Nonprofits need technology. Here’s how they fund it

Nonprofits need technology. Here’s how they fund it

Lean operational models aren’t just a fad in the nonprofit world.  They are a way of life.  Most nonprofits run on a shoestring because they have to, or because they feel they have to.  Overhead is a dirty word in the nonprofit world – every dollar spent on staff, equipment, and facilities is a dollar that could be better spend on the “real” work.

Yet in the latest tECHO talk, we learned that technology spending is actually at the heart of any nonprofit’s core work.

It’s called the “overhead myth” – the perception that nonprofit performance can only be objectively measured through the ratio of operating expenses to program expenses.  Many nonprofits base their donor outreach on the assumption that nobody wants to give to fund operating expenses.  Donors would rather draw a direct line between their money and a positive outcome – or so the overhead myth would tell us.

Yet the conventional wisdom around this is quickly breaking down as nonprofits witness actual donor behavior.  The very organizations which coined the term “overhead myth” are the agencies which rate the effectiveness of nonprofits and monitor donor trends.  The reality they observe is that donors can connect the dots between technology spending and the outcomes that nonprofits strive to achieve. The numbers back this up – in 2014, the median percentage of grant dollars used on general operating support increased for the first time in years.

This is not to say that funding technology is always an easy sell.  Like any nonprofit expense, it has to be justified to the donor base.  While there may not be a direct line between spending on technology and an organization’s outcomes, directors of advancement know that creating a story around how technology grows a nonprofit’s capacity is critical.

Here are a few strategies for organizations looking to fund investments in technology:

  • Be specific.  Donors want to know exactly what their money will buy and how it will improve the organization.
  • Demonstrate a tangible return on investment.  Link the funding of technology upgrades to tactical impacts rather than broader strategic goals.
  • Prepare an accountability mechanism.  If a technology upgrade will increase productivity in a certain way or to a certain degree, be prepared to measure it.  Collect the data you need for the “before” and “after” snapshots.
  • Ask creatively.  Maybe it’s not just about the money.  An in-kind donation of technology consulting services, equipment, or even configuration work can be just as valuable as a straight monetary gift.
  • Understand the ongoing costs – and ask for them!  Technology often involves upgrades and other periodic costs, but many nonprofits focus donations solely on the up-front expense of buying and installing the software.  Make sure that technology doesn’t increase your overhead in the long-term by incorporating the total cost of ownership into the donor pitch.

Want to learn more about technology funding for nonprofits?  You can get the entire tECHO talk here.