Ep 96: Your Numbers Tell a Story: Understanding Nonprofit Finances with Stephen King

Storytelling is a major component of any organization’s marketing.

People love a good story, and effective storytelling can make the difference between gaining that new donor or falling short on your projections… again.

More often than not, when looking for a compelling story, one overlooks a glaring opportunity in one’s organization. See, when telling a good story, the devil is, as they say, in the details.

And what better place to look for details than one’s own numbers?

My guest today is Stephen King, Founder and CEO of GrowthForce, a financial management firm that specializes in working with nonprofits to help them keep their missions on track through sound financial management.

Stephen is a font of valuable information: from how to stay on top of your reporting, to how to leverage your accounting data to make all kinds of organizational decisions. He shares his understanding of how healthy finances create tangible results for every organization.

So buckle up for an eye-opening episode of Relish THIS.

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Stephen: Our industry has been focused on looking backwards. It’s focused on compliance, getting you through the audit, getting the nine 90 done so that you can check all the boxes. I’ve looked at accounting and saying, as a former director development, and said, How do we help you raise more money? What data would, How do your numbers tell your.

What, what? What information would be valuable for a foundation to be able to justify the increase of your gift last year by one and a half times their highest previous contribution? And what the Society of Fundraising executive says, If you show the donor the tangible result of their gift, you’re gonna raise a lot more money in both.

You’re gonna get higher average gift. And you’re gonna get more frequent giving.

Are you looking for ways to shorten your marketing learning curve and help your organization survive and thrive? Welcome to Relish. This the Purpose Marketing podcast. A show for purpose focused leaders who want to use marketing techniques to fuel their organization’s growth. If you’re a returning listener and you have it subscribed already, we’d love to have you.

Also please consider leaving a review wherever you listen to podcasts. Now, here’s your host, author, and marketing specialist, Stu 

Stu: Hey everybody. Stu here. My guest today is Steven King and he is the founder and CEO of GrowthForce. And if you think. A discussion about financial planning and financial management is going to be not completely fun-filled and full of just amazing advice then, then hold onto your seat because this episode is for you pretty much.

Every nonprofit at some point is going to need this type of service in order to you know, stay up on the requirements for reporting or just to get an understanding of, of what programs within their organization are working and which ones are not. And Steven comes to the table with some amazing ideas and some really great insights is as to how finance.

And financial management can help fuel your marketing even you know, getting your messaging right, allowing those numbers and that data to, to really shine. And these things are so important for any organization, especially nonprofits. I think this episode was just so much fun to record. Stephen is amazing.

Check it out and I, I hope you get as much out of it as I did here.

Good afternoon, Steven. How are you doing today? I’m doing great. Well, thank you so much for being on the show. I’m really excited to learn more about what you are up to over at GrowthForce and how you bring a lot of amazing insight in the financial space to nonprofits. Sounds like you have your own podcast 

Stephen: as well.

I do, yeah. I have a, a podcast, it’s called Path to Profits, and it’s designed, you know, I believe that non-profits need to run like a well run for. and the only difference is you, you reinforce, sorry, you reinvest the profits back into the mission and creating more outcomes. So, you know, part of what I try to do is to take the lessons of successful business and help a non-profit be able to apply them to their organization.

Stu: Yeah, I think that’s really a great great way to think about it. You know, non-profit businesses are in fact businesses, and so they, having, having some of those insights and, and understanding of, of the finance piece is so important. Where are you, where are you calling in 

Stephen: from today? I am in Kingwood, Texas.

I’m, I’m a New York City boy. Who got transplanted to a livable forest in Northeast Houston, and I gotta say, it’s one of the best things that happened here. We love it in Kingwood, Texas. Oh, neat. 

Stu: That’s, that’s, that sounds like a, a very interesting move to go from, from New York to to Texas, but I’m happy that you’re, that you’re enjoying it there.

What how did you get into the nonprofit space? 

Stephen: Well, I feel like I’ve always been in the nonprofit space. You know, I’m a oldest son of two Irish immigrants off the boat. the every single Sunday in the fall. You know, we were out raising money for the Colomb Fathers and selling raffle tickets, and anytime anybody was sick in the community, my uncle Jerry and aide had a raffle going to raise some money.

And so it’s kind of in your blood that you need to be great, have gratitude for all your blessings, and give back. My first real. Volunteer job ended up turning into my real job. I got involved with Amnesty International as a student area coordinator for a couple years. I was responsible for helping coordinate about 60 high schools, the New York, New Jersey, and Connecticut Tri-State area.

And then af I was at Ernston Young where I was a manager of accounting system design and as, and as a volunteer and. They asked me to become their chief financial officer, or, or I should say officially, the Deputy Executive Director for Finance and Administration, . That’s a fancy title. It was cool, man.

