November 17, 2017
THIS POST IS PART OF A SERIES.
YOU CAN READ PART 1 HERE.
Hopefully, we have already convinced you to create a forecasting document. Now it is time to go into more detail about how not to create one. We also provide some tips and tricks to make your forecast more accurate and useful.
Tip 1: Use a template so you don’t reinvent the wheel!
In the previous post, we talked about creating probabilities based on the type, tier, and history of the funder. But we do not want you to reinvent the wheel when doing this work. A template can make this process a lot easier, and we’ve provided one that you can download at the end of this post.
Type of Funder
You should classify your funders as either public, corporate, or foundation. Depending on your circumstances, it might also make sense to have a category for family foundation, major donor, or local v. national foundation. In general, public agencies are going to have a lower funding probability than corporate foundations and both will be lower than private foundations. National foundations are going to be much lower than local or regional funders.
Tier or Alignment
Tier should be used to classify funders by how well aligned you are. Obviously, you are more likely to be funded by organizations with which you closely align. Some nonprofits also benefit by classifying funders by which program they support. They know that one of their programs is able to win new funders 10% of the time, while another might only win funding 5% of the time.
History or Relationship
Your probability should obviously be MUCH higher among existing funders. In fact, if you are not renewing over 90% of your existing funders, at least among those who fund annually, you need to examine your stewardship efforts. History can also help you classify funders by your cultivation efforts and how long you have been building a real relationship with them.
Tip 2: All your funders must be named. Prospects AND ‘TBD’ ARE not funderS!
A major problem we see with forecasts is that many people want their projections to yield more money than they do. They frequently add a line for prospects that are not yet identified. Whether you call this TBD or ‘unidentified funders’ or ‘prospects’ — it does not belong on your forecasting chart, and you need to immediately delete that row.
Of course, there is an exception to this rule and it depends on timing. If you’re creating a projections chart for next year just a few months into your current fiscal year, you can have a line for unidentified prospects. If you have included this, you or your development team should ensure your team is actively bringing a lot of prospects to you every few weeks.
However, if you are approving an official projections chart for the upcoming year, there is a small probability that you are going to find new prospects, cultivate them, apply to them, and win first-time funding during that same year.
Tip 3: Expand your list or increase your renewal amounts (NOT your percentages)
If you have elected to set a fundraising goal before looking at your revenue projections, we recommend that you revise your goal after seeing what is possible from your projections.
In particular, please do not arbitrarily fiddle with your projections, percentages, or ask amount to get to your desired fundraising goal. Instead, create a low and high version of your projections, with riskier percentages. (To see a real example of how we did this, make sure to download the free template at the end of this post!)
If your projections still do not reach your goals—again—please do not adjust your projections arbitrarily. Instead, this is your opportunity to see what is missing from your projections and if you need to expand “the top of the funnel” by adding more prospects. You can also look at your renewals and increase the ask amount in order to upgrade them to larger amounts.
Finally, if your projections still are not where you need them to be, you need to adjust your goal downward. It is MUCH better to do the difficult work of limiting expenses now, before you have spent the money, than it is to be mid-way through the year looking at an expense budget that surpasses your revenue projections. You will have less time to cut those expenses, and so the shortfall will actually feel more significant if you wait for six months.
Tip 4: Examine your assumptions and learn as you go!
The goal of your forecast is to predict reality given all the uncertainty there is – so even if you raise a LOT more than you thought you would, your forecast was not as helpful as it should have been.
Much worse, and more common, is if you have projected that you will raise much more than you did. You are likely stressed already and will have to cut major planned expenses.
If you’re new to forecasting, and this has happened, you have to fully examine your assumptions:
- Are you better or worse at cultivating than thought? You can determine this by noticing if what you projected as very unlikely—5% or 10% possibilities—turned out to be funded closer to 20% of the time.
- Were there external things you did not predict but could have – i.e. new government opportunities that became available or former funding streams that were shut down? To predict these better, you can make sure you’re on the right listservs, attending the right coalition or association meetings, and networking with your colleagues to stay in the loop about local and federal funding opportunities.
forecasting isn’t an exact science, but it is a necessary practice.
