Competition for audiences is nothing new, but in recent times, it has been compounded by shifts in demographics, conflicting constituent interests and commitments, and higher expectations for innovative programming. Museums and cultural institutions must be agile with strategies to fully engage with audiences and build attendance. However, new endeavors are risky, and often the funding for those endeavors isn’t fully available. In many cases, comprehensive program needs are not covered by designated funding, and thus they put additional strains on overall operations. To keep current and relevant, institutions have to be willing to take on the subject of realistic cost estimations in determining funding needs and requests.
Each program and exhibit bears a burden of overhead, a topic frequently ignored in funding appeals. Funders increasingly expect institutions to do more with less and often have unrealistic expectations about how far their contributions will stretch. On the other hand, institution employees sometimes don’t fully understand or consider the true costs of projects, or are reluctant to communicate to donors the full financial needs associated with programs and services.
Besides financing direct costs, overhead and infrastructure, appropriate reserves are critical to ensuring sustainability and protection against unforeseen financial challenges. A younger generation of donors is reluctant to fund sustainability; they increasingly contribute to initiatives associated with immediate action, rather than offering support to long-term goals.
Funding for sustainability and growth must be addressed both inside and outside the institution. The following guidance could help your institution match funding to needs.
Get an institutional understanding of costs
Solicitations for funding should be a collaborative effort between development, program managers and the finance department. Program managers can help to clearly articulate the objectives and outcomes of the programs, while the finance department can offer the wider perspective of the true “fully loaded” costs. This can all be communicated to donors, but it must be understood first by institution staff and leaders.
Take a business approach
Have a straightforward dialogue with funders about your need for working capital, technology improvements, debt reduction, long-term savings and reserves. Make the point that a vigorous infrastructure — including financial reporting systems, training programs, solid IT systems and development practices — is expensive but crucial to overall success and just as important institutionally as programmatic endeavors. Provide thoughtful demonstration of past successes as well as future plans. Funders will be more likely to support institutions that have a strong business model and healthy balance sheet — particularly if you can make the case that these are vital to achieving mission and long-term institutional viability.
Communicate true costs
Seek funding for the full costs of projects, including their ongoing administration — not only direct costs, but also realistic overhead and contingencies, especially for new endeavors. Remind supporters that innovation, new programs and growth all require a solid capital investment.
Donors may not be initially interested in funding utility bills or occupancy expenses. Explain that as with any operation, they are a necessary part of the business, and projects don’t happen without incurring those costs.
Seek unrestricted support
Keep in mind that every additional program you undertake puts an additional burden on your infrastructure. Donors are increasingly attempting to provide restricted funds for projects that meet their personal interests. Be careful not to stray from your mission or undertake programs that are only partially funded solely to satisfy donor interests. When appropriate, don’t be afraid to say no to a restricted contribution.
Communicate the potential outcomes to funders
Rather than simply requesting funding to cover a list of budgeted expenses, emphasize ideas and innovation. Focus on bold visions and audacious goals, your past track record, well-thought-out plans, and the correlation between the funder’s mission and your projects. Articulating your visions may encourage funders to brainstorm with you and reach greater levels of support.
To go beyond survival and on toward attaining new goals, institutions must face financial realities and guide their supporters to do the same.
See the full report: The State of the Not-for-Profit Sector in 2015