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September 01, 2008

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chris

"If Pallotta TeamWorks was a non-profit enterprise and had carried traditional non-profit values, they might have operated on a shoestring and shown real results."

What in your mind are real results? Netting hundreds of millions of dollars for AIDS and Breast Cancer seem to reflect real results. It seems in my humble opinion that having development coordinators do simple admin stuff because there is no secretary and as a result raise less money for the cause, or having crappy 50-cent marketing books that no one wants to look at, are the result of a shoestring budget.

No one would dispute that PTW had failures but they also had amazing successes because of the things you claim are so evil. You want to throw the gauntlet down on PTW, all the while non profits are so proud of their efficiency but lack the ability to capitalize on scale, leave more and more money on the table and their hands are tied because of the desire for shoestring budgets which makes them unable to compete with the for profit world. Perhaps we need not to restrict non profits but instead ask these organizations to employ the same techniques as Coke, Starbucks, and Toyota to end the great social problems of the world.


Cheers,

Chris

David Sherwin

Thanks for your comment, Chris.

I agree with you, in reading my words as part of this post, that I am very harsh on Pallotta TeamWorks and the concept of for-profit companies producing nonprofit events as an intermediary. Five years ago, I felt that they were the great hope of nonprofit fundraising. Recently peeling back the detail on their financial statements and then cross-comparing it with how events like the 3-Day are being produced today governed much of my dramatic change in mindset.

I also agree that nonprofits have a long, long way to go in adopting successful marketing techniques that top brands use to market their causes and raise great funds, and could learn a great deal from Nike, Starbucks, etc. The lack of scale and grand ambition, which PTW had in great quantity, could have been game-changing.

In my mind, real results for a venture like PTW in 2008 would consist of the following:

1) Balancing the need for generating awareness and participation (which PTW was fantastic at) with the bottom-line goals of their sponsoring nonprofits. In PTW's business model, which was privately held, the nonprofits and the event participants were actually the shareholders, because they provided the rallying vision and the money to fund both the event and the cause.

With this in mind, ideally at least 65% of every dollar should go back to the sponsoring charity. Great, well-structured nonprofits can produce an event with paid support at around 70% or higher, and this is a more than fair metric. This guideline is the #1 reason why PTW lost their support.

2) The events must be produced in a sustainable manner, meaning that expenditures for online and offline marketing, PR, direct mail, and other avenues of promotion must be mindful in reach and expenditure. Sure, spending $8 on a brochure to get me to raise $2,000 for an event doesn't seem like an undue expenditure... at first. If you think about common nonprofit benchmarks for fundraising, however, it can take 100 to 150 fundraising letters or brochures sent into the world to get a single donation of any denomination.

When you run the math on $8 brochures or $2 mailers to prospective event participants -- and also factor in the costs of producing the actual events -- you can see what I mean about operating on a shoestring. Nonprofits don't have the flexibility of corporations to amortize their marketing expenditures across a volume of products or services. You can't "pay it forward."

Nonprofits need to solicit donations, grants, and establish foundations and other forms of recurring revenue that support the outlays necessary to support medical research, outreach, etc. Doing a global ad buy with heavy TV, radio, print ads, and direct mail for an event like the 3-Day is very, very difficult to manage without very stringent response and cost-per-participant goals. If you fail, then the money comes out of your hide.

So, think slim enough to make an impact and inspire participation from passionate supporters for your cause, but bold enough to gain attention in a crowded market. It's a fine line to walk, even for a corporation. That's why so many of them fail.

Oh, and I almost forgot including the last point...

3) Get out of the way of the charity. It's important to have a charismatic leader for your nonprofit concerns at the event and thank participants. Let them get the love.

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