Estimate on the conservative side, be realistic about your probabilities, and adjust your assumptions as you become more comfortable with your organization’s probabilities for success.
NOVEMBER 2, 2017
For organizations just starting explore the world of foundation fundraising and grant applications, the intricacies of attachments and additional proposal elements can be downright intimidating.
For almost all foundations, it isn’t enough to submit a compelling narrative and clearly defined goals—you’ll also need to be able to back up your words with budgets, financial statements, board lists, diversity tables, logic models, funder lists, and more. Remarkably, gathering these components can be daunting for both small and large organizations, as you will either be responsible for gathering everything yourself or need to coordinate documentation from multiple departments within your organization.
Despite this foreboding picture, supplementing winning proposals with strong supporting material doesn’t need to be a puzzle of PDFs, spreadsheets, and constantly outdated staff lists. All it takes is an intentional focus on staying organized and a commitment to making the effort to file items properly the first time. As an added bonus, taking these steps consistently and gathering the required attachments ahead of a deadline can strengthen your program design and help further your goals.
Below are some tips to help you keep all your documents organized and up to date:
1. Keep everything in one place.
Nobody wants to dig through all their emails or sift through folders to find that 990 from last year. It’s really easy to create an Attachments folder within your Dropbox or shared drive so that when it comes time to pull together a proposal, you know where everything is.
2. Create an organizational system that works for you, and is comprehensible to others at your organization.
A good starting point is making a folder for each type of attachment (budgets, board list, funders, etc). I’m a big proponent of fine tuning tools or systems to meet your individual needs, but be sure that whatever you choose is either clear enough that someone else could easily follow it or is possible to explain to others. It couldn’t hurt to create a basic user guide or other form of documentation for your coworkers to reference.
3. Use clear file names (with dates!).
To build on that last point, make sure that your naming conventions are clear and consistent, so that they can be easily understood at a glance. I’ve found it’s helpful to include at least and month and year in the name of the file, especially with items that may need to be regularly updated. BONUS TIP: If your files are arranged alphabetically, adding 0- to the beginning of the name will always sort it to the top.
4. Keep a ‘current’ and ‘archive’ folder for each attachment.
This is especially useful and important for those documents that get updated regularly, like funder lists. We’d recommend creating both a CURRENT and an ARCHIVED folder for each, saving as new version of each document in the “current” folder each time you update it, and moving the old one to the “archive” folder. By combining this step with the previous step about including date in your file names, you’ll never have to second guess whether you have the most up-to-date file.
5. Create checklists to stay on track:
As in all things, a list is a great way to keep track of all the moving parts, especially if you’re working on multiple proposals at the same time. In that case, putting your attachment lists side by side can help you cross off multiple items at once.
6. Think a few steps ahead.
The trick to avoiding a late-game scramble to gather all your attachments is thinking ahead! As a good rule of thumb, you should be thinking about what attachments you will need and where to find them at the same time as you are thinking about drafting the proposal. Thinking ahead also applies to updating your documents – updating your funding list as you receive funding will save you from the scramble of making those updates (and hoping you didn’t miss any!) when it’s time to gather attachments for an upcoming deadline.
JUNE 1, 2017
Managing an annual grants calendar takes time, planning and thoughtfulness.
The calendar is an essential tool to keeping your grants program organized and strategic. But rather than expending all your resources and applying to every RFP under the sun, it’s important to be mindful of your short and long-term fundraising goals while remaining realistic and honest about your organization’s capacity to respond to RFPs throughout the fiscal year.
Below are six best practices to keep in mind that will help make your crazy year of deadlines feel more manageable and strategic!
1. Create a calendar
Sure, it sounds pretty obvious, but creating a calendar is the first step to keeping your grant program focused and manageable. Choose a format and management tool that makes sense for your organization and those who will be using the calendar on a regular basis. Spreadsheets are great and super customizable, or maybe your donor database software allows you export the data you need to build a funding calendar. If you want to capture greater detail over several fiscal years, perhaps consider investing in a more robust project management tool.
