School In A Box/How to Finance your plan
INTRODUCTION
This sections builds upon earlier chapters and explains in clear and simple terms how to begin securing the finance needed to turn your plan into a reality.
As with other chapters in this Hand Guide, it is designed to meet the needs of a wide range of readers ranging from individuals with no previous experience in fundraising to organizations with an established history of financing large-scale projects.
For this reason not every approach outlined will be relevant to every reader nonetheless, the general process of analyzing your project from the point of view of the funder will be common across all organizations.
This process begins with an overview of basic concepts followed in by a discussion on understanding your school as a ‘product’ and the key features that will help sell your plan to funders. Next we consider the funding ‘market’. Who are the major players and what financing options may be available to different organizations? Thereafter we look at how to identify and research prospective donors, social investors and the information sources that can help in this process.
Putting together a successful funding proposal is a mix of art and technique. Our final sections includes a step-by-step approach to developing your proposal while the last section illustrates a case study on funding a self-sufficient school from scratch.
Contents
OVERVIEW AND BASIC CONCEPTS
The objective of this chapter is to provide you with an overall view of the financial elements that are needed for effective and efficient administration.
a. Finance: the magic ingredient
The very word ‘finance’ can be enough to strike fear into the heart of individuals looking to create social change. It can seem a huge mountain to climb, one where the path is uncertain and where the risk of broken dreams is high.
Viewed from another perspective finance represents the final magic ingredient to making change happen. The strange thing is that by itself finance achieves nothing but when added to experience, research and thorough planning, it can transform a project from words on a piece of paper into a school capable of changing lives.
1. THE BASICS
Let’s start by looking at some of the basic terms we will use in this manual and which may be defined differently by other people
- Finance / Funding
Money used to support an initiative. This can take many forms from grants or loans to income generation. For the purposes of this manual we will treat the terms finance and funding as having the same meaning.
- Funders
Individuals or organizations, which provide finance and based on individual circumstances may or may not expect a return on their investment.
- Investors
Individuals or organizations which provide finance with the expectation of receiving a return - i.e. making money from providing finance.
- Social Investors
Individuals or organizations which provide financing, having the expectation of achieving a direct social return for example increasing the number of students receiving an education.
- Donors
Individuals or organizations, which provide funding with no expectation of directly receiving any return
Although the above definitions may seem quite similar the differences between them have important implications. It will affect who you choose to approach for financial support for a project! It can also alter aspects of how a plan is put into place i.e. a project where a financial return is expected may need to start work on income generation from day 1, whereas a similar donor supported project might choose to begin first with looking at educational content.
Despite the fact that many of the individuals and organizations who you will approach may not think of themselves in terms of such categories, there are other good reasons for being aware of these differences. If you are clear about what type of support you are looking for, it can help to avoid misunderstanding and improve your ability to be targeted in terms of seeking that support. It is worth remembering however that there are other forms of support, which may be equally important in ensuring the success of a project particularly in its early stages.
Non-financial or ‘in-kind’ support can bring a number of benefits, which go beyond the most obvious one i.e. reducing the need to spend money on goods and services needed by the project. This issue will be covered in more detail towards the end of the manual.
Finally, while the material covered in this manual is aimed at assisting you to develop your own financially self-sufficient school, the same concepts and processes apply across the whole spectrum of social change. Whether you work next on a water management or healthcare project your ability to navigate the business of attracting finance will be directly related to your effectiveness at creating social impact.
b. Common fears
Success in attracting finance requires confidence and a willingness to dedicate time and energy to fundraising. Before we look further at the ‘how to’ of finance, it is worth looking at some common fears in regards to raising finance.
1. EXPERIENCE
If you have never tried to finance a plan on this scale before, you will quickly gain experience as you start to spend more time focusing on finance as an activity. Asking others with experience for advice and taking advantage of working documents such as this one can help to ensure you head in the right direction.
2. SKILLS
There are technical and personal skills required for finance that you don’t have. Many of the skills you need are just common sense while others will have to be acquired through practice. Where more specialist skills are needed it is worth considering enrolling on a training course from a trusted provider.
3. TIME
Your existing work requires almost all your time. One way or another for your project to happen you’ll need to free up some time specifically to dedicate to finance issues. A targeted proposal is a worthwhile investment of time and one which you need to make.
