One of the great benefits of working at a Christian nonprofit organization is that many staff members want to hold down costs. They do this because they want to be good stewards of the resources God has entrusted to them. But sometimes spending more money is a sign of good stewardship.
Once, while working at a Christian nonprofit organization I asked an IT specialist to purchase a small enhancement for our database management system. I wanted to purchase this enhancement to improve service to our donors.
This well-intentioned brother responded, “But that will cost $500!” I thanked him for being cost-conscious. But then I told him that with the improvement we could attract more donors and serve current donors better. Increased giving by just a couple of donors or even acquiring one or two new major donors more than covered the cost of that one improvement.
When we focus only on costs, we tend to forget to look at the potential to raise more money for ministry by spending just a little more. What we need to focus on is “net revenue” or, to use an accountant’s term, “margin.”
Net revenue, or margin, is simply the difference between the money raised and the cost of raising it. The greater the net revenue, or margin, the more money you have to fund the ministry God has called you to perform.
In most cases, determining the cost of equipment or a service is the easy part—assessing the revenue potential is more difficult, but not impossible. When considering buying a piece of equipment, software or even the services of a consultant, ask other nonprofit leaders who have faced the same decision in the past what their experience has been. Ask these two questions:
1. Did they focus so much on cost and purchased the lowest priced item only to find that they “paid” for it later with poor service or limited usefulness?
2. Have they seen an increase in giving attributable to that purchase which more than justified the expense?
Think back to the last time you spent money on your fundraising program. For example, when considering a donor management system:
· Did you decide to create your own or looked for the cheapest system available?
· Did the system give you the information you need to track giving? Or does your staff spend lots of time trying to figure out how to make it work?
· What if you spent more money on a system that works well for your team members? (Then, releasing them to go out to make calls on major donors rather than wrestling with a poorly functioning system?)
Or, maybe you’re faced with the decision to spend some money on an analysis of your donors. You’d like to find out which ones have the capacity to give more than they have in the past.
Maybe instead of giving you that $100 gift once a year you find out they have the resources to give your organization a $5,000 or $10,000 major gift to your capital campaign. In most cases, the increased giving will more than pay for the additional analysis.
Let me encourage you to ask the “net revenue” or “increased margin” question when considering purchases for your fundraising program in the future.
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