At age 29, I got to report to the executive director of the world’s largest human rights organization and do what I loved, which was accounting for an organization that I was already passionate. 

Stu: Yeah, that’s so important. I think, you know, in, in the nonprofit space and business space in general, just being able to, to align that kind of business culture with your own personal ideals is is fantastic.

That’s great that you learned that at such a young age and, and were able to experience 

Stephen: that. Yeah, I feel really blessed. I mean I was responsible for anything that was not related to human rights, so finance, fundraising, it, HR facilities in seven cities. But what was really interesting is after doing that for four years, and this was, I, I joined two weeks A in 19 19 89, which was like two weeks after Bruce Springsteen and Sting and U2 and Peter Gabriel finished a Worldwide Human Rights Now tour.

Can’t forget Tracy Chapman, right. And. and Amnesty grew from 6 million to 18 million in revenue in a year and 

Stu: a half. Whoa. And you, you were the in charge of, of handling all that growth. That’s you’d 

Stephen: fantastic. Yeah, that was my job and it was really great. I mean, I, I just l lived it, you know, seven days a week going to.

Grassroots activists and, and human rights activists across the country and sleeping on couches to help them kind of get organization around this, this massively successful accomplishment that Jack Healy made happen. And yeah, that’s cool. When I got to age 33, I was there four years and the accounting systems were done and the, the h we put an HR policy in place and all, everybody got a computer cuz they were all using typewriters when I showed up and, you know, all that money we put to waste on a technology infrastructure.

And then I that, I’m a builder, so I was thinking, all right, I’m done. I went to Jack and said, I’m 33, I’m ready to be executive director of a non-profit. And he. The job of the executive director is to raise money, so you need to learn how to raise money. And two weeks later, D Lee, d d Teal came into my office.

She was our director of development. She came in, she reported to me, she said, Diane Feinstein has decided she wants to run for Senate. And she called. So I have to. And Jack said, Why don’t you take over fundraising? I’ve heard you speak. You could do it. And I did. I ended up getting to about a little over 20 million a year, three years I did it.

And I just learned so much about how to raise money and how if you show the donors the tangible result of your gift, how you can raise more money, and that’s kind of what I’ve dedicated my life. 

Stu: Well, , there are so many questions that I have about that journey and, and, and just that, that kind of amazing you know, rocket ship rise for, for amnesty and international.

We, I mean, that sounds like a dream for most non-profits. Most non-profits are out there trying to figure out, you know, where they’re gonna get their, their next donor donor and, and how they’re. How they’re gonna increase donations and how they’re gonna make, make payroll and, and do all of the things attached to their mission.

Were, were there any things that were, were negatives about, about that kind of growth that, that you saw at Amnesty? Sure, 

Stephen: sure. I mean rapid growth creates a lot of change and change is hard unless you’re really good at change management and we weren’t. It also. It meant making a lot of mistakes.

You know, like when we put in that IT infrastructure, first thing I did was wire the building for, to interconnect all the computers. Well, coaxial didn’t go around corners. Well, it didn’t work too well. So, yeah. You know, but I think, I think the good far outweighed the bad. You know, we got to make a real difference in a lot of people’s lives and you know, I think what really helped was.

The leadership was passionate about the organization. So you know, we were all united. There wasn’t any politics for a political organization, right? It’s one of the only four non-governmental organizations that are affiliated with the United Nations. So it’s very political, but we weren’t internally. So I think, you know, that’s Jack’s leadership that really helped Jessica, Kurt, and I be one.

Stu: Yeah, that’s great. I’ve heard people talk about getting great big windfalls like that and how one way to help manage those is to. Is to, is to kind of bank the, the, the big gains and then budget a budget kind of normal for normal growth. Is that how, how you would recommend handling Yeah. A big windfall like that?

Stephen: Absolutely. And I we’re actually doing that. I’m meeting with a client in an hour who has had a really good year. I guess the state needs to get rid of some money, so they’re trying to do planning for next year and that’s exactly what, what you do. And we did it Innes. You know, zero based budgeting is one of the best concepts for a non-profit.

It came out of the Nixon administration actually on the, you know, government side. And basically what it means is you stack rank all of your programs and you look at the ones that have the biggest impact on your mission. Which ones help you further your mission the most? Ranked by a couple of drivers that are important to you.

Which ones help you serve more people, if that’s a primary goal or is it a better, more important for you to figure out which programs help you increase the quality of the service you have to the existing people, or which programs fill a need that no one else is doing, and which ones bring in money? To help fund the other programs.

And so by ranking the programs in a, in with a, you know, one, two, or three, which ones are the best at, this is one. Which ones are the worst at? This is three. And everybody, anything else in the middle is a two. You can multiply those, those. Drivers, you know, the increasing quality or serving more people at times, the number of, how good are they at raising money?

