Episode 55: Restricted Funding: The A part of the A + B = C Formula for Funding Success
There is a Formula for Funding Success. It’s 60% Restricted Funds + 40% Unrestricted Funds. This distribution ensures program coverage, demonstrates to funders organization stability and viability, and allows the organization to be agile and responsive to the unforeseen.
LINKS:
Hootsuite
YouTube Nonprofit Program
NONPROFIT SPOTLIGHT: Greenpeace
Podcast Transcript
Speaker 1 (00:07):
Welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding, impact, and sustainability. And now here's your host and resident Philanthrepreneur, Amber Wynn.
Speaker 2 (00:30):
Your host and resident philanthrepreneur, yes, that's me. Hey, fam, I'm back and I missed you. Did you miss me? I know you did. You know why? Because we have fun when we hang out together and today will be no exception. Today I am going to talk to you about the Formula for Funding Success. If you know me, and I think you guys know me pretty well, I've been doing this for about a year now. And if you know me, you know that I do not believe in going into something willy-nilly. I believe in, if there is a rule, we follow it. If there is a pathway, we take it. I'm about the path of least resistance because you need to save all your energy to do the work that you're doing in the community. Today we're going to talk about the Formula for Success. Do you remember back in high school when they taught you in algebra A plus B equals C? Well, that is the same premise that I'm going to use with my formula for success. The A part is restricted funds. The B part is unrestricted funds. You put those two together and you get funding success. So today we are going to take care of the A part, but y'all know how we do it. When we come back, we're going to talk about restricted funds.
Speaker 3 (01:58):
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Speaker 2 (02:39):
Welcome back, you’re On Air with Amber Wynn, Philanthrepreneur, and today we are talking about restricted funds using the proven A plus B equal C formula. It's very basic and sometimes in life those tried and true proven processes are good enough, right? A lot of times people try to freak stuff out and fancy stuff out, but at the end of the day, what's tried and true works and this formula is tried and true, and trust me when I tell you it works. So today we're going to talk about restricted funds. What is a restricted fund? When a funder says to you, please list for me all of your restricted funds, or if a funder says, this is an unrestricted fund or restricted, what does that mean? It means this. A restricted fund is typically when your donor tells you what you have to use the money for. It's restricted for that purpose only.
Speaker 2 (03:42):
So if you write a grant and you say, we'd like for you to fund the Young Heroes Program, I don't know, they're like, wonderful. We'd love to fund the Young Heroes Program. You are committing to only spending that money on the Young Heroes Program, and when they ask you for a budget and you put line items on that budget, those are the things that you are restricted to use the money for. It's important that you understand that because you can get your nonprofit in a world of trouble if you take the money that your donor has issued you and use it for something else. I'm going to use a classic case. Grant writers, a lot of times my Founders will say, Hey, can you write this grant? I'll pay you a percentage of whatever you win. That is mismanagement of funds. Why? Because the grant that you're writing for is restricted for whatever it is you are asking them for.
Speaker 2 (04:43):
It's not to be used for things that you've already in incurred in the past. Does that make sense? Because you have restricted funds. Why are there restricted funds? Because funders typically aren't going to write you a blank check. They're going to write you a check for something so that at the end of that grant period, they can come back and say, did you accomplish the goals that you set out to do? And if the answer is no, then they can say, okay, you won't get funded anymore. Or if the answer is no, they can say, okay, give us our money back because we didn't give you money to pay a grant writer. We gave you money to support your Heroes program, and specifically, we gave you money for counseling, we gave you money for wraparound support services and we gave you money for counselors. So restricted funds are extremely important.
Speaker 2 (05:34):
Let me tell you why from a funder's perspective. When we ask you for your budget, we're looking to see how much restricted funds you have and how much unrestricted funds you have. The formula A plus B, equal C, we can take it a little bit deeper. You should have 60% of your revenue as restricted funds and 40% of your revenue as unrestricted funds. Why? Well, from a funder's perspective, if 60% of your revenue is restricted, then what I know is that your organization is stable. I know that your programs are covered. I know that there is probably long-term sustainability that is in your future because you have monies committed for your program, right? Now, we don't want all of your revenues to be restricted. We don't want all of your monies to be grant money because what happens is you don't have any wiggle room. So, it's important to understand that restricted funds typically come with the restriction of being allocated for programs.
