe they should stop measuring “Retention” and instead should measure “Faithfulness”. [Read that here.]

I believe they should do more in the way of forecasting out four, five, or even 10 years, to see what their expected finances will be. That way, they can determine how much they should spend in order to change that future with greater retention rates. [Read that here.]

And I believe they should stop calling themselves “nonprofit”, as if they are identified by their tax status. [That’s a much longer post, and for another time. I’m not ready to back up that point just yet.]

The message is, though, that each of these positions is unique. I take it, I can defend it, I am using these to stake out my own place in this industry.

My blog posts aren’t just collations of “7 tips that everyone else already knows, but I feel like I’ve got to create some kind of content, so, here, take this that nobody really is going to read or, if they do, won’t learn anything new anyway, but, heck, at least it plays the SEO game well.”

I’m actually providing thought leadership.

Which, if you want to be taken seriously, you’re going to have to do as well.

No more of this circle-jerk of linking to “influencers” in the hopes of some kind of a shout-out.

No more repeating what’s been conventional wisdom for decades, just because you need something to fill a content hole this week and you lack for ideas that might change how you do business or work with a partner. ‘Tis better to skip throwing more crap on the pile than to simply regurgitate for the sake of Google.

Do your own research.

Take a risk. Stick your own neck out.

Make your own noise.

Be different.

And make the world better for it.

***

This is part of a sporadic series of posts on useless ideas to stop, and what to replace those with. [Stop Saying Thank You] and [Nonprofits Don’t Have a Donor Retention Problem, They Have a Donor “Retention” Problem] are the first two, with more to follow.

fundraising industry

Provocative Thoughts on Donor Retention Math, and a Homework Assignment

There’s one big metric that is measured in most nonprofits: the “retention” rate. [See here why I think that’s bad terminology.]

Generally, the nonprofit sector has a problem with this. Most donors who give one year don’t give the next. The current benchmark is under 50%. That means fewer than half of those who give one year will give to the same organization in the next year.

But overall, philanthropy isn’t really growing or declining. In the United States, it’s been hovering about 2% of Disposable Income for the last 3 decades or so.

This basically means each year, the same people give, about the same amount, to charities (mission-driven organizations). They’re not giving more, or less, they’re just giving differently than the year before.

So, most of your effort spent acquiring new donors, or re-activating lapsed donors, is wasted. Because, in another year, you’re going to have to do it all over again.

Let’s Get Mathy

(Yes, that’s a bit of a play on my name. Sue me.)

The 50% retention affects you like this: if you just set a group of donors who gave a total of $100,000 this year on autopilot and let them run, the next year you’d receive $50,000. The year after that, $25,000. And then $12,500, $6,250, and $3,125. That’s the 5-year value with a 50% retention rate. Let’s call that $96,875 the baseline that you could get in the next 5 years (after the initial $100,000 “acquisition” year).

So, what happens if you increase your retention rate a little bit? Maybe instead of 50%, you have 55%. Is it that big a difference?

YES.

Year 2: $55,000;

Year 3: $30,250;

Year 4: $16,638;

Year 5: $9,150;

Year 6: $5,033.

Now, the 5-year total is $116,701.

That’s an increase of over $19,000. That’s a lot of money, for not a lot of change. Just 10% more donors sticking around each year (55 vs 50).

What Would You Be Willing To Spend In Order To Keep An Extra $19,000?

So how do you apply this kind of math?

Well, the first step is to start making projections. It’s easy to get into the habit of looking only at one year’s worth of data, or this year’s budget, or last year’s gift, and ignore trends or forecasts. Don’t do that. Go deeper. Start measuring you retention rate and making long-term projections to see what you can reasonably expect in the future.

A second aspect is to consider what you might have to do to get that additional retention. Because, let’s face it, doing what you’ve always done has gotten you to your current 50% value. You need something different, and that probably means spending money. On donor appreciation events, or another fundraising staff member (maybe part time) to make personal phone calls, or an extra mailing in the year, or whatever.