And all the ones are one times, one times one, become your best programs, right? And all the threes are three times. Three times three is a 27. Those are your worst programs. And. That’s allowed organizations that we work with to be able to kind of draw a line and say, Okay, where, where’s our operating funding level?

How much can we afford to do without beating up on development and forcing the staff to work for low wages and work backwards from there so you can, you know, then start to make data driven decisions about how to have a budget that furthers your mission the most. 

Stu: I really like the use of that math because it’s, it’s so telling when you have something that, that, you know, let’s say it hits a three on, on, you know, more than one one ranked factor.

It, it really demonstrates how. How much of a, of a negative effect that that has on, on one’s organization. So that’s, that’s a really cool way of, of taking several variables and, and really applying the, the math to, to make those decisions most effectively. I, I love 

Stephen: that approach. Yeah, it’s, you know, the most successful organization’s for-profit or non-profit make data driven decisions, right?

They have data to back up their gut, their emotions. Not to say that your gut or your emotions are not important, that’s what got you where you are, but, You can’t just do it on what you feel. And so by having an objective measure, you know, it allows, would your, what’s really interesting is how easy it breaks up.

You know, we, I do some work with an organization called the Village Learning and Achievement Center helps adults with learning disabilities live an inclusive life in our, the. . And so when the executive director was really struggling because we had a deficit and hard decisions had to get made. So by going in and doing this stack ranking, you could see natural divides, right?

All the ones and the, and the twos and the threes were up together. And the, then you get to some fours and sixes and nines up together, and then twelves and 20 sevens are at the bottom. There was one program that just stood out. It was the only one that was really a 27. It was a government that, a program where the state of Texas was providing funding for some services for, for a adults with learning disabilities.

But the state of Texas is 49th out of 50 in funding for adults with disabilities. And, you know, we’re here in Texas, right? So it’s, there’s no state income tax. There’s, there’s a mindset of small government, part-time legislator. And the program really wasn’t the quality that the Village Learning Center was known for.

And so by showing them that it didn’t help attract new people, it didn’t help increase the quality of, I’m sorry, it did help attract new people, but it didn’t increase the quality of the services to the people they’ve got, and it didn’t help. funding cause mm-hmm. , it costs more to deliver the quality service.

It’s $47 a day to deliver the services and they only got $28 from the state. So the more you did, the more successful you were with this program, the bigger the drain. Right. By just seeing the data, it just makes it so much easier for an executive director who’s you, you’re asking them to, which one of my babies do I get rid of?

Right. Right. And she said, This really helped me. Make it so hard. It was, I was able to explain it to the parents. 

Stu: Yeah, it kind of reminds me of I don’t know if you’ve heard of EOS or Traction, It’s a operating, I love eos. Yeah, yeah. You know, it reminds me of that in terms of like a plus minus, plus minus, plus minus, plus minus.

Yes. In terms of ranking And it, it takes the emotion out of, out of things because then you have a qu, a quantitative measure by which you can, you can make decisions as opposed to having it all be about, about qualitative and feeling it, it, it. It standardizes that and, and makes it a lot less emotional.

And this seems like a, even, even more qu, more quantitative way to do that, which I, I really, really like. 

Stephen: Yeah. Stu, you, you really mentioned something that’s very important for anybody who’s listening here. EOS is the entrepreneur organizing. And it’s, there’s a book by Gino Wickman, g i n o, Wickman, called Traction.

That just outlines the step of how do you get traction in an organization, and we recommend it for our nonprofit clients. This village Learning center I talk about is a great example. They follow traction, which means they have a two page business plan, which allows us to work backwards from those goals and say, Okay, what are the drivers of those?

what? And then you can say, Okay, what are the decisions that you have to make? And there are five big decisions a nonprofit has to make. And then you can say, What data do I need? And that EOS is a really nice compliment to what we’re doing. . 

Stu: Yeah. If anyone’s interested in that book, there’s a, a sister or a, a companion book that’s pretty interesting and it’s a quick read.

It’s called Get A Grip, that is also by Geno Geno Wickman. That is essentially a kind of a fictionalization of. Of the application of traction to kind of a it’s like a case study against a, a fictional model, which is it makes it interesting to be able to see that kind of in, in play. So if you’re interested in, in kind of learning more about EOS or Traction, that’s a really great place to start.

So when you approach. These clients and, and how, how much resistance is there to going, going into that kind of qualitative, I’m sorry, I keep getting those mixed up, quantitative measures. Is there, is there a lot of pushback? Does it take, take you some time to kind of help people see 

Stephen: that vision? You know, it’s really a function of where the organization is in the life.

So we typically work with organizations once they hit a million dollars and up. Okay. All the way up because at a million dollars is when you typically move from founder led organizations that are mm-hmm. driven by loyalty. And a board of directors, that’s an activist board, meaning they’re, they’re filling in the holes that the staff and the managers can’t fill.