Speaker 2 (06:43):
Remember, a nonprofit is a business. It's just a business with a philanthropic purpose. So Funders are expecting you to cover your business costs. Unfortunately, typically those costs are overhead and under overhead you have salaries, but this is how a funder looks at it. If you are running a business, you are responsible for paying your employee's salary. So they're not, they're going to cover the programs. And so that's why it's restricted. It's restricted for your programs. Now, typically, a funder will out allow you to use between 10 and 25% of their grant towards salaries. So if you get a grant for $250,000, you can expect to get between 25 to like $35,000 to go towards your overhead, not a lot of money. That's why it's important that you have the unrestricted part so that you can make up the difference. So today we're talking about restricted funds, the A part of the A plus B equal C formula when we talk about funding success. What I want you to try and wrap your mind around is the purpose and why you need to have both. When we talk about diversifying your funding streams, it's not just have 10 streams, which every nonprofit should have, but it's having restricted and unrestricted. You can have 10 diverse unrestricted funding sources, but that doesn't powerfully position you for stability, agility, or success. If all of your funding sources are unrestricted, then from a funder's perspective anyway, it might be challenging to believe that your organization is stable. Let's just say you have a fish fry and you have a golf tournament, and you have a gala, and all of these things that are unrestricted. Well, we know during the pandemic what happened, right? All of those in-person activities shut down, but if you had grants in place, right, then that money was committed, it was restricted and it was allocated to your programs. You may have had to adjust how you deliver those programs, but that money was committed. So, when we talk about looking at your funding formula for success, it includes both restricted and unrestricted. Okay, when we come back, we have the next portion of our episode, which is Ask Amber, and it's where you get to ask your questions. So when we come back, Ask Amber.
Speaker 4 (09:33):
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Speaker 3 (10:48):
Welcome back. You're On Air with Amber Wynn, and today we are talking about restricted funds, a foundational part of your funding formula for success. And now it's the time of the episode where you get to ask me your pressing questions. You can reach me on any of my socials. I'm on Facebook, I'm on Twitter, I'm on Instagram, I'm on LinkedIn. You can email me at amber@amberwynn.net. And the purpose of this segment is because I can talk all day, I can talk all day, I can find a topic, but it's meaningless if I'm not answering your questions, those things that are meaningful to you. So if you have a question, feel free to reach out to me. I'm also on Anchor, Spotify, YouTube. Hit me up on my DMs and let me know what your pressing questions are because I'm here to serve you. Today the question comes from Quentin in Redding.
Speaker 2 (11:45):
Hi, Amber. This is Quentin from Redding, California. I'm curious, you serve nonprofits, but you choose to establish your business as a for-profit consulting firm. What you do obviously could qualify for a public charity. Why did you decide to form your business as a for-profit versus a nonprofit given the vast nonprofit experience and success you have as a nonprofit professional? Well, Quentin, aren't you just the observant person? Yes. I'm very upfront that the business model that I've chosen to use to make an impact in my nonprofit community is for-profit, a consulting firm, very open about that. Could it have been a public charity? Yes. As a matter of fact, from 2009 to 2013, I did have a nonprofit. It's called the Institute for Nonprofit Management. And at that time, I was trying to get funders to cover the training costs, just like what I'm doing now.
Speaker 2 (12:55):
And it was unsuccessful and for me, for it to be unsuccessful at a time in my career when I was the most successful because I was a grant writer, then it spoke volumes about what was going on in the nonprofit sector. We didn't have all of the social injustice focus back then. And so when I would approach funders, they would be like, what do you need to train nonprofit leaders for? They should know that they have their nonprofits and their, but it wasn't true. It wasn't true then, and it's not true. Now, a lot of people start their nonprofits as we know, because they have the passion and they have the commitment, but they don't know what they don't know because they're not the same regulations for forming a nonprofit as there is for a for-profit. For a for-profit, before you can get any funding from an investor, they want to know that you've done the research.
