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Friday, March 24, 2017

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Self-Test: Are Your Income Projections Realistic?
Karen Eber Davis

November, 2011

Joe was hired four months after the start of the new fiscal year. Among other duties, he was asked to raise money for his organization. The income he was responsible for included $150,000 in grants, $100,000 from corporations, and $90,000 from individuals. Was Joe set up for failure? Or was he given realistic goals that incorporated a reasonable growth stretch?

Unreasonable income expectations include too little stretch, like not seeking any growth to meet inflation. They also include too much stretch, like going from zero to a half million dollars with a new funding source. The first causes under performance and reduced revenues. The second, too much stretch, stresses everyone out and results in budget shortfalls. Joe, you, and your leadership want and need expectations that are “just right,” that is, expectations that are realistic and positive. These are expectations that include growth to cover expected inflation and to respond to the increased effort you are making. Use this test to determine if your projections are realistic. To take the quiz, read the sentence below and then check each true-for-your-organization description.

Expectations about the nonprofit income to be raised next year are based on:

1. Experience. Does the income estimate represent reasonable growth based on your experience from recent years? In the last three years, Joe’s organization raised $120,000, $90,000, and $80,000 respectively from individuals. Joe checks yes.

2. Industry Standards. Do nonprofits, ideally in your sector and genre, regularly achieve this level of income or income growth? For example, according to American for the Arts, fifty percent of nonprofit arts organizations’ income is earned. Joe calls his statewide service association to confirm that the level of corporate support is common. He marks a second yes.

3. Solid Strategy. Do you have a path from here to there? Joe talks to his executive director and learns that several corporate sponsorships are in the works and a list of prospects has been developed. The two discuss how they can achieve the corporate support goals. Mark this yes if you know the action steps needed to achieve your goals. Mark it no if expenses less other income was used to determine the amount of individuals’ donations you must raise and no strategy how to do this exists. Mark it no if other goals without plans exist.

4. Resources. You can’t make spaghetti if you lack pasta. Do you have what you need to achieve the results you seek? Joe learns that there is a list of potential grant sources with an interest in his cause. Several foundations have funded the group in the past and are encouraging applications. With a flourish, he checks this off.

5. Skills. An individual can be an expert at brain surgery theory and have a full hospital of resources, but if they have never operated, would you want them to touch your skull? There is nothing magical or unknowable about obtaining nonprofit income. Joe has some skills. He is an avid reader in the field. For more help, he has access to a consultant, board members, and professional groups. His board is experienced in helping to raise money, and donates as well. Half gave gifts of more than $5,000. Joe knows the more skills he has or can access, the better the predictability of his income. He looks forward to growing his existing skills after he checks this yes.

6. Time. Having resources and skills and using them are two separate experiences. Many people own treadmill machines. They know how to use them. Yet, they are covered with spider webs and dust bunnies. You may have incredible prospects, like wealthy widows with no children. If you fail to invest time interacting with them, are your expectations realistic? Joe speaks to his Executive Director. She decides to assign another staff member the marketing and public relations function that were part of his job description. After this, Joe concentrates his efforts on contacting donors and pursuing the three income sources assigned. He uses a pen to mark this yes.

7. Commitment. You, your board, and its members may intellectually understand that achieving your income goals will require different actions, but if everyone continues to embrace necessary changes only halfheartedly, you lack realistic expectations. When it gets hard, does tough income work become a low priority? When a “no” disappoints, does this reduce efforts for 60 days? Mark this yes if you are steadfast in your commitment. Mark this yes if board and staff are willing to invest, grow, and take actions even if it makes them squirm. Check this yes if obtaining income and fundraising is really a top priority. Joe checks this yes after three months of hearing choices that confirm commitment to obtaining income and sensing team support.

8. Flexibility. Flexibility is about a willingness to learn and respond to real changes. All the skills, resources, commitments, and income strategies which were successful before the Great Recession face new challenges during and after it. If you are flexible on how you will obtain income, and recognize that you do not control all the factors influencing it, check this yes. Joe does, when he is sure his boss and board understand the challenges of fundraising and income growth, and he learns about adjustments being made midcourse.

Scoring:

To find your score, add up all your check marks. The higher your score the more realistic your expectations.

6-8: Great, go for it.

4-5: Maybe.

1-3: No way.

No matter your score, like Joe, you can modify your goal and actions now to create realistic expectations and the income you need next year. Setting realistic expectations, obtaining income, and fundraising are processes. Start sharpening your expectation setting tools today.

For more information: see http://www.kedconsult.com/articles-resources/setting-realistic-expectations-about-income/



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