At Elevate, our teams use Salesforce to manage our clients’ calendars. Regardless of what type of platform you decide to go with, your calendar should include an overview of each month in your fiscal year that details deadlines, request information/amounts, strategic notes, application requirements and timeline/process, contact information, and tasks associated with the application. Using a well-integrated system to keep track of your daily tasks in conjunction with your grants calendar is a great way of ensuring you stay on top of deadlines!
2. Review past grants
Set aside some time towards the end of each fiscal year to review the grants you applied to that year, and to update your strategy. Consider how much time and effort went into each application and whether reapplying makes sense for your organization in the coming year. This step will also involve researching the foundations’ funding priorities for that year, to make sure the alignment with your programs is still strong. This is a great time to review your grants strategy to guarantee your time will be used to pursue opportunities that are well aligned with your work and meet your fundraising needs. If you’ve decided to not pursue an opportunity again, make sure to note the reason why. This will be extremely helpful in times of transition to prevent new staff from trying to figure out why you didn’t reapply to a grant you’ve been applying to for several years!
3. Start filling in hard grant and reporting deadlines
The easiest step in creating your calendar is starting off by adding the hard deadlines. These deadlines are the least likely to shift, so it provides a great starting point and allows you to see where there are gaps and chances to add rolling deadlines to your calendar. Speaking of rolling deadlines, be sure to include one or two in each month to allow yourself the space to respond to new RFPs that may be released throughout the year.
4. Research new funding opportunities
As you’re creating your new calendar, you might come across some funding gaps that you need to fill. Throughout the year, you should be researching new funding opportunities that are well aligned to these needs, as well as your larger mission and programs. Include the carefully vetted opportunities in your calendar, but be mindful of the staff time needed to apply to the grant and the chances of your organization receiving funding. You might find that these new prospects require an invitation to apply, but that shouldn’t hinder you from building in time into your calendar to cultivate a relationship with the funder.
5. Be realistic
Staff time and resources are incredibly valuable, so it doesn’t make sense to go for grants that you know your organization has no chance of winning. It will always be better and more strategic to write 10 extremely compelling proposals that you will win than to spend time writing 20 average proposals. This also means that it is critical to remain honest and realistic about your organization’s capacity to take on new grants. Of course, new and additional funds are great, but putting your organization in a situation where you can’t deliver on your promises is never ideal. When building your calendar, always keep in mind your mission, funding needs, and capacity.
6. Review and update your calendar throughout the year
The grant calendar is not a static document. Reevaluating and updating it throughout your fiscal year is important in making sure that it aligns with your organization’s evolving needs. Be sure to build in time into your schedule at least once a month to review upcoming deadlines, and which opportunities will require time and attention from you and other staff. Review your cultivation tasks to ensure you’re on top of everything so that your calendar doesn’t become unwieldy and you aren’t missing out on great opportunities!
Whether your organization has a robust existing grants calendar, or you’re just starting your foray into the institutional fundraising space, these best practices will help you implement a thorough and strategic system for staying on top of your existing grant deadlines, identifying new opportunities for funding, and maximizing your organization’s time and resources along the way.
January 12, 2017
THIS POST IS PART OF A SERIES.
YOU CAN READ PART 2 HERE.
If you’re the leader of an organization, one of your key responsibilities is to predict the future—and prepare your organization to respond.
While this probably feels semi-impossible on many days, you’ve certainly been asked to predict—and prepare for—your revenue and expenses during annual budget season. And if you’ve ever been in a cash crunch, you might have wished you’d planned a little more rigorously earlier in the year.
Therefore, we want to share some tips and tools to make this process easier for you. Below is Elevate’s Guide to Creating Forecasting Charts, which we produce annually for our clients.