Speaker 2 (13:47):
They want to know that you've identified your competitor. They want to know what the market is, the saturation. That's not a requirement for a nonprofit. You get three people, put them on your board, you file your documentation, you meet the criteria of a public charity, boom, bam, bam, and you are a nonprofit. And so, because of that, we have so many nonprofit leaders who don't really understand what their purpose, their function, and how to fund their nonprofit. So I did not get that idea funded as a nonprofit. And when I came back in 2019, I mean, I was still doing the work, but when the pandemic happened and all the social justice had happened, there was a shift in our culture and there was an influx of money coming in to address the disparities in marginalized communities. And I took advantage of that. And let me just be very honest.
Speaker 2 (14:44):
What I did not want was to take money from my nonprofit leaders. So I had to figure out how could I get this information to my community without adding an additional financial burden? Yo girl is not cheap. So what I did was I opened my consulting firm and I get money from funders and they pay for my nonprofits to go through my training programs. I like this format because I still get to make an impact in my community. For those of you who know me, I didn't grow up with a silver spoon in my mouth. I'm from Watts, California, and the struggle was real. So I made a commitment to myself and my family that I would have generational wealth. You're not going to have generational wealth from a nonprofit. I mean, not coming from the marginalized community. Of course you've got the Ahmamson’s and all, but they already have wealth and they're just passing that down.
Speaker 2 (15:42):
That's not going to happen with your typical public charity. And so I chose to have a consulting firm because I get to determine what my revenue goals are, what my caps are, and I get to drive my vision. All of those things are pretty much set for you as a nonprofit. That's not the space I wanted to be in. Your girl wants to have lots of money, okay?. So Quentin, that was a very observant question and it makes sense. And my truth is I know what it takes to run a nonprofit, and I'm not trying to do all that work. I'm not trying to manage a board. I'm not trying to raise five times the amount I need in order just to pay my salary. I'm, that's not what I want. And I know that I'm making an impact with my for-profit consultant, and I know that's why I have alternatives.
Speaker 2 (16:37):
I share with you what the alternatives are, and one of them is you can have a for-profit, you can have a for-profit and make an impact in your community, and the monies that come in goes directly to you. So I just want you guys to think about that and I share that. I share that because it's something that I practice. All right, so now we're going to switch over to my absolute favorite time of the episode. That's when I get to put a spotlight on the most amazing people on the planet, my nonprofit leaders. You guys work so hard and sometimes you work too hard. You work so hard that you're not out there tooting your own horn, letting your potential customers and clients and potential funders know the work that you're doing. That's all right. It's all good. I'm your girl and I got you. Today we are going to focus on an organization called Greenpeace. Greenpeace is a global network of independent campaigning organizations that use peaceful protest and creative communication to expose global environmental problems and promote solutions that are essential to a green and peaceful future. Let's check out Greenpeace.
Speaker 5 (17:46):
Hi, everyone. I'm Ebony Martin, Co-Executive Director of Greenpeace. Greenpeace is a movement of the people, and we welcome you. We welcome everyone from moms like me, to dads, students, brothers, workers, sisters, aunties, uncles, pastors, neighbors, and friends. We all deserve a healthy, sustainable planet. Please choose to join Greenpeace today and help us fight to save our communities and our planets.
Speaker 2 (18:20):
That's Greenpeace. They've been doing the work for over 50 years. If you would like to find more information about Greenpeace, join the movement or make a donation, please reach out to them at www.greenpeace.org. Let's keep it moving you guys. The next thing we're going to do is have a little conversation, right? Y'all know I always share my 2 cents with you towards the end of the episode. It's called Mindset Minute, and it's where I take a minute to just share something, some musings, some things that have been on my mind. Today I'm going to talk to you about why having an all volunteer nonprofit is not as honorable, and more importantly, as fundable as you may think it is. And I'm bringing this up, I'm sure I've mentioned it before, but I was working with a client and doing my little assessment intake or whatever, and I asked her, I'm like, okay, do you have any paid staff?
