Financial terms every fundraiser should know
Jargon is often tossed around within any particular industry.
During Fundraising Day in New York 2013 attendees were acquainted or reacquainted with several financial terms that are used routinely, even though one person’s meaning might not be another’s. The terms:
- Sustainability. This is an organization’s ability to attract sufficient reliable, renewable support year after year, to support the full costs of its activities.
- Exit. This term is lifted directly from private equity and typically refers to a donor or grantmaker’s plan to cease supporting a particular nonprofit at a certain time.
- Evidence-based. These are programs delivered by nonprofits that can prove their effectiveness as judged by an independent, third-party evaluator.
- Overhead. Costs and management.
- Leverage. Using loans or debt to magnify returns or acquisition.
- Scalability. Ability to take an idea or process and expand it over a large group or market.
- ROI. The rate of return for a financial investment. In philanthropy, this usually means a measure of social impact or social returns.
- Deploy capital. To invest. To many donors this replaces “give” or “charity” or “donor.”
- Benchmarking. To measure the performance of similar efforts or products.
- Social-impact bonds. Also known as pay for success bonds. Donors put up the money for a program and if it works as planned to prevent a major social problem, the government pays the donors back.