A good way to think about this is to decide what additional programming value you want to create from additional funds raised. If it’s that you want to get $5,000 additional value out of that $19,000, then you have $14,000 with which to do it. If you need $15,000 additional value, then you need to make it happen with $4,000.

Here’s how the math works out: Returning $19,000 (net $15,000) for a $4,000 spend (to improve retention from 50% to 55%) is an ROI of about 390%. Alternatively, it’s a Fundraising Ratio of a little under 40% (or Cost to Raise $1 of under $0.40). You may think that’s too high, but it’s not. It’s totally worth it. Because you brought in waaaay more money than you spent.

Another Example, Please

Or, you might need to think about it like this: if you need $15,000, what’s another way to get it? Well, suppose you’ve done some analyses and you feel you would need to spend $30,000 to increase retention enough to net that $15,000. How much do you need to increase retention then to get that additional $15,000? You’ve obviously got to figure out a retention strategy that’s going to work to bring you $45,000 additional money over those 5 years. Turns out that’s about a 61% retention rate. So, will your $30,000 spend increase your retention by 20% (61% / 50% – 1 = 0.20)? If not, you’ll need to find more efficient ways of doing it.

Working Out The Math

Spreadsheets are great for creating these solutions. You can use them to play around in just a few columns to see different projections with varying retention percentages.

Begin with your current retention rates, and project that out to an immaterial amount. Above, I went out for 5 years, and that seemed small enough relative to the initial cohort of $100,000. As you increase the retention rate, though, you’ll see that cohort of significance extend later and later.

[At that point you will probably also want to start adding discounts for interest, but that’s a bit more technical and doesn’t materially change the discussion, just the magnitudes of the numbers involved.]

For example, it takes about 7 years at a 50% retention rate to drop the annual giving to under $1000 ($781 in year 7). At a 55% retention rate, not only is each year’s value higher ($19k in the first 5 years above), but it takes longer to become immaterial. There’s a whole additional year of material giving at this level ($837 in year 8). And as you increase the retention rate more, the compounding effect gets greater and greater. A 60% retention rate adds 2 more years, and an 80% rate doesn’t become immaterial until year 21. Talk about impact.

Your homework challenge is to figure out the differential in giving that would come from that 80% retention rate, and then determine how much you could spend to improve that retention in order to have a Fundraising Ratio of under 50%.

Knowing what some of the possibilities are can enable the discussions you’ll need to have with your entire fundraising staff, from front-line to directors, on where your priorities should be and what you might need to do to materially change your results.

Conclusion

The point is, a small change in your retention rate can have a big impact. If you know just how big, then you can know just how much you can spend, and should spend, to make that happen. Until you start working out the math to actually make the changes, though, it’s going to feel like you’re forever running in place.

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When you just tryin’ to keep up
business development, craft

Why “…Those Who Can’t, Teach” Is A Terrible Saying, and How To Fix It

Raise your hand if you’ve ever heard this old adage, generally used disparagingly…

Those who can, do. Those who can’t, teach.

98% chance your hand, like mine, is in the air right now. Everybody’s heard this phrase. Most people have said it. Keep those hands up if that phrase has come out of your mouth. While not as high as before, I’m pegging the over-under on this one at about 75%, self included as well.

Generally, this saying is issued to somehow insult teachers, as if they “couldn’t handle the real world” of mathematics, or writing history books, or of producing documentaries. You’re not good enough, is the implied meaning. You’re not dedicated enough. You can’t handle the pressure. You’d be out making a lot more money in the “real world” if you could, but you can’t, so that’s why you’re settling for teaching.

And while some of those may be true, on an individual basis, it’s a rather gross stereotype, one I now see as encompassing a terrible mindset about those who teach.

Problems Inherent

One major problem is that it’s rather limiting to a professional to say that he or she is required to perform within the world outside academia, as if that is the first choice and the standard for performance within this world. We hear so often, “Be what you want to be,” but then receive contradictory messages denigrating those who may just really want to remain immersed in the subject itself, rather than applying the principles in an increasingly competitive, cutthroat economy. If a teacher, who is happy teaching, sees all of her peers miserable because they’ve succumbed to the rat race, who has made the wiser choice? Who has followed her dream more faithfully? Who should we really admire and look up to?