You know, their treasurer is serving really as like a CFO and helping ma forecast cash flow, or actually looking at check registers and the like. Once you get to a million in revenue, first off in the 26 states, you gotta get an audit. So you’re, you have to get more sophisticated in your record keeping, but you also then have enough money to be able to hire professional staff, you know, And that’s 80, 80% of the expenses in a nonprofit is staff, right?

Between the salaries and the taxes and the health insurance and the, you know, the training and the recruiting and. When professional staff want measurable results, right? They wanna be, they’re accountable. And if you’re an accountable organization, you need clear goals because then you can say, Okay, this is what I’m gonna be measured against.

And now this is more important than I’ve been at CPA serving nonprofits for 36 years. I’ve never seen what I see today according to the Charity Aid Foundation of. There’s a 68% decrease in funding across the United States. This just came out early this year and combine that with a 34% increased in demand, increase in operational costs cuz of inflation.

So, The, the sophisticated organizations, the ones that have a professional staff where they’re move past that founder state into more professionally, run with a board that is a more oversight than active. The board’s wanting to be able to have that management team be held accountable and let them focus on what they should be.

Which is besides oversight fundraising. Mm-hmm. so, So right now we’re getting a lot of organizations who are saying, I got real pressures. I got pressures on revenue, I got pressures on. My costs are going up, and I just don’t know how to go about making the hard decisions. And so that’s why I think we’re finding so much success right now.

You know this covid, post Covid period, as we’re getting into October and year end planning, there’s some hard decisions that have to get made. 

Stu: Yeah, there really are, and it’s across the board. I think, I don’t think this is a unique necessarily to, to the non-profit space. But it, it does feel like it hits non-profits harder.

Like you mentioned that there’s a 34 or ish percent increase in, in cost, but the, that the revenue drivers, the donations are down even twice that it sounds like are almost twice that. So Where for-profit businesses probably aren’t seeing quite that same decrease in revenues. You know, non-profits are, are getting hit hard.

What, what are some of the things, I mean, one of the things that I know is is, is a, a challenge with within the non-profit space as well as, as certain aspects of the, or certain portions of the for-profit spaces. This idea of cost versus investment and. And so when people start thinking about hiring.

Someone like growth like you at, at GrowthForce? My guess is that there’s a little bit of a, a pushback in that how is this, how is this going to, how am I gonna get a return on this? Mm-hmm. , in terms of, of of what we’re putting into to hiring some expert outsourced financial assistance, what, what would you recommend people.

Think about when, when they are approaching this as a, as a decision that they need to make. 

Stephen: Well, I, you know, one of the things I always like to say to our prospects, but prospects is unlike I’m a cpa, I’ve been on the executive board of the Tech Houston Society, CPAs and the Board of Texas Society, and the American Institute of CPA’s, Tech Advisory Group.

I’m a cpa. True and true. So I don’t say this to demean my. Our industry has been focused on looking backwards. It’s focused on compliance, getting you through the audit, getting the nine 90 done so that you can check all the boxes. I’ve looked at accounting and saying, as a former director development, and said, How do we help you raise more money?

What data would, How do your numbers tell your. What, what? What information would be valuable for a foundation to be able to justify the increase of your gift last year by one and a half times their highest previous contribution? Mm-hmm. and what the Society of Fundraising executive says. If you show the donor the tangible result of their gift, you’re gonna raise a lot more money in both.

You’re gonna get higher average gift. And you’re gonna get more frequent giving. And so, you know, we are very different from the traditional CPA and that, yeah, we’ll take care of the getting the tax returns done and get your, your audit ready 12 months a year. That’s a requirement. But we are more passionate about helping you raise more money, helping you be able to use, measure the economics of each.

You, you stu, you, you said something really important there. You were like, you know, a lot of organizations trying to look at the expenses and whether or not they’re gonna get any revenue there. You know, the, the, the secret is to study how your money gets spent and then, and then look at comparing them to by program.

You know, what we do is in addition to the traditional financial accounting we do management. And in a non-profit, it’s the same as in a for-profit. You have to be able to look at what does it cost you? Fully loaded labor costs with all those fringe benefits I mentioned. And typically when you add up taxes and health insurance and 401k, F or 4 0 3 Bs, or the recruiting and training costs and all the other stuff that come with people, it’s 28 to 30% of the salaries.

Mm-hmm. . And so the first thing is really understanding the true cost of your. And then being able to change your accounting system. We specialize in QuickBooks. We’re gurus in unleashing the power of QuickBooks. One of the keys to success here is separating the labor, which again is 80% of your costs above the line and below the line, and, and most people in nonprofits don’t really know what that means.

And it’s really very simple and it’s an important concept. The line is the cost of delivering your services. So if you look at your, your income that comes in, minus you’re above the line costs. I, I’m sorry I said that wrong. The line is your gross profit margin. How much do you bring in for each program above what it costs you?

