TurnAround Executive Coaching, Author at TurnAround Executive Coaching

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Do you lead a nonprofit that needs money? Do you look with envy on some other executive directors who haul dollars into their vaults in sacks or bitcoins? Maybe you’re like me—an outsider director.

Outsider directors don’t know rich people who are trying to give away their estate. We didn’t graduate from a famous college. And the End of the Year solicitation hit a high point when my mother gave $50. Outsider directors are executive directors whose birth, education, or family connections did not give them the network that some other executive directors enjoy.

So how does an outsider director cope with the need for cash? There are two types of capital structure: capital sources that are based on results and capital sources that are based in time-consuming relationships. Since outsider directors don’t have well-built networks for relationships, start with result-based methods. Here are seven results-based ideas and three relationship-based ideas on how to build your capital structure.

Note: For sustainability, I recommend that you choose three out of this list of ten methods. One source leaves you too vulnerable, but each additional source requires time and energy to build.

  1. Fee-for-service. Some nonprofits have core customers who can pay for the service. Hospitals and universities understand this method. Is it possible for you? A benefit of fee-for-service is that the surplus is completely unrestricted. Your only source of launch capital for new programs is an unrestricted surplus.

Fee-for-service also saves time because the cash is derived from the result. An outsider director needs to spend every minute carefully. Do you want customers for your daycare? Operate a quality daycare and advertise. No time-consuming evening meetings and fundraising events are needed. The challenge of fee-for-service is to find a needed service for which other companies are not competing.

  1. Embed. This is a special instance of fee-for-service. Since government often wants us to make bricks without straw, they create social programs with a lot left undone. Just consider public schools that dismiss at 2:30 p.m. Who’s able to get out of work and over to a school at that hour?

My parents had home-delivered meals from a nonprofit agency. The government contract provided food and delivery. So what was missing? Dessert! Those meals omit dessert since we all know dessert is bad. Frankly, when I’m 80 years old, I still want dessert.

So, the nonprofit offered a cookie/nuts/seltzer choice for $1 with the food delivery on holidays.

Follow the rules of your contract but look for opportunities to embed your own enhanced services for which people will pay. Other examples are fee-based daycare for working parents after the contract after school program ends or adding optional fee-based trips on additional days at a contract senior center program. Again, check contract rules!

  1. Membership fees. Most of us pay to join our local nonprofit consortium. I’m in one group that charges $1,100 a year and has 500 members. This is a great method to consider when you can offer more resources than people will use. The consortium has workshops continually, and I rarely attend, yet the support is there if I need it. People often won’t use your program every day, but they’ll pay the membership fee to have those resources available in case they run into a problem.
  1. Government contracts. Most nonprofits that take in over $2 million in revenue will have significant government contracts. This is a great method if you work on a problem that is new to government. The government tends to be generous when it doesn’t know what to do. Half of the entire military budget of the U.S. goes to military contractors!

Government contracts are a good sustaining method as long as another source provides the cash for new projects and the implementation of your full mission. One challenge of obtaining cash from contracts is that a change in politics can bring with it a windfall or the reverse: a welcome increase in contracts or the unexpected termination of contracts.

  1. Investment or endowment income. Harvard’s endowment is $53 billion. The investment interest alone pays for their entire operation! But their endowment is also 400 years old, so don’t hear this and retire early. If you’re planning for a long-term mission, the endowment can play a role.

This method is great for serendipity. It’s my experience that even outsider directors occasionally get gifts from unexpected sources. When that happens, create the endowment.

  1. Cy-près. For this, consult an attorney! Let’s assume that an estate has to be settled and that the decedent was concerned about helping people who are homeless. You direct an agency that helps people who are homeless. At times, people die without leaving an heir. Perhaps an insurance policy is discovered long after the estate is settled and heirs are deceased. A judge often decides how to spend the money. If the court is aware of your agency, you could receive the estate.
  1. Debt instruments. Debt is a source of cash. If you bought your house with a mortgage, you added debt cash to the down payment, and it all worked. Normally, nonprofits are closed out of debt markets. We often don’t have the assets to secure debt. That changed when the EIDL loan expansion increased to $2 million, and I was first in line to apply. Finally, an outsider director has a chance for real launch capital!

Debt cash can leverage your launch capital to start a new program. Board members can be a source of debt cash, but here, again, you should consult an attorney. It’s not a method for the faint-hearted, but outsider directors are usually not faint-hearted. Check out American Nonprofits, whose goal is to provide the nonprofit sector with financial resources, including low-interest loans to qualifying nonprofits.

Now we get to the difficult capital sources in order of importance for an outsider director. These sources are difficult because they depend on relationships. Since outsider directors lack networks, these process-based methods can create anxiety and guilt.

  1. Donor-advised funds. This is a fast-growing method for wealthy people to make gifts. Simple networking can add you to their list. Visit the foundations in your community where these gifts are often made. Invite the director to your site. Foundation directors cannot make gifts themselves. But when a donor shows an interest in health clinics, the director already knows about your clinic and can recommend you as an agency to receive the gift.

Two benefits that the investment allows process time for building a few relationships with directors and the gifts are in the thousands instead of the tens and hundreds.