Second, what does this phrase tell students about those who are instructing them? Oh, these people can’t really do economics, so they’re here in your high school class to teach you about it. Yeah, we can’t afford real professionals, so you get the amateur hour. Is that instilling confidence within our youths, or, really, anyone on the outside, to think of our educators as incapable of performing at the level required of them? Or causing them to doubt their education, and, consequently, their own opportunities for the future?

So Nobody’s Teaching Anymore?

Far from it. Many still choose to teach what they know. Not just in the formal school system, either. We’re now seeing a mass democratization of education, with online courses on hundreds of platforms, where one can learn everything from traditional college-level biology or philosophy delivered by big-name institutions (https://www.edx.org/) to immensely practical, individually-led on-demand learning about flowcharts or e-commerce store inventory management (https://www.udemy.com/).

The number of these individual courses grows every day. And they’re not just on dedicated sites – new tools now mean just about anyone can teach a course on, well, virtually anything they know about. I just logged on to Facebook (ugh, I know), and the 3rd post was literally titled “Finally, a Predictable Way To Get Writing Clients”. This is, clearly, another writer selling me his system (free at first, then the upsell once I’m hooked) for getting clients.

I can buy virtually anything these days, because people are selling training courses for nearly everything under the sun. The question is, Why? Why, if we have denigrated teaching so much and for so long, would so many be putting time and money towards presenting themselves as teachers? Why would they be leaving the doing of whatever it is (getting clients, trading energy derivatives, building business analytic systems, etc.) they have clearly achieved some level of success, in order to shift over to the lowly position of teacher?

Because It’s The Economy, Stupid

Now, just to be clear, I’m not calling you stupid. (I’m referencing a phrase from an old Bill Clinton candidate message.) I am, however, pointing out that people selling those courses are, in fact, selling something.

And those who are working at teaching economics or poetry or computer science at our high schools and colleges are actually selling that education, as well. They may be selling in bulk, and the payor (school system) may be different from the client (high school students), but the idea is the same.

Instead of doing the work once, and getting paid for it once, by an employer (or client), these innovative entrepreneurs are doing a different kind of work once, and selling that work product multiple times, with little to no marginal cost to them.

It’s like how if you custom-design cars, or computers, or clothes, it takes a lot more time and cost to produce them. But if you figure out how to do one thing over and over and over, you spread the design and set-up cost over a vastly larger set of outputs, meaning your costs go down, and your profits go up.

Think about it. A professor of biology does the same amount of work to lecture 20 students as 30, as 40, as 1. Which makes the most sense, from an economic standpoint?

An online educator proclaiming to instill within me a 7-step foolproof method for how to get new writing clients could be using those 7 steps to land new clients left and right. But then she’d be stuck doing that writing work over and over and over again. Much better to, instead, exploit my naivete a little bit, make some passive income selling a portion of her knowledge to me and ten thousand others around the country (around the world, even!), and free up some time in her day for a visit to the State Park or to work on developing the next course. Again, which one makes more economic sense?

Am I Just Being Extra Cynical?

I don’t think so. I believe I’m offering a warning to those out there who imagine they will get something for nothing. That they’ll get the “secret” to instant success and financial freedom, simply by following some guru’s “foolproof” formula for landing bigger, better clients or making money with other people’s money in real estate.

Yes, those people could be off doing the thing and making money there, but they’ve figured out that it’s an easier life selling the idea of making money in whatever industry they have some experience in, and they’re pursuing that endeavor with abandon.

Good on them.

I’m just not likely to participate.

Didn’t You Mention A “Better Phrase”?

Yeah, I guess I did. Remember, the old idea was “Those who can, do. Those who can’t, teach.” I think we need to retire that one and, instead, replace it with the following.

Those who can, do. Those who wish to scale, teach.

Keeping this in mind will help everyone who comes across the next “free” seminar on how to get something for nothing. It’s less likely to give you value than to create a profitable revenue stream for the “guru”. You’ve been warned.