That’s the. Anything above the line is the cost to deliver your services, and there’s only two parts. They are the direct expenses that are required for you to deliver on your program. There’s direct program, pa, labor costs, so direct program, payroll and direct program materials. That’s it. It’s the cost of the people who are serving your clients.

Or your patients, or your members or whatever you call the, the, the, the villagers you serve. And it’s the stuff that you hide, the materials that you need to deliver on educational services or gas for transportation or your, your, you know, the supplies the nurse needs. Those two go direct program, payroll and direct program materials.

Adds up to cost of services delivered. Mm-hmm. . And so by subtracting your revenue minus your cost of services, delivers, and looking at gross profit, what that allows you to see is which of the programs do you have cover their costs. We, the more we do of those programs, it actually increases cash flow and which ones are you subsidizing through your fundraising efforts.

The more you do with those, the more money you have to raise.

Stu: Yeah. It’s just a really, really cool way of breaking that down by service line. Right by by item offered. 

Stephen: Yeah, by program QuickBooks. QuickBooks is designed just to do that, and most nonprofits use classes. As each program, you know, a class in a for-profit is a department, a class in a non-profit is a program and you can do up to, you know, six Subclasses and QuickBooks Desktop and three online.

You can have the big program, you know, like for example if you have day rehabilitation services or vocational services and then you can have sub-programs subclasses and be able to break it out into vocational training or the transportation needed for the vocational training or. You know, if you’ve got psychological services, you can measure the economics, the revenue minus the cost of the people and the cost of the stuff shows you your gross margin on each program.

Now, what’s really powerful about that is not only can you see which programs create a surplus and which ones need an investment, all your other expenses are below the line. They’re not what you directly needed to serve your, your pay. It’s not. Client directly paid for, or the villager directly benefited from.

Mm-hmm. . It’s overhead, it’s indirect. It’s, it’s the cost of just keeping the lights on and paying the executive director’s salary and the accountants and the lawyers and IT, and hr, and all the stuff that you need to be a well run organization because that overhead should be allocated to each of the program.

You have to be able to look at the full cost. To run a vocational training program, you have to look at the rent. The executive director’s gonna spend a certain amount of time working un supervising that program and. Then you can go, you can see the, the fully loaded costs of your program, the direct and the indirect.

And then you can go to your donors and say, Here’s what it costs us by program. And if I, you divide it by the number of people you served, here’s what it cost us per village. Per patient, per per student, per whatever you do. And now you’ve got data to allow you to see which programs give us the biggest bang for our buck.

Stu: Yeah, I love that. I’m just actually was just taking a note because what it, what is interesting is how you know most. Most Eds and most boards probably think of marketing as separate from, from finance, right? In terms of divisions in one’s company. But if you are, are thoughtful and, and a little bit clever about it and have a good partner in your, in your finance department, you can actually deliver data that then helps fuel.

Your messaging and your marketing, which also helps fuel HR and how all of these things are so interconnected that, that we, we tend to put them in silos. We tend to put things in buckets, but just thinking about the, the ecosystem of, of your organization and how all of. All of the activities, whether those are, you know, direct program activities or like you mentioned, just indirect activities that, that maybe aren’t fueling program growth necessarily, but they’re, they’re all required for a healthy, thriving organization and, and each of them can.

Kind of support and and I, I, you know, and fuel other portions of, of that organization’s growth and, and health and wellbeing. I just, I just love that idea that, that, that, that finance and, and your, your accounting firm can actually help help you, you know, formulate your messaging. 

Stephen: Yeah. You, you, your numbers need to tell your, And I, I love, you know, when you take it a step further than, and translate this down into giving options and giving levels, you know?

Mm-hmm. I just got an appeal from from the village you know, telling me that for $250 a month, we could pay for seven villagers to be able to go out on activities every month to go to the movies, to go bowling, to go to the petting. And the mission is to help build live an inclusive life. Mm-hmm. . And you know, you can pay for $250 a month, you can pay for six people to have a seat on the bus so that you see the Village Learning Center’s logo.

You know, you’ve put people on that bus and so it really makes you feel like you’re making a difference. And that’s where I think the power of management accounting is. Have your numbers tell a. It, it gets really interesting when you start to figure out the big decisions that every nonprofit has. You know, the fun part about doing this for small organizations and, you know, 20 million organizations and everything in between for a few decades, is you look at patterns and you realize there are a couple of big decisions that a nonprofit has to make, that if you have data will help you make.

Be more effective in achieving your mission. The first is, who are the best clients to serve? Mm-hmm. , not all, unless your mission is to serve anyone who shows up at your door. Not all clients are created equally. I mean, if you have unlimited resources, yes, but nobody has unlimited resource. And so we suggest that you figure out who’s your ideal client in the for-profit world, be called the ideal client profile.