Forecasting v. Cash Flow
Before we dig in, we want to remind you that a forecasting chart is not the same as a cash flow chart, which is also a tool nonprofit executives need. Essentially, a forecasting document helps predict what funding you will receive, and a cash flow document records when you expect to receive your funding (as well as when that money you will need to spend throughout the year). You should plan to do your forecast document first and cash flow second.
What are revenue projections?
It’s all about probability! Simply put, a revenue projection is the probability that you will receive a certain amount of money during your fiscal year (or some other timeframe). To get a reasonable projection, we estimate the likelihood we will win a grant and then we multiply that probability by the amount of money requested.
For example, if we submitted a renewal request that we believe we are likely to win again, we might say that we have a 90% probability. If we submitted a cold proposal to a funder who has never given to us before, we might think we only have a 5% or 10% probability.
Here’s the math:
$ ask amount x % probability of winning = $ expected revenue
For example:
$100,000 request x 50% probability = $50,000 expected revenue
We add each anticipated proposal’s expected revenue together to create a forecast and get the total expected revenue from grant funding for our organization, and then update this throughout the year.
Why should you forecast?
The best expense budgets are based on reasonable projections of revenue; therefore, there is a high burden on you to ensure that your projections are reasonable, if not conservative. If you create an expense budget and then hope you can raise that amount of money, you are going to be absorbing a lot more risk than if you create your projections first and then create your expense budget based on what you can raise.
How often should you forecast?
Most organizations forecast annually and revisit their forecast before Board meetings. You should be regularly updating these as you win and lose grants, and tracking your progress to ensure you are going to meet your revenue goals. Just make sure there is a balance between the difficulty to project and the value you get from your projections.
How do you create a forecast or projections chart?
STEP 1:
Define set percentages based on the type, tier, and history of the funder. There are a few pretty standard percentages. For example, a nonprofit with a consistent strategy and leadership can assume that most private foundations that give annually will be renewed at least 90%. However, in general, these percentages will depend on your sector, funders, context, and leadership. For example:
If your executive director has recently changed, you might not renew all of your past funders.
If the broader context of your issue-area is changing, or public priorities are shifting, the funding landscape might be changing too—with public agencies making less funding available or harder to secure.
If your executive director is skilled at cultivating relationships with funders, you might win a higher percentage of cold proposals than an organization whose executive director does not cultivate or is new to it.
STEP 2:
Modify as few percentages as possible based on your knowledge of the funder. For example, if something has changed that makes you want to be more conservative or ambitious. We encourage you to stick to a set methodology though, both because it is easier, and also because you are least likely to insert your own bias (or unreasonable hopes!) into the process.
STEP 3:
Stay in the middle. No projections should be 100% unless the funding has already been awarded and no funding should be 0% unless you will not submit a request that will be awarded during the time period.
STEP 4:
Input your actual best estimate of the ask amount, ideally based on research.
STEP 5:
Set up your projection chart to calculate expected revenue from each funder and then the total (sum) of all opportunities. If you’d like to, you can create a lower-risk forecast and a higher-risk forecast. We generally think this is a good practice and does not require much more work.
We understand if you are skeptical. After all, when you put a 90% probability on a $100,000 grant, and then win it, your projections are off by a full $10,000! Even worse: when you put a 10% probability on a $50,000 grant and win it, the difference is a full $45,000. So, what’s the point?
Your goal is not to get everything about every funder right. Instead: it is to play the averages and get your total projections as close as possible to reality.
All grants, by the end of the fiscal year, will be either 0% or 100% — so when you project a 10% probability, you are not estimating that only 10% of your ask amount will be granted. (Most likely, you will win most of what you request.) Instead, your goal is to win ONE out of every TEN funding sources that have a 10% probability in your projections. The same is true with renewals: if you plan to renew all the money you won last year at 100%, you are taking on too much risk – if a single foundation chooses to change priorities, and not fund you again, having a 90% projection will allow you to absorb that loss much more easily.
THIS POST IS PART OF A SERIES!
You can read part 2 of this series here, and make sure to download our free forecasting template below!