4. CONFIDENCE
Confidence is an important success factor in attracting finance. A well thought out finance strategy will get you the positive responses you desire even if you don’t achieve all your targets on day one. As long as you can keep going till the first results come through you’ll find your confidence will grow naturally.
c. Where to start?
Financing your plan can be broken down into six key stages.
1. UNDERSTAND YOUR OWN POSITION
At the very core of the process of attracting finance is a firm understanding of your position as an individual, and that of your organization. Credibility is everything! No matter how good your plan is, unless those with financial resources have a reason to believe that you and your organization can implement the plan, you will not be able to find the finance you seek.
2. UNDERSTAND THE PROJECT
If you’ve spent a considerable amount of time putting a project plan together you should have a clear picture of how you intend the project to work for example budget, beneficiaries and goals. However in terms of attracting finance, you’ll need to ‘understand’ your project in a broader sense and look at it from an outsider’s perspective. What are its strengths and weaknesses? What are the risks? How have you incorporated the views of key stakeholders?
3. UNDERSTAND THE MARKET
From social investors to grant-makers there exists a well-established ‘marketplace’ for financing social projects. By learning about the different organization types that make up this market, their constraints and their institutional needs, you will acquire the necessary knowledge to begin shaping a viable financing strategy.
4. DO YOUR RESEARCH!
Once you feel you understand the finance and funding market sufficiently you should have a good idea what type of finance will best meet your needs. The next step is to start looking at which specific organizations or individuals exist that are able to offer this type of finance. The more widely and deeply you are able to research these potential sources, the better positioned you will be when it comes to actually developing your finance strategy.
5. DEVELOP A FINANCE STRATEGY
All the steps leading up to this point are primarily designed to allow you to be strategic in your quest for finance. Time and money are always in short supply and the finance process can be expensive in terms of both. Being strategic should save you time and money, increasing your effectiveness and efficiency at attracting the resources you need.
6. WRITE YOUR PROPOSAL!
The final stage is to actually put the proposal together that you will submit to your strategic targets. No matter how good your planning and research has been, unless this proposal is well structured, compelling, and complete, your previous work will not yield the results hoped for. Even if you follow our advice religiously it is not guaranteed that you will be successful the first or even second time. But by asking for feedback from your earliest proposals you should ensure that later efforts generate the results you’ve been working for.
THE PRODUCT: YOUR ORGANIZATION, YOUR SCHOOL AND ITS NEEDS
The objective of this section is to look at the first two stages of the finance process i.e. Understanding your Organization and Understanding your Project.
a. Why a sale analogy?
Businesses depend on making sales to survive and grow. In the same way for your school to become a reality, you’ll need to ‘sell’ it and yourself! But the analogy goes further than this. In the commercial world there are always two sides involved in a sale, the seller and the customer. It is also not enough for the seller to have a great product - the customer has to be aware that the product exist, in what way the product will meets their needs, and that the price is affordable.
In a competitive marketplace where the customer only has limited time and money, companies also need to show why their product is better than the alternatives and to convey this information as succinctly as possible. The challenges faced in financing any FSS School are extremely similar: Funders need to know your organization and your project exist.
When conveying your product, it needs to be clear and concise exactly what the benefits of your project are for those providing the finance as well as for the beneficiaries. However the project is presented i.e. either in whole or in part, it has to be affordable from the funder’s perspective and you’ll need to show why your school will meet the funder’s needs better than typical alternatives. This information will need to be delivered in punchy headlines as well as more detailed descriptions
b. Understanding your organisation
Building a more comprehensive understanding of your organization will help you to sell it more effectively. If your organization is small or you have been with it since the beginning, you might already know everything you need to know about it. For others this will be a learning process requiring a degree of research, which needs to be addressed before you can start looking at how this information can be presented.
Some typical areas you’ll need to be able to understand about your organization en route to developing your finance strategy are as follows:
1. HISTORY
• How long has your organization been running?
• What motivated the establishment of your organization?
• How has it moved from the areas it originally focused on to those it tackles today, and why?
2. EXPERIENCE
• Where does the expertise in your organization lie?
• What areas has it worked on during its lifetime and with what results?
• What is the background and experience of key individuals?
• Who in the organization has experience of finance and fundraising?
• What successes have you had in attracting finance?
• What were the drivers behind these successes? What hasn’t worked, and why?
