Not-for-Profit | | Dec 16, 2020
According to the 21st annual Forbes Top Charities list, which ranks the largest U.S. charities based on private donations received, “The 100 largest charities pulled in $51.5 billion in donations,” which “represents 12% of all charitable contributions given in the U.S.” in 2019.
Business publication The Non-Profit Times also does its own “NPT Top 100” with somewhat different criteria. NPT pegs its group’s total donations at $84.7 billion, or closer to 20% of money donated to charities.
Of course, it is mostly the biggest of the big charities that are on the Forbes and NPT lists. But, 10 of the charities between #75 and #100 on the Forbes list, and 5 on NPT’s, have less than $200 million in overall revenue, with #98 on Forbes reporting $142 million. So, the question we pose and will address here is this:
How did those smallest of the biggest charities get to $142 million or more?
There are myriad reasons, of course, but for those nonprofits that aspire to break into the Forbes 100 range, clearly there is a way to do it. Because those smallest of the biggest on that list, and even nonprofits many times their size, were once $50 million or $100 million charities.
The good news is that the biggest of the big have actually taken a fairly modest portion of the overall donation pie. The bad news is, according to the latest figures from the National Council of Nonprofits, there are almost 1.3 million public charities in the United States
Which means, that while the mission of the majority of nonprofits is noble, that is, some form of bettering people’s lives, the stark fact is this: The pool of donor dollars is finite. Meaning, the nonprofits that market the smartest, make the most efficient use of every fund-raising tool, and compete as vigorously as any for-profit business, will net the most donations.
As with any brand, and make no mistake, a nonprofit is a brand, it must, in business parlance, differentiate itself to realize a “competitive advantage. In other words, it needs one of the storied cornerstones of successful businesses: A Unique Selling Proposition, or USP. As defined by Entrepreneur magazine, a USP is “The factor or consideration presented by a seller as the reason that one product or service is different from and better than that of the competition.”
While nonprofit charities may balk at being called a “seller,” when a benefactor decides to donate to charity A and not to charity B, clearly that donor was “persuaded” by charity A that its organization provided the donor and the recipients of its beneficence a benefit not offered by charity B.
Call it persuading, call it convincing, call it what you will, in most cases, donors decisions do not just happen on a whim. The wealthy rely on staff to scour the charity landscape and bring them recommendations. And those recommendations come to nonprofits that employ carefully considered strategies that maximize resources as well as maximizing efficiencies once the donation is made. That is how a $100 million charity becomes a $150 million charity. Or, a $1.4 billion charity, as is the case with Direct Relief, which is #7 on the Forbes list.
Here is the lead copy on its website:
“Direct Relief’s work earns wide recognition from independent charity evaluation agencies, including a 100% fundraising efficiency rating from Forbes, a spot on Charity Navigator’s list of the “10 Best Charities Everyone’s Heard Of,” and inclusion in Fast Company’s list of ‘the world’s most innovative nonprofits.’”
Forbes describes Fund Raising Efficiency as “…the percentage of private donations left after subtracting the costs of getting them. The average for all 100 charities (on its list) is 89%, meaning that it cost 11 cents to raise $1.” Meaning it doesn’t get much more efficient than Direct Relief with 100%.
We may, in another piece, further plumb Direct Relief’s amazing performance. But for now, considering its efficiency, combined with making Charity Navigator’s Top 10, and Fast Company’s list of innovative nonprofits tells us they are making absolute best use of the resources available, not just to them, but to all nonprofits. How is that done?
No matter the size of a nonprofit, our suggestion would be to bring in an accounting-based company that has expertise to take a very hard look at a nonprofit, top to bottom, to determine several things.
- How efficient is the nonprofit’s fund raising? How many cents is it taking to earn $1 worth of donations?
- Based on that efficiency, is a high percentage of revenue going to “program expenses” that fulfill an organization’s mission—a key “selling point” with donors.
- “Innovative” may be an overused word, but an innovative nonprofit looks at everything and says, “Could we be doing this better? And how?” That not only gets recognition, it gets more donations.
Our firm has a practice section dedicated, not just to nonprofit accounting, but full-on examination and evaluation of everything a nonprofit does. We then recommend innovative ways, both big and small, from tuning direct mail copy and telemarketing scripts, to creating email blasts that actually hit the target and carry a message that opens wallets. That is how an organization can maximize donations. That is how it can maximize what is done with those donations. And that is how a nonprofit goes from $50 million to $100 million to being chosen as one of America’s Top 100 Charities