Nonprofits face unique challenges that for-profit organizations don’t have to grapple with. First, nonprofits have to ask for money from people who don’t directly use their services. Instead of customers, nonprofits rely on donors. And many donors insist on spending less on administrative and managerial tasks, yet these functions are what make philanthropic efforts possible.
These challenges make negotiation for nonprofits different compared to for-profit negotiations. Here are five proven ways you can get your donors to increase funding for your nonprofit.
Set the right tone
Donors and board members are your partners, and, in most cases, your organization needs long-term relationships with consistent funding over the years. Setting the right tone makes a huge difference in nurturing the donor-nonprofit relationship. You may want to convey a deep appreciation for your donors’ participation while at the same time being candid about the challenges you face in executing your mission.
As your partners, your board members and donors understand the importance of the mission. Ensure you provide regular progress reports that show how the partnership is making a difference. Let your passion for your mission show when talking to your funders. Express your gratitude in person and in the organization’s literature so your funders know they’re recognized and appreciated for making the mission possible.
Negotiate full-cost agreements
Managers of nonprofits often quote the costs of a campaign minus administrative costs. Workshops in funding teach that including overhead costs in your funding proposal increases its chances of success.
Overhead and administrative costs are a necessary part of any project and can’t be wished away. Your nonprofit will need to employ staff, administer allowances and per diems, process payroll, pay for amenities and smoothly run logistics. Make donors aware of all costs pertaining to the campaign’s objectives before asking for funding.
Recover indirect costs
In executing its mission, a nonprofit often incurs indirect costs: unique expenses that you may not encounter with other projects. Some donors may require special considerations that come with additional costs (special insurance coverage, for example).
Carefully go through the grant award details and let the donor know that the extra costs may be invoiced as direct and reimbursable. Usually, the donor will retract on the special requirement or else agree to foot the bill and reimburse the costs.
Negotiate favorable payment terms
Grants normally spell out terms and requirements for when invoices should be submitted. However, the terms often leave out when submitted invoices should be paid. While such a scenario is practically unheard of in for-profit circles, silence on payment terms is quite common for nonprofits.
When conducting a nonprofit negotiation workshop for a grant, it’s important to train members to include terms for when payments should be made.
Whenever possible, use negotiation training techniques to establish terms that ensure advance or net-zero payments. Otherwise, in most cases, your best chance would be to get Net 30 terms, meaning funders should honor payments within 30 days of receiving an invoice.
Establish performance-based terms
To secure funders, it may be necessary to agree to terms of payment that are based on performance. Your organization takes the risk of receiving less than you spend on services. A performance-based pay plan increases the chance of achieving results at a lower cost.
Nonprofit performance-based contracts are made on the premise that your campaign gets to serve a designated number of eligible people. In addition, these types of contracts offer an accepted level of service for an agreed-upon financial reward.
Performance-based terms work best when your organization’s capacity to provide required results is already established and the community you serve is already identified. Otherwise, the overhead and administrative costs may far outweigh the donor funds applied for.
Negotiation is hard, especially if you’re new to the fundraising world. But if you follow these tips and stay true to your mission, you’ll be ready to take on the challenges that come your way.