Who do you add the most? And then more importantly, who should you not serve? You know, I keep using the village because I’m working with them right now, so they’re top of mind. They found out that adults who were low functioning should not, would not be good clients for their residential housing program because they’re 24 hour nurses, which are very expensive.

But you can’t have somebody who’s violent in a group. And so, you know, understanding who that the clients that leverages your services the most are, are the ones that will help you achieve the most outcomes. They’re the ones that typically are your best. And so, you know, when you’re making your stack ranking and trying to decide which programs are the most effective at serving more people or increasing the quality of the value they deliver, or filling a need that nobody else can serve.

You have to make sure that you’re measuring it against the clients that you should be serving and that, you know, the Fort Bend Women’s Shelter had a policy of not turning anyone away, first come, first served, but since the beds were full, every. In order to increase the number of outcomes and their outcome, their mission is to break the cycle of, of homelessness and abuse and with women and, and the children.

And their mission is not to house the homeless. That’s the city of Houston’s job. Right? So they had to work backwards from their mission to figure out which clients benefit the most from their services. And those are the ones that. The most outcomes that serve their mission, the outcome that they thought served their mission the most was somebody gets her first job.

Mm-hmm. , because that breaks the cycle. But people who don’t participate in their counseling program end up repeating the cycle of abuse. So, They took by taking a bed. They take waste an opportunity for somebody else who wants that first job. And by shifting the, the, the priorities and figuring out which clients are the best ones to serve, they’re able to create more outcomes.

Stu: Yeah. Is this basically like the perret? Is it, I believe the Perretta principle? Mm-hmm. , the 80 20 kind of exercise where, where when you look at your, you look at you, you assess your data, and a lot of times it’s not always true, but a lot of times you’ll find that, you know, 20% of of your. , Let’s say your recipients lead to 80% of your donations and, and, you know, there’d be a, a variety of different calculations that one would need to, to do or, or associations to get to that information.

But essentially, if you start looking at that, you, you can then narrow down to the, to, to help serve more of those people that drive. Either the most revenue or the most benefit, or however, however you want to do that assessment. Is that kind of the principle that you’re Exactly, 

Stephen: that, that you use, work backwards from the end in mind, right?

What are the outcomes that further your mission the most? Let’s stack rank those. So we have data to back it up. It’s not just your gut, and then which are the clients that take advantage of those programs and achieve the most outcomes? Keep those clients and give them what they. And you’ll achieve your mission further.

You know, that leads to the, the, the hard decision number two, which is, you know, which programs do you stop? Which ones do you start and which ones do you continue? Right? And that’s where that stacked ranking comes. You know, the ones, the twos, the threes, the fours, even the sixes, maybe the, at least the ones, twos and threes, you know, you’re gonna keep those.

And the ninths and the twelves up to the 20 sevenths, those are the ones that are, are the lowest. Right. What we found at Amnesty was in our budgeting process, we spent our energy in the middle on the ones that were to use a basketball phrase on the bubble. The ones that just barely made it above the line, or were just barely missed it.

And you bring that discussion to the board, 

Stu: right? . Yeah. How do you move more of those people from kind of a, a mid-level performance to, to a great performance? 

Stephen: And, and if we, if all things even stayed equal the same as they are now, do we have alignment about which are the highest priority programs?

Because, you know, if the Charities Aid Foundation of America is. We’re, you know, nonprofits get hurt in a recession faster than anybody else, and that’s been my experience. I’ve been doing this for, for this is my, this is my gonna be my eighth recession in 36 years. It’s part of the healthy economy. Every seven, eight years, we should have one.

We haven’t had one in a long time. So even if we don’t have one, the process of going through, getting the difficult decision of where do we invest our limited resources the most is. The how a well run organization runs. So, so, so looking at the ones that are in the middle on the bubble and seeing, okay, which program achieves our mission the most, and, and, and having the boards focus on that strategic decision means you’re not gonna get them dragging into the weeds.

You know, that’s, that’s, I I, I have a whole ebook, I should have probably said this at the beginning. I have a whole ebook that outlines these five steps, and we have a webinar around it. Step four is getting the board aligned and, and to approve that budget. One of the biggest mistakes that I see from a financial management perspective is executive directors don’t have a strong controller.

Right? Somebody might have a title accounting manager, but they don’t have a cpa and maybe not even an accounting degree, cuz who can afford $125,000 controller? Unless, you know you’re sizable organization. That’s why we exist. But the, the key. You know, if I’ve seen executive directors who just print out the profit and loss by class report and the company p and l and the balance sheet, and give the whole 38 pages to the board, what happens then is they have to justify their existence.

