Individuals, organizations or foundations that provide financial support to nonprofits can (maybe should) wonder about the impact their support is having and whether it can be utilized to greater effect.
This can be especially true for those entities helping arts or cultural nonprofits, which provide a benefit that cannot always be quantified.
Speaking during the Association of Fundraising Professionals International Fundraising Conference, Janet Brown of Grantmakers in the Arts and Brian Bonde of Advanced Certified Fundraising, provided five suggestions for funders about the help they provide to arts/cultural groups.
* Be clear about your chosen role. Are you a “buyer” (a source of ongoing revenue) or a “builder” (a source of periodic capital)? Funders can play one or both of these necessary roles, but each role requires a different kind of investment strategy.
* If you are a buyer (who provides revenue), fund programs and projects at full cost, supplemented by unrestricted support. Funders who invest in program expansion without supporting related operating costs are encouraging organizations to overextend.
* If you are a builder (who provides capital), orient support to the hierarchy of financial need. Encourage and support organizations to address their liquidity needs first by prioritizing working capital to manage cash-flow cycles and operating reserves to absorb regular operating risk.
* Talk about capitalization principles with organizations. Review business models with applicants and discuss what drives revenue and expenses.
* Talk about capitalization principles with other funders. Consider pooling capital resources with like-minded grantmakers.