What Looks Like a Fundraising Problem Might Be a Business Model Problem

Underneath most fundraising problems is a more fundamental one: a broken business model.

In two recent phone conversations, one with a prospective client and the other with a former client, the presenting problem was a fundraising one. How can we raise more money? And fast.

We spent some time on the phone exploring causes and possibilities. I asked questions, and a lot of the answers were along the lines of we tried that or that won’t work, and we came up with some immediate tactics. The energy of the calls leaned toward urgent, interim responses. What I didn’t say at the time (but perhaps should have, although perhaps it is obvious) was that sure, we can try ramping up your fundraising, but something is off. bout the ratio between what you’re trying to make and what you’re bringing in. Underneath your fundraising problem may be a business model problem.

A business model that works means you can make (or do) whatever you are making (or doing) for less than your customers (or clients and investors) will pay for it.

That’s it, whether you are a small business or a nonprofit organization, but that’s probably the hardest thing, which is saying a lot. Because almost everything about managing a nonprofit organization is hard.

Taking the time time to pause, design, and organize around a realistically, ambitious and coherent model for a financial turnaround strategy for stabilization or growth? This approach feels risky because it is. But continuing to do the same things the same way, with some new attempts at raising money for the same things being done the same way by the same people? That’s not risky. It’s predictable: continued stagnation and decline at best, and more likely The End.

Some challenges to an organization’s business model come from the outside — the economic conditions change (2008) or technology changes (online everything). You can’t change outside these conditions, but you can respond by adjusting, or in some cases radically, shifting your business model.

Your response will certainly be at least one significant change in something in your work, your program scope, your message, your relationships, your operations, your capital structure, or people, or how you manage these elements. It’s also possible, perhaps probable, that you also need to change something about how you raise money. So, raising more money is essential, but not sufficient.

A focused financial renewal or turnaround strategy needs to make sense conceptually, and has to be ambitious, realistically and financially. The challenge to an organization’s leadership is to figure out the particular combination or permutation that will work best as a business model for its work, for its community, in its environment, given its unique strengths of skill, experience, and relationships. And then to engage partners and philanthropic investors in pursuing it.

In the next conversation with my colleagues, I’ll raise the idea that if there isn’t time to pause and reconfigure the business model right now, then let’s commit to fixing it while activating increased fundraising. That means turning on the beginnings of a turnaround plan involving a refreshed or renovated strategy for program and growth, relationships, and also fundraising.