Why did I take two hours a quarter to come have this meeting? Let me find something. I have to speak up about something, and you end up with discussions. Why is the technology expense over $5,000 over? Is there something going on with your server? And now it’s a not a strategic board, It’s, they’re down into the details.

We suggest, we’ve built this scorecard. It’s a three page scorecard that allows you to have a one page p and l of every program, one page balance sheet, and one page of trends to show you the, the, the five most important drivers of every organization on one page over a two year. And if you keep your board at the high level, then you’ll be able to get them freed up to be able to focus on how do you increase income.

Cuz that’s where I see most boards struggle. They were brought on to because they needed a control. Somebody who was willing to volunteer as treasure and do help with the books. Right now. And now as you move to a professionally run organization, the board has. Help with providing resources. And if you don’t have the cash, then you need to put them to work otherwise.

And so what I’ve suggest is, you know, you, your development office starts to use the board members to go out on donor calls and teach them how, especially the, the chair and the treasurer teach them how to be able to talk, to tell the numbers that tell a story. The other thing here is, If you wanna bring in more money, study the past about what brought in more money in the past to make it decisions that are likely to increase it in the future, You know?

Right. What, What development activities bring in the most? income per dollar spent. Right. This is, I’m gonna, I’m, so I’m gonna shift, Let me, I move from the board now to, to development. So be, Is that good with you, Stu? Yes, absolutely. Because that’s what I get excited about is how do you raise more money, right?

The first thing is study the past to predict the future, right? So, mm-hmm. , look at the return on investment of your development department. Just like in a for-profit, you would look at marketing and we, are we getting an ROI on those Google ads? And, and you know, how do you measure the roi? Well, it’s how much did you raise total dollars raise divided by total fundraising costs.

So if you spent a dollar and you got five, you got a 500% roi. That’s pretty good. Yeah. So just by looking at the total dollars earned, divided by the total dollars spent, lets you look at and compare and contrast each investment and what you’re gonna find. Now remember, your, your biggest expense is people.

That’s 80% of it. So you gotta allocate the time spent on the development activities to be able to see the true cost. When you find out what the cost is to have your staff running around town, getting wine bottles for a uh, for a silent auction, that is not a good money maker in most organizations, right?

Events are. Fifth, in the order of value for money making fundraising, they are really, really important to be able to honor your donors, to have their name appear in a booklet and recognize, and, and, and reward the ones who have contributed the most. But the event is not where you make the money. That may be when you collect the checks.

Mm-hmm. , but it’s really for cultivating new donors, asking those major donors to bring somebody else and getting them to bid at the live auction, which is always good if you. Gifts. But the, the way to raise the most money, 80% of giving according to giving usa over 80% of giving comes from individuals.

When you look at major giving and personal solicitation and estate planning, you know, that’s over 80% of where the money comes from. So, What I see when I get new clients is their money’s coming from foundations in the government, which is, it’s the second or third biggest, but it’s 10% and 8%, cuz 80% is people.

So if you’re getting most of your money from government funding or from foundations and maybe even some corporations, which is really. Big misconception that corporate America funds nonprofits, Right? Right. Not the opposite is true. If you invest in individual donors and communicate the story of the mission and what those outcomes are that help you achieve that mission and what the actual costs are, and what their contribution will buy.

You’re gonna raise more money, you’re gonna be able to get, What I love is the monthly giving programs. That was something we put in place. Sorry. 

Stu: Yes, absolutely. 

Stephen: Yeah. We, we put that in place at Amnesty International. You give it a name, right? It’s called a sustainer program. You give it a name like Partners of Conscience.

That’s what we called it at Amnesty. And it allows you to get weather the storm. You know, especially coming into, if we do have a recession, People are gonna start looking at cuts. They’re not gonna be worried as much about a hundred dollars a month as they might be a thousand dollars at the end of the year.

And, and what we recommend you do is you take your, your, your donors, not all of them, the ones that the development office is personally solicitating, don’t do this. Mm-hmm. , let the, the personal solicitation is the best way to get money from individuals. You still have to tell them the story. She’ll have to show them the tangible result of their gift, but for the people that you don’t have time to manage individually.

Look at their highest previous contribution over the last three years, cuz that’s kind of the relative range we’re in right now. Right? And you multiply at times one and a half. So you got, somebody gave you a thousand bucks. You ask for 1500, right? Except, except you ask it per month. It’s $125 a. Right. And you show them that for $125, they get three villagers to be able to go out on activities including bowling and movies and the petting zoo, and you send them a monthly reminder that you’re debiting their bank account.

Don’t use credit cards because credit cards change and it’s a hassle to have to get the new one. And it give them an option to say, You know what, I, It’s, times are tough. I’m gonna stop this one. But when it comes right out of the bank account, it’s really. mm-hmm. . And you send ’em an email of villagers on a bus and petting a lama.