  1. Volunteers. Like cash, volunteers are a resource with which you can do great things. Volunteers are a great capital source. If you have process time to select and supervise volunteers similar to the way you do regular staff, this is a great resource. The challenge is that most volunteers are not well-screened when they apply, and they’re not supervised properly when they work. Check if your insurance carrier offers you discounted screening services for volunteers. Volunteers, like staff, are a high-process commitment.
  1. Charitable giving. According to The NonProfit Times, about 10% of nonprofit revenue is from charitable gifts, and it’s declining. I set aside 10% of my income for charity. Even at that level of giving, I took the standard deduction last year because Trump’s change in the tax law removed any tax-motivation for giving. This method is high process—fundraising calls, meetings, and stories take time—and many people give $10 and feel like they gave $100.

What to do? Find simple ways to build relationships. I follow the example of politicians: a lot of small events that take little time to set up and a quick call afterwards to ask for the gift.

If you’re struggling as an outsider director, you’re not alone. It is tough and isolating to face closed doors to networks that other executive directors open automatically. However, with grit, optimism, and a passion for mission, outsider directors can fill their vault. I hope these ten tools are an encouragement to keep fighting the good fight.


Mike Bishop

Dr. Ronald Dale Tompkins  is Managing Partner and Principal Coach of TurnAround Social Sector Coaching. His passion for empowering outsider directors comes from leadership roles in five different agencies.

The thought leadership that Dr. Ron brings to clients for coaching includes:

  • Management Accountant associated with the Institute of Management Accountants
  • Certified Scaling Up Coach
  • Ph.D. in Higher Education Policy (Buffalo)
  • MBA in Finance (State University of New York)

Dr. Ron is gay, married, and has children and foster children in the USA and Southeast Asia. He has been a member of the Indo-Chinese Caucus and Cambodian Caucus of the United Methodist Church. He is a long-term resident of New York City.

Contact him at tompkir1@gmail.com His thought leader website is www.RonaldDaleTompkins.com

Coaching partnerships are art as well as science. Since we operate with two coaches, our capacity for new clients is low. The first interview is the disclosure of our values as well as understanding your roadblocks.

Who is a Great Client Match?

At TurnAround, we want to co-architect sustainable and resilient social sector agencies through the 3rd year that lift the creative spirit or promote fairness. These include those who protect human rights, organizations led by women and persons of color, LGBTQI leaders, and organizations working with immigrants.

Our Coaching Values

  1. Diversity – Solves intractable problems and brings joy to the human experience. We reject recent appeals to America first and intolerance of diversity.
  2. Cutting Edge – Resiliency is not found in the middle. Nonprofits need coaching as much as the Yankees do!
  3. Empower – Vocabulary unlocks dreams and energy to win. Paulo Freire was right!
  4. Lifetime Learning – Always carry a book so you don’t look so damned stupid. None of us are smart enough to lead our companies as they will be a year from now.
  5. Team-Based Solutions – Teams turn today into growth tomorrow. We’re not impressed by stars.
  6. Chaos Control – Chaos is weaker than plans. We help you create systems with the Scaling Up Performance Platform and follow them.

NonProfits rarely see the need to find a business partner. At best, they find a favorite auditor, attorney or supply vendor and essentially develop no-bid contracts with their favorites. Stuart Mendel and Jeffrey Brudney found that nonprofit and business partnerships were only 10% of partnerships.

Partnerships mean that both partners get something that they want from the relationship. Nonprofit CEOs are nervous about relationships that might make a business – more profitable. Actually, every time that you pay your auditor, I assume that they get richer! So there is nothing illegal or unethical about partnership with business.

What are bad partnerships with Business?

Brand Risk – The biggest risk is Brand risk. If you choose to partner with businesses that don’t match your values, mission, or values of your clients, you can seriously damage your brand. Partnerships with business should hire a coach to help you review partner proposals with your leadership team, board, and stakeholders before you proceed. For example, the company in New York that has done audits for Mr. Trump also pushes aggressively in the nonprofit space locally. Would it affect your nonprofit brand if you chose the same auditor? What questions would you raise before you made the decision? Your coach can help.

Kentucky Fried Chicken partnered to give money for breast cancer cure. They printed a month of pink buckets for chicken. Media quickly seized on the links between calories, obesity and breast cancer. There was nothing unethical with the business relationship but the nonprofit failed to consider key implications of their brand. Proceed slowly and use a coach!

Process Risk – A second risk is process risk. The processes and corporate cultures of all companies are far different. When any two groups develop a partnership, there needs to be a written charter that the coach helps you to carefully spell out details

Both Brand Risk and Process Risk can be managed. Leaders lean into the danger, use a coach, and do risk management! You can partner with business.

What’s a good reason to partner with Business? Mendel and Brudner list four reasons and I add two more!

