Friday, December 19, 2008

Growing in a new economy

The starting point of many conversations over the past few weeks has been: how has the recession affected your revenue growth. Our clients are experiencing the tension of tightened budgets.

We're concerned. The rapid rise and then plummet of the Canadian dollar significantly impacts corporations and organizations that trade in US dollars. For some the low dollar is advantageous; for others it plays havoc with the bottom line. The overall consumer caution is causing concern. The chaos of the markets have decreased available investment funds.

A flurry of writing from fund raising professionals indicates the breadth of the impact. While some of our clients have experienced a gap between budgeted revenue and actual revenue, most of them have increased in overall revenue from year to year. Some have fell short of particularly aggressive budgets, but gained 10 - 15% over 2007.

Non-profits dependent on government and foundation donations will very likely experience declines in their annual revenue. Small non-profits that lack a diversified donor base and are dependent on a few major revenue sources will also struggle. But organizations true to their mission, with strong relationships to a diverse group of donors and supporters should experience consistent giving and may even experience some rise in their giving. Faith-based non-profits may also experience a rise in giving, especially if they emphasize their core mission.

In my research and from client experience, I have put together 7 foundational principals that will help you weather the storm:

1. Make investment oriented business decisions. I know, that sounds simplistic. But let me explain. Cut out overhead costs that do not add growth to your business. Retain budget lines to acquire new donors and serve loyal donors. Negotiate better terms and invest less for greater impact. With tightened marketing budgets, the climate is warm for negotiation.

2. Build relationships with your donors. Increase your donor engagement and service opportunities -- make it easy for your donors to choose you over other agencies. In downturns, the market is incredibly competitive -- it`s a buyer`s market and the service they receive will impact their long term purchasing and giving decisions.

3. Innovate and diversify. Organizations dependent on one form of marketing or fund raising are in a precarious situation. While integration and diversification increases costs -- it also increases revenue. Look for creative ways to tell your story. Don`t produce a newsletter because all of your competitors produce a newsletter. Listen to your agency. They see the numbers of other clients. While the numbers are proprietary -- the agency can identify trends and increase your effectiveness by applying those trends to your marketing strategies.

4. Track results. Use your data. If you are not tracking well -- put the pieces in place to track. Your data tells the truth. Phone calls from customers and donors do not -- they tell a tiny fraction of the story. Compare anecdotal comments to actual results to make decisions. When planning new campaigns and media buys, data is essential to make wise buying decisions. Use web analytics to understand how people are using your web site. It will give you a lot of insight to use for other marketing ventures.

5. Concentrate on Net Income and not ROI.
Our data intelligence allows us to segment tightly -- but be very, very careful. While higher response rates increase overall return on investment, it will also decrease overall net revenue. Focus on raising money. To help get your mind around this, consider two "a-thon" events. In 2006 an organization spent $300,000 and raised $1.2 million -- with a 4 to 1 return on investment and $900,000 towards their cause. In 2007 they spent $1,000,000 and raised $3,000,000 -- the 3 to 1 return on investment did not meet the traditional 80/20 -- but the organization contributed $2.1 million to the cause -- $1.2 more than the year before. While the return on investment was less, the monies contributed to program were far greater.

6. Do not stop acquisition efforts.
Acquisition is costly. Not investing into acquisition is much more costly. The effect of the lack of acquiring new donors will continue for many years, multiplying the effect of the loss of income.

7. Streamline messaging, emphasizing your core mission. Now is the time to get back to basics. Make sure your donors and supporters fully understand your core mission and inspire them to join you in fulfilling it. Focus on high profile projects and goals, giving donors a clear understanding of your work.

I wish you a very Merry Christmas... rest well so that you will be ready to prepare strategies and tactics that will help grow your organization in the New Year.