We’re living in a time of unprecedented challenges. And opportunities.
The pandemic is disrupting everything. You’re looking for ways to adapt.
Ways to justify not cutting. Or … how about ways to justify an increased investment?
How does my operation stack-up in comparison to my peers? How much more could I raise if …?
What’s a reasonable goal?
You need data as a starting point for your business case.
Here’s a Simple Benchmarking Formula you can use as the basis of your business case in language understood by finance and senior management:
Measure your performance as return on investment per FTE.
Many hospital fundraising programs are underperforming because they are underfunded. Some are underfunded because they are underperforming. Some fundraising organizations are raising less than $500,000 per FTE. High-performance organizations are raising from $750,000 to as much as $1 Million per FTE … or more. The path to success is to first determine your revenue per FTE, and then use your current productivity and potential capacity as the basis for your business case.
(See below for our offer of a free capacity assessment!)
If you do the math, you can make it clear that investing in your fundraising operations can really pay off. To demonstrate how in the health care world, let’s compare investing in facilitating philanthropy with investing to build service line volume. Although net margins vary from hospital to hospital — with many struggling to make 2 or 3 percent — for the sake of comparison let’s assume that your hospital is netting 5 percent from service line operations.
Fundraising costs vary, as well. Considering development staff time and associated expenses, the true cost can be as low as 20-cents per dollar raised, or less in highly effective fundraising operations.
Let’s assume your hospital’s fundraising operation is running a 25% cost ratio.
Based on these assumptions, what’s the result if we invest to increase philanthropic revenue as opposed to increase service line revenue? Through philanthropy at a 75% net margin, you need to bring in $4 million in gifts to put $3 million on the bottom line. Through service line operations at a 5% net margin, you need to bring in $60 million in revenue to get the same bottom-line.
So if you put a fundraising performance improvement initiative in place, and it yields an additional $4 million in philanthropy, you achieve the same bottom-line impact as increasing other revenue by $60 million. Suddenly, philanthropy looks like a smart investment.
How do you achieve such results? The solution starts with a multiyear fundraising business plan presenting a strong performance improvement program, a credible financial pro forma, and a discussion that builds confidence in the strategy and shows a diligent assessment of risk vs. reward.
Market factors are rarely a limitation
Hospitals and health systems are not even close to reaching market limitations on healthcare philanthropy. The constraints limiting healthcare fundraising performance are principally internal, not market factors.
Ken Gronbach, a demographer, futurist and author of The Age Curve: How to Profit from the Coming Demographic Storm, speaking at the AHP Orlando International Meeting, told us that shifting demographics are expanding the market potential for major gift philanthropy to unprecedented levels.
A significant percentage of the Baby Boomer generation has amassed enormous wealth and is reaching the age when legacy becomes a prime concern.
Shifting demographics—on top of an already difficult business environment and a pandemic— are real threats facing healthcare. As the Baby Boomers age, healthcare needs will rocket up while tax revenues drop like a stone. Healthcare will have to figure out how to do much more for much less. Innovation in the way healthcare is delivered is essential. Philanthropy can be a key part of the solution, but only if development teams work to their potential.
Health care fundraisers are motivated, more than anything else, by a desire to help people. You joined this profession to make a difference. Imagine how much more of a difference you can make by funding breakthrough innovation and being a critical lever that enables your organization to transform itself.
We can help you make that busines case.
Give us 30 minutes (along with some data). We’ll give you a free, no obligation capacity analysis.
Email us at jrechtien@mpicompanies.com or fill out the form below and we will be in touch.