Development partners increasing their partner database and diversifying their pool of recipients are progressively conducting due diligence on non-profit organisations before investing. This is evident in the related processes, conversations, and publications. This includes stringent application requirements for the former, while the latter can be seen through articles by the Tata Sustainability Group, the Bridgespan Group, and Angels for Angels. This is mainly to minimise the risks associated with financing nonprofits (e.g., mismanagement of funds). Similarly, as explained in an article published by Hashtag Non Profit there is growing discussion on the importance of nonprofits to also conduct robust due diligence on potential donors. In this blog, I share some tips for nonprofits on identifying “red flags” when engaging with potential donors. These are mainly based on my experiences as the Regional Business Development Coordinator for Solidaridad Southern Africa and conversations with resource mobilisation experts.
Fundraising for nonprofits is an extensive process that can take a few months to a couple of years. Coupled with the fact that one of the most valuable assets in a nonprofit organisation are the staff (more importantly, their time and expertise), further emphasises the need to ensure that the target donor is worth pursuing, and hence minimising the opportunity cost to the organisation from engaging with this donor. While with each opportunity pursued, there is the probability of being unsuccessful — this is a risk organisations are willing to take.
A study from Richard Perry shows that only one in three or four donors who meet your major gift criteria actually want to relate to you.
In proactive fundraising situations, instead of declaring their lack of interest and/or capacity to invest, some donors will continue to string nonprofits along. This may happen for various reasons, such as, “data mining” (i.e., collecting their innovative ideas and then either implementing them or getting another partner that they prefer to do so), amongst many others.
To help make the most efficient use of your time during your fundraising efforts, I’m sharing five “red flags” to be on the lookout for during the initial engagement stage with potential donors. These common behaviours are intended to assist nonprofits in deciding when and if to continue pursuing a potential donor, providing guidance on identifying potentially uninterested donors.
- When donors are reluctant to share critical information. To promote sustainable funding, nonprofits will often diversify their sources of funding. This translates to them regularly exploring partnerships with new donors. Often, nonprofits share all the requested information by the donor, which is often very comprehensive, to help donors establish the investment potential. As relationships are a two-way street, the issue arises when donors avoid sharing critical information such as the investment amount available, the application process, when decisions are expected to be made, when requested from the applicant.
- When donors are reluctant to document their commitments. Although virtual commitments from donors can be acceptable once trust has been established between both parties, concern should arise when donors avoid documenting their promises. This can be a tactic to avoid accountability, hence reducing the probability of the donor following through on what was agreed on verbally.
- When donors prolong the application process unnecessarily. While we understand that delays may occur when applying for funding, some donors frequently extend the process unnecessarily by, for example, continuously transferring you to various departments in the organisation that have no clear role in your application process. Here, it begins to feel like there is limited progress being made. One can also argue that this is a strategy used by donors to exhaust the applicant and hence resulting in them choosing to no longer pursue the donor.
- When donors continuously introduce scope creep. When you start engaging with a donor, it is important to agree on the process that will be used to potentially secure funding, and hence be clear about the expectations from and of both parties. Be cautious of donors that start deviating from the agreed plans and request extensive additional information without a clear explanation. Again, here one can argue that this may also be a strategy to tire the nonprofit and push them to lose interest in the donor.
- When donors rarely communicate. Donors interested in partnering will often provide regular updates on the progress of your application. Therefore, in cases where the nonprofit often has to request an update, this could indicate of the level of priority of your application. However, this could also be a sign that the donor is overwhelmed with work, and so this point should be considered once such reasons have been ruled out.
Additionally, resource mobilisation requires one to rely on their instinct to complement their expertise and the aforementioned tips.
Following your instinct could potentially save you a lot of time, allowing your organisation to channel its efforts into another, more promising donor.
While the above may not always be red flags, we must be aware of these during our resource mobilisation efforts. It will also be important to consider each tip in light of the situation and discard the tips that might not be applicable. To further complement these tips, there is value in reaching out to your network and those that have previously engaged with your target donor. It is not uncommon to find that they too might have received the same treatment from the donor, and so we can learn from their experiences.
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