And you know, the pre the, their excitement as they were walking into the AMC movie theater. And that helps you get a higher frequent gift and more and, and the higher average gift and more frequent giving. Yep. Absolutely. 

Stu: That’s what I get excited about. Yeah. We see that all the time in, in the work that we do as the, the easiest.

Quickest way to drive revenue is to, is to play in that repeat and refer phase of the, kind of the, the stakeholder life cycle. Mm-hmm. or the, their journey and, and getting somebody to, to give again or to give regularly. Is vastly easier than to get a new person to, to give even a little. And and then like you just said, just reframing that conversation.

And even if somebody, let’s say they’re a one time a year, a hundred dollars kind of person, and they feel pretty good about that, it’s probably pretty easy to get them to give $20 a month instead. Yeah, just because of the, the emotional attachment to $20 versus a hundred dollars. But when you do that, you.

Over doubled you. You 2, 2, 2 0.4 per or 240% are their, their regular donation. Exactly. And, and it’s just You know, it’s a, it’s a relatively straightforward ask. It’s you know, it’s typically if you have donor systems in place that that can help you manage this, which most non-profits either do or, or certainly should.

You know, it becomes a pretty easy, easy way to increase your your donor revenue without really a, a, a lot of additional investment. And And it’s just, it’s just a really great way to, to reframe that conversation. 

Stephen: Yeah. It, it, it, it’s, it’s also allows you to, you know, a lot of organizations we see kind of struggle in August, you know, September mm-hmm.

before the gala. And a long time since whatever you did in the spring, the golf or the outing or the, you know, the auction and that steady cash flow sustains you. So what’s really nice is when you combine it with a basic CRM or donor management system with QuickBooks. Mm-hmm. QuickBooks is designed for this.

You just have to know how to, to unleash the power of it. And that’s, you know, so it’s not a big investment to get. And then when you start showing donor impact statements, It’s a, it’s a whole different development operation. It’s a whole different and, and it professionalizes the whole organization because now you can take those same numbers and say, Okay, people, here are the outcomes that we are measuring everybody against.

Did we go to the movies three times and did we get 12 people on a bus? And outcome driven management is a, is the only way to go in a, in a world post covid world where you can’t see employees every. Yeah, 

Stu: absolutely. Well, I, man, this has been just a, such a fun conversation. I’ve learned a ton and I hope that everyone listening has, has had as much fun as I have chatting with you.

I know you need to get to a, a meeting. How can people find out more about what you do and, and connect with you? Well, 

Stephen: our website is the best way cuz there’s a lot of resources on there. You can go. Dub Dub dub growthforce.com, G R O WT h force.com/nfp for non-for-profit or I’m e email if you have any questions.

I love helping nonprofits. It’s why I’m here on Earth. Stephen s t e p h e n, at growthforce.com. I’m also on LinkedIn, Stephen King’s cpa, and Twitter as Stephen King’s c. 

Stu: Well, I would also encourage people to listen to your show. I’m guessing that it may be not necessarily completely non-profit focused, but there’s so much information that you’re, that you were so, you know, willing to impart here with us today that I’m, I’m, I suspect that people would get a, a kick out of that as well.

Tell us the name of, of your show. Yeah, it’s 

Stephen: path to profits. But on the website you know, we have a whole non-profit resource list. There’s a form you can start a conversation with someone on our team, and we’re happy to share advice and we’ve got a non-profit webinar on this topic as well as an ebook to help organizations serve more people and raise.

Stu: Wow. That’s just great. I, I really appreciate all of the information and, and all of your willingness to share here today, Steven. If people were wanting to take action, I, I really like having conversations and talking about things and, and getting, getting new learning and, and all of that. But at the end of the day, I, I really wanna try to get people to take some kind of action.

What would you want people to do after listening to our conversation today? 

Stephen: I would go to the webinar. I would, I would go to the non-profit webinar. It’s about 40 minutes and it’s got an ebook that you can read along. And, and what you’re gonna find is the first step is to figure out which programs further your mission the most.

I have, we have templates in there. We have we have a whole workshop that we’re gonna be doing this fall to help people do everything we talked about today. 

Stu: That sounds great. I would encourage everyone to do that. And again, that’s growthforce.com/nfp. And Steven, thank you so much for being on the show today.

I’m, I’m really excited to to have this conversation with you and, and really appreciate you being on the show, Stu. Thanks for having me. Have a great day. You too. And there you have it. Another great episode of Relish This. Thanks again for listening. You can find past episodes of the show@relishthis.org.

And remember, if you liked what you heard today, please subscribe and leave a review wherever you listen to podcasts. For more information on purpose marketing, grab your free copy of my book Mission Uncomfortable, How Non-Profits Can Embrace Purpose Driven Marketing to Survive and Thrive. Get your copy now@missionuncomfortablebook.com.

Thanks again for listening. Come back next week, won’t ya.