  1. Your nonprofit needs money – Pampers diapers and UNICEF were partners for a long time and UNICEF got funding for its mission. Pampers added to its brand strength by being interested in children. Find a business owner who really likes your mission.
  2. Your nonprofit helps a Business that helps your clients – A family doctor has a practice locally that easily accepts cash and his prices are low. Any nonprofit that helps low income families would be helping their clients by referring them to the doctor if there are not other good choices.
  3. Your nonprofit needs more expertise – A local construction company is willing to partner with your nonprofit with internships. You have a training program for people released from prison but no expertise in introducing your best graduates to the job market. The construction company gets a supply of semi skilled workers that come there with your recommendation.
  4. Both you and the Business want market share – You realize that a local bakery attracts young parents whose children would be eligible for your school. You already have 200 parents who don’t go to that bakery. If both companies give discounts to each other’s customers for a month, then both groups of parents are now potentially interested in both companies.
  5. Sumo Number Four – Bernie Brenner suggests that you find a partner who is 10x bigger than you and partner with them. For example, a real estate developer suddenly gets bad press about rodent infestation. They need a brand partner who will help them clean their brand. They donate money to your nonprofit and rebrand as the safe rental for families. This partnership is the most risky for the nonprofit but potentially the most effective.
  6. More Respect Than Government – Government partnerships are often take it or leave it contracts. They add conditions without reflecting on the costs of compliance. They assume that they are the head in the partnership and your nonprofit is the hands and feet. Business partners can be different, You can search until you find the right business to partner but you can’t easily choose another government to partner if you don’t like the first one!

Conclusion: Partnerships are critical in the growth of nonprofits and often welcomed by business. You will be treated as a co-equal partner by the right Business. Remember:

  • This is not a plan for next week – it’s in your three-year plan.
  • Use a coach and develop carefully.
  • Avoid brand and process risk
  • Involve your leadership and board in the decision
  • Enjoy the expansion of your good work!

Giving Tuesday may provide gifts for your nonprofit, but most of us need more than one Giving Tuesday! Financing your nonprofit programs through charitable giving is a cliff hanger because gifts come and go quickly. You probably have discovered that.

I just analyzed the 990’s of a large, wonderful nonprofit in New York City.

BUT I WAS SHOCKED

Their gifts dropped from $120 million to $70 million in one year. I couldn’t believe it. I have a friend that knows them and she said that gifts from hedge funds really have been their major source of funding. In bad years, the hedge fund gifts go away.

For Giving Tuesday, I’m giving two hours of coaching in December to five nonprofit leadership teams. APPLY HERE I’ll review your 990’s, answer questions, and share a couple of tools as appropriate. Good advice never disappears or loses value!

I’m getting more requests than I can honor but its free to apply.

And I truly hope your finances get a major boost on Giving Tuesday also!

Kind Regards

Ronald Dale Tompkins
Certified NonProfit Teams Coach

APPLY HERE. It takes one minute 😊  

  • Federal cash for social programs will drop massively by 20%
  • Federal cash for NonProfits is lowest in 40 Year Average of GDP.
  • In 2019, it drops to 11.1%.

Social Security and Medicare costs place incredible pressure to shrink community development, education, arts, afterschool, LGBT civil rights, etc.  Some of that money flows to states and cities and then to your agency –it’s drying up by 10% right now. I see frantic responses to save great programs that are cash starved,

  • Contributions are declining. Tax Law changed in 2017 so there is no tax benefit for most people to make a gift.
  • Religion is quickly declining. Religion has been an important teacher about charity and volunteering. Belief has dropped 12% in a decade.

On Giving Tuesday, I’m offering five NonProfit leadership teams relief from the stress. Apply here. It’s not a miracle but you may get a new direction. I’ll give a two hour coaching session to each team over the holidays. There is no cost at all. Part of the discussion will be planning multiple cash streams to keep your agency stable. I use the proven Four Decisions system (People, Strategy, Execution, Cash).

Apply here. Like the lottery, the only way to win is to try!  I hope the best for you.

Remember, things can grow even in deserts.

Many nonprofits are being damaged by fundraising. The change is like being hit by a fast freight. Next year will not feel like last year. Nonprofit leaders often regard charitable gifts as the first and major provider of money. It’s critical! Cash pays staff and helps clients. Three forces are changing the giving landscape. Are you ready?

NonProfit leader about to be hit?

First, Tax reform in 2017 doubled the standard deduction. Only richer people and tithers (people who have a spiritual habit of giving) benefit financially from gift-making. Reports indicate that gifts from individuals declined by 1.1% in 2018. Charitable gifts from corporations increased. Gifts from those over 70 years old who made gifts from IRAs also increased.

Second, the number of corporations that received half of all profits in the USA declined. In 1975, 109 companies made 50% of all profits. In 2016, the number dropped to 30. There are very big gifts but not as much capacity for small and medium gifts.

Thirdly, Christian religious affiliation is declining rapidly in the USA. Christianity has been a major inspiration for giving. Pew Research shows a decline of 12% in the last decade! It’s hard to describe what changes this rapid rejection of religion will make in American society, but charitable gifts will be affected.

Are you watching your dependence on gifts and making appropriate changes?

I coach nonprofits who face turbulence. Contact me at tompkir1@gmail.com for a free consultation.

Sources: Richard Eisenberg (Forbes, June 18 2019), Pew Research (October 2019), and Richard Wolff (Democracy at Work)