Being Charitable in a Slow Economy – A look at both sides of the coin

As a business owner and a community volunteer I love helping our local community as much as possible, however, it seems as if I’ve recently noticed a catch in the system. Non-profits most generally operate on funds provided by the charity of others. They have fundraisers and events, and they take the money raised on these things and use it to fund the cause they support. I serve on a number of these boards so I do know that economic booms and slows directly effect these non-profits. In a thriving economy members of these non-profits and community partners tend to be more generous in giving out money, but when they tighten the proverbial belt during slower economic times, some of these extra expenses are the first to be cut from the budget of many corporations. The problem, however is that as these Corporations cut back on the giving, the non-profits suffer because unfortunately they have to cut back as well.

I thought I’d explore this problem from both sides of the coin. First we will look at it from the non profit side. I wanted to share some views I have on what generally happens and then a few suggestions that probably everyone already knows. Afterwards, we’ll explore the same situation from the business standpoint. We will look at what we can do to continue to support the organizations we love, even when the economy is quite booming as we’d like. I will also share some of my corporate practices that I’ve either come up with or adopted along the way.

The Non-Profit Side

Non profits rely on money from others either through membership or charitable contribution to survive. Without others supporting these non-profits they just don’t work, it is that simple. Non profit organizations most generally have a board of directors that guide its flow. Many times, in my observations, these board members are usually business leaders in the community; many of which serve on several boards throughout the community. They are also expected to contribute, not only volunteer time, but also in many cases monetarily. As I stated prior, when businesses cut back non-profits are usually one of the first places they trim. This can be bad, especially if the non profit has come to rely on these contributions. I server on several boards in my own community, and even chair or have chaired a few. The most important thing for non-profits is to STICK TO BUDGET. As with any business the budget is the key, and not a terribly complex concept to grasp. If you don’t have the money set aside, don’t spend it. I am firm believer in always having a budget for any non-profit you serve on. If you sit on a non-profit that doesn’t have a budget it can be bad for the organization, and indirectly (as a board member) bad for you. What some might not realize is that upon acceptance of a board position, you also take on a liability for the decisions of that board. There are things like director and officer insurances that protect the members of the board, but the bottom line is that anyone can sue anyone else for anything they want. This doesn’t mean it’s a valid argument, or that the person is right in doing so, but lawsuits happen daily for all sorts of various reasons. From that standpoint, having a good budget in place makes sure the organization is able to continue to pay its bills, and do the good that is was setup to do in the first place. Not only should non-profits have a budget in place, but in my opinion that budget should always balance. As a board member, I personally don’t want to spend money that is not there. I also don’t want to be facing the barrel of this loaded-gun later down the road; even if the “we’ve got a little extra money now” mentality should rear it’s head.

Balancing Your Budget

Balancing the non-profit budget is pretty simple. You make sure that your income and your expense are the same. Now a budget is just a road map, so there is no surefire guarantee that things will work out exactly as on paper, but I’d rather have a map when heading into a jungle than just relying on instinct. Especially when there is a board involved. Boards, in general are made up a group of people usually with many differing opinions. This can be a good thing, and it can be a bad thing. In most cases it is the glue that makes non profits work. It helps make the organization the best it can be by offering up differing opinions. Just remember the Golden Rule of boards. BALANCE THAT BUDGET. I think it is important to always shoot a little high on your expenses to start with. That way you have a little money saved up for unforeseeable events. You never know when that air conditioner is finally going to give way, and while we never plan on things like that happening it usually comes at the worst possible times. By having a high estimated expense side you’ll have room to adjust to these problems without blowing the budget. The next thing I suggest is that you take those expenses and then come up with a good game plan as to how to come up with the funds on a categorical list of income that you have available. I try to always shoot these lower than possible and then at the end try to cut expense (not project bigger incomes). Remember working hard gets you so far, but you can’t make money grow on trees and you can’t just put a number in income that isn’t realistic and not expect failure. If you make more money than expected, or pay less in your expenses great, you’ll have that money set aside for next year. Just because an organization is non-profit doesn’t mean they have to break even on a yearly basis. They just don’t need to be in the business of turning a profit for themselves, but rather using that money to benefit the cause.