3. GOVERNANCE
• Why are your governance arrangements structured as they are?
• Are there any restrictions within your constitution on how you can finance your activities?
4. FINANCIAL COMPETENCY
• What previous experience does your organization have with income generation to support its work?
• How does your organization manage and protect its finances?
• Are accounts audited and produced on time?
• What previous experience does your organization have with managing grants or loans?
• What was the scale of these projects?
• How successful were they?
5. INSTITUTIONAL CONTEXT
• How is your organization’s broader work developing?
• Where are your organization’s real strengths?
• Where are your organization’s weaknesses?
• How dependent is your organization on outside funders?
6. ACHIEVEMENTS
• What have been your organization’s biggest achievements in its lifetime?
• How were these achievements financed?
• What do your beneficiaries think about your organization’s work? Ask them!
Aside from these areas, it is worth looking closer at your organization's previous experience in funding its projects. Are there contact lists you can work from? What pre-existing materials can you recycle i.e. funding applications, case studies, brochures, press articles, pictures etc?
c. Selling your organisation
With a rounded understanding of your organization you should now be ready to start thinking about how you can sell its merits as the provider of your ‘product’. Let's look at this from the point of view of a buyer.
1. RELIABILITY & PAST PERFORMANCE
We’ve all ordered products only to find they arrive late or it is not the right item. The larger the sums of money involved the more critical this becomes. The better you are able to demonstrate that your organization is reliable and can be trusted, the easier it will be to persuade funders that you are an organization that can be relied on to implement the project you’re putting forward.
Using your understanding of your organization’s achievements, your task is to construct a picture of past performance that creates confidence in your reliability.
2. REPUTATION AND VALUES
The less well known the product the more important it becomes what other people think about the seller. It also matters who is giving us this opinion, the more we trust them the more account we will take of their views. From the understanding you’ve built up of your organization, from how it is viewed by its beneficiaries to the opinions of past funders, your task is to make an iron-clad case for the strength of reputation you’ll need to convey.
The more convincingly you can provide evidence of your good reputation and the more respected the sources used to support this view of your organization, the more confidence funders will have in placing their trust and funds in you.
3. COMMUNICATIONS AND RESPONSIVENESS
How well does the seller communicate what’s happening on their side of an order? How do they respond to queries particularly when things aren’t going so well? When you’re buying a basic product like bag of rice, these aspects aren’t so important. But suppose you are having a house built. It is complicated and it takes a long time.
You would want to know that the builders could be relied on to keep you well informed of their progress and to listen to and respond to any questions you might have along the way. Your project will be far more complicated than building a house, so you’ll need to persuade any prospective funder that your organization can be relied on to communicate with them clearly, in full and on time.
4. DIFFERENTIATION
When all the sellers are great in all the above areas, how can I make a distinction between them? The higher the quality of the competition the more important it becomes to find a way to stand out from the crowd. In the commercial world this takes the form of branding.
People buy Nike trainers not just because of their physical appearance and performance, but also because it allows them to make a statement at the same time. If you can make your organization seem distinctive in a way that appeals to a funder, it is one more factor working in your favor. It can only make a difference if everything else is right but it could just be the extra edge you need.
5. UNDERSTANDING YOUR SCHOOL AND ITS NEEDS
As we mentioned earlier, when it comes to attracting finance you’ll need to ‘understand’ your project in a broader sense and look at it from an outsider’s perspective. As you come to ‘sell’ your plan, you will inevitably focus on the positive side of things. It is only natural that prospective funders will want to test your assumptions, look at the risks involved and consider the process by which your plan was developed.
6. COMMUNITY PARTICIPATION
• How can you demonstrate that the community is behind your proposal?
• How have they contributed towards its development?
• Which sections of the community will be negatively affected by your plan?
7. RISKS
• What are the key assumptions you have made? Financial, environmental and operational?
• How will you prevent fraud and corruption where money is involved?
• What is the worst-case scenario?
• What contingencies have you got for dealing with the worst-case scenario?
8. MEASURING SOCIAL IMPACT
• By what benchmarks will you measure the social impact you’re creating?
• What mechanisms will you put in place to ensure these indicators can be measured?
9. CRITICISMS
• Isn’t this model potentially exploiting students as free labor?
• Couldn’t the time students spend working be