Speaker 2 (19:26):
And with so much pride, she says, we're an all volunteer organization. 100% of our proceeds go to support our veterans. And I'm like, okay. All right. You don't even have a paid executive director. No, I function as the volunteer executive director. As I stated, 100% of our proceeds go to support the veterans. Here's what I want to tell you guys. You may think that that's honorable, and you may think that that makes you more fundable, that a donor's going to look at this and be like, oh, 100% or 80% of your proceeds go to support your target audience. But there is a missing there, and I want to talk to you about it.
Speaker 2 (20:13):
Funders are business people, and those checks that they write, that they write to nonprofits are not free money. They have to report out not only to their board or their investors, they have to report back to the IRS. What did you do with that $250,000? So when they are vetting you and they're comparing you to other organizations and trust and believe they are, because they want to select the most qualified organization to help them meet their funding goals, they're going to look at that. You are an all volunteer organization. What does that mean? What do you think of when you hear volunteer? I'm going to tell you what a funder thinks of they hear. Nobody is accountable because as a volunteer, that's what you're doing. You're volunteering. You can come today or you can not come today. You can't make anybody come. If they volunteer, it's up to them If they choose.
Speaker 2 (21:10):
Now, you can be the Executive Director and you're like, well, I founded this organization and I'm going to come. And they don't know that. All they hear is there is no accountability. You don't even have one staff member who's receiving a check that's going to make them make them, because a check makes you show up. Y'all know it's, y'all know it's true, right? So many people are working nine to fives because they got that mortgage to pay. They go to work to get that check. It makes them accountable. So the fact that you don't even have one person on staff that is accountable, that makes a funder look at you a certain kind of way. All things considered, you could be providing the most amazing service to your veterans, to your clients, but if there's no accountability for that money coming in, a funder's going to look at you a little bit differently than the organization that has a paid individual responsible.
Speaker 2 (22:02):
Who are they going to call? She's like, well, they're going to call me. I am the executive director. I'm just not taking a salary. It's not any different. On paper. It is. If you decided to walk away, there's absolutely nothing they could do. Absolutely nothing, because you're a volunteer. So we got into a little bit of a push, and at some point, I just stopped and I smiled, and I said, okay, because you know what? I'm not going to force anybody to do anything they don't want to do. All I can do is share with you my insider knowledge. And as a funder, we are looking to protect our investment. And if there's no one that I can pick up the phone that is accountable on paper, you can say all you want, that you're going to be there and you, but legally because you are a volunteer, you don't have to show up.
Speaker 2 (22:51):
So I want you to consider that when you are submitting grants. If you have been unsuccessful as an all volunteer organization and you don't know why, because you're providing major services, I want you to think about your infrastructure. Is there anything in your infrastructure that says to a funder that there is accountability? If you don't have at least one person, your executive director, that's generating a salary; that could be a red flag. That could be the reason why you have been unsuccessful in securing grants. Because trust and believe, there are plenty of nonprofits out there doing what you're doing that are submitting grants, and they have paid staff, and the funder fills very comfortable with knowing that if anything goes down with their money, they can pick up the phone and they can call someone who legally is responsible for that organization. All right, so that is my Mindset Minute.
Speaker 2 (23:44):
Today we have been talking about restricted funds. Restricted funds are the first part of your funding success formula. You've got restricted funds plus unrestricted funds, and it equals funding success. Next episode, we're going to talk about unrestricted funds. If you've enjoyed this topic, do your girl a favor, hit subscribe, hit like, make sure you share this with people in your community. Nonprofit leaders who you think it would benefit. Share, like, subscribe, and make sure you come back and visit me next week because I'm going to be here with more information to support you. All right, I'm out.
Speaker 1 (24:31):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.net/podcast for the links and resources mentioned in today's podcast. See you next time.