Focus on your organization and events

Focusing on what your organization is about is the second key to a successful non-profit. These are a few key things I want to touch on here. First, if you don’t have a clear plan of action, you’ll simply be caught spinning your wheels. I think this goes hand and hand with your budget. After all, how are you going to budget if you don’t know what you plan on doing with the money. Remember to focus on the key purpose of the organization. Try not to get too far away from the purpose found in the by-laws as you steer the organization on its course. Secondly, in fund raising, try to have only a few larger fund raising events instead of several small ones over and over again. As a business owner, I can assure you I’d rather give you money just once than to think, oh no here they come for more money. I think most business owners feel this way. This is why I feel it is important to always run new ideas through a simple test for non-profits. A) Does it benefit the things the organization wants to benefit (ie. the community, The goals of the organization, etc), or B) Does it make the organization money that can be used to benefit the things that the organization wants to benefit (ie. does this event/project raise funds for our organization, does this event/project make money that can be used to benefit our goals). In 90% of the cases, if it doesn’t do one of those two things, then it probably will just be a time waster for the organization. Non-profits can put hours of time into a project/event, do all the right things, and still not have one of these two things happen. If you are trying to fund raise, remember that you must also consider your paid staffs cost in the project/event. If the staff works 40 hours on something that only profits $500, you need to make sure that after paying your organizations staff, that the $500 mark isn’t reduced to nothingness. It’s are scary thing for non-profits to let go of some of there smaller fundraisers, but in the long run your community partners will be happier to give to you just once, or twice a year than every time they see you coming. It’s also a good idea not to refocus on the same things as others. If you have similar goals as other non-profits, try to partner with them to reach those common goals.

Be mindful of the other side

As a non-profit you must also remember a few key factors about the Businesses that support you. First, these partners are supporting your organization because someone they trust asked them or because they directly believe in the organization. Remember to nurture this relationship every chance you get. Let them know that you appreciate them for helping your non-profit. Make them know that they are getting something out of it. It doesn’t always have to be advertisement. Just knowing how the event/project worked to benefit others can sometimes be a great thing to share with your supporters. Next, we must remember that just because someone tells us no on giving, doesn’t mean that they don’t support our cause. Maybe timing was wrong, maybe they just got done doing something big for another organization, maybe they just don’t want to; regardless of the reason, remember that it isn’t always just because they don’t want to support you. Be courteous and ask if you can check back with them on the next project/event. Lastly, most businesses budget too. This means that its a good idea to get your project/event planned far enough in advance that you can make sure to let your supporters know about it. Most businesses plan how much money they are going to give well in advance, and if they can budget you in it’s almost as good as knowing you are going to be funded. Keep your supports informed above all else, and let them know what is going on in your organization. I find it much more easy to give when an organization sometimes sends me information where they aren’t asking for money. It makes it feel more like a relationship and less of a hand out asking for money.

Non-Profit Conclusion

The non-profit side of the coin can be tough. Harder times, don’t mean that less money is spent on expenses, but many times does mean that business will not support you financially because of their own budget restrictions. It’s important to make supporters aware of your plans, and keep focused on a clear vision for the organization. Always try to make your supporters feel appreciated and encourage them with stories of the success of your end goals. These things lead to a better relationship with your community partners, and help keep you in the spotlight when it comes to businesses contributing to your cause. Innovative and Proven Projects/Fundraisers tend to be more successful than the same old event that everyone else does. Bake Sales, Golf Tourney’s, Car Washes, and the like are great, but they can get a bit repetitive and boring on business owners if lots of organizations have the same type event in your community. Remember that you are going to same businesses that all the other non-profits in the area are going to, so a clever new idea might be more welcomed. Set yourself apart from the herd.

The Business Side

Business owners and managers are constantly called upon by non-profits and organizations for support. To the point where it can sometimes feel as if one can’t get any work done without being bothered. As stated above, when the economy slows businesses tend to tighten up the belt. They stop giving as much and want to make sure that the money they do give is well deserved and goes to benefit something they truly believe in. Business owners will often give money to a cause near and dear even in slower times, but in todays fast paced world, business owners and managers can often become inundated with requests for support. It is important to know how to handle these requests and not let them get in the way of your day to day business operations. During my business career I’ve adopted several methods in helping me do this. These methods are great guidelines, and while they don’t always fit the situation, they do tend to offer the beginning of a roadmap on what to do when non-profits come calling, and if you are in a commercial area and have been in business for any amount of time, or perhaps even if you just have a phone number or an email address, then trust me when I say – THEY WILL CALL AND ASK YOU FOR SUPPORT.

A clear understanding

First, I recommend that as a business you have a budget, which you most likely do. You should also know how much you are willing to spend on two different line items of that budget; Advertisement and Charity. Just as important is the ability to recognize the difference in each. Remember that sometimes what can seem like advertisement is just you contributing to another organization (Be it non-profit or profit). If an advertisement isn’t creating a proper return on investment (ROI) then you probably should discontinue with it. At the same time, just because you sponsor a charity that you believe to be a good cause, doesn’t mean that you are just giving your money away. Remember that people see what you do in the community. There are also times when charities will put your names on thank you advertisements, and promote you as the sponsor for their event/project. These things can sometimes be more profitable and have a bigger return on your money than standard forms of advertisement. In general just knowing have to spend, what you want to spend it on, and when you want to spend is only a good start. It is also important to make your staff aware of your goals and why you can’t support every cause (no matter how great) that comes calling. Come up with clear procedures on how to handle these phone calls, emails, and office visits. The best idea I have adopted thus far is from a friend who came up with a grant consideration form. The form (my copy available for anyone who’d like to create one) explains in writing that while the business would love to support every organization it simply just can’t due to the overwhelming amount of requests that it receives. It asks for simple details of the reasons funds are being requested and then we meet to determine which of the requests to fulfill. The form does a few things from a business stand point. Primarily, it makes it where you as a key person in your business, don’t have to stop what you are doing each time a request for funds comes in. Alternatively, it also creates a form that can be filled out more conveniently keeping in respect both parties time. Thirdly, the form tries to eliminate last minute events/projects by asking them to fill the form out in advance of the event. My form states that we only meet once a month and will determine which projects to support at that time. While this is what normally happens, we do look at them as they come in and make alternate arrangements on a case by case basis if needed. Last, the form stops about 50% of the people who are asking us for money from asking us for money. It amazes me that people who want a donation, or sponsorship won’t even fill out a simple one page form to get it. This however makes my job very easy in telling those people that I am sorry but I can not support their project/event. If they do not have time to fill out a form, why should you have time to support them with either your time or money? Print these and education your employees on how to hand them out. Again this isn’t a fix all but it is definitely a great start in eliminating some hassle.

What about that one you just have to support no matter what?

There is always those times, when you have to support an organization. Perhaps it’s because of the person asking. Maybe it is because that organization is near and dear to your heart. Maybe you just feel led to help. No matter the reason, remember that you don’t always have to support financially. You can volunteer time and service to events/projects. We are often asked to donate an item from our business instead of giving money. Our business is a service business for computer repair, and we love promoting that business. I will (upon the recommendation of a friend in the restaurant business) generally give a certificate for a “Free Computer Tune Up” or a “Free Hour of Labor” certificate before I will give an organization money. The reason is two fold. 1) The certificate gives my business an opportunity to be advertised. 2) I possibly gain a customer that didn’t know about my business prior. I think the certificate / gift card idea is also great for the business. Several times I’ve seen an item go in a silent auction for 5 times what I’d normally buy it in the store for. This gives the businesses opportunities for ROI, while still letting the organization have a successful event. A win for both parties!

Knowing when to say NO

Unfortunately there are also times when you need to say no. No isn’t a bad thing, especially if the person asking for the donation doesn’t have a cause that fits into your idea of something your business would like to support. The 2 best examples I can give about this are from calls I receive on an almost quarterly basis from two organizations. I’ll also share my tip for figuring out if I’m being scammed by a fake. The first is a call I receive from various persons saying they are selling tickets, t-shirts, whatever to benefit the local school. All these whatever will be printed and given to the school to hand out at all the football games, etc. Sounds like a great thing, until you realize that this person doesn’t work for your local school district. In fact, they probably don’t even give out the items they say they are going to give out (who knows!). The best thing I tell them if I find out is that I support the organization, school, etc. either directly or locally which is true. I would much rather have a student/local person ask me for a donation, than a cold call sales person from a company trying to turn a profit (even if they are going to share with a great non-profit). Sometimes, however I simply don’t know if the call is from someone local or from someone trying to scam/sale for the organization. The simplest solution to this problem is something I thought of a while back. Listen to the offer, and if you still can’t decide then tell them you need to consult with someone else within your organization. Ask for a number that you can call them back at. If the number isn’t local, then chances are neither is the person on the other end. This method of weeding out sales calls hasn’t failed me as of yet. If you still can’t determine, send them a Grant Request Form from the previous section via fax or email.

Business Conclusion

In conclusion, businesses always want to support their communities and make them better places to live. There are just more organizations out there than we can support. It doesn’t mean you don’t have a worthy cause, it just means you’ll have to get your funds from another source. Remember that the people asking you for donations/support are usually customers and so you always want to be mindful of the results of supporting or not supporting them. You don’t have to support with money though. You can use the steps outlined above to both help the great organizations in your community and promote your business. Just remember that it doesn’t make you a bad guy to say no, even if you’ve sponsored or donated before. By setting up guidelines and procedures, budgeting your donation and advertising expenses, and making sound judgement calls, both your business and your community can benefit from a mutual relationship that encourages team work and promotes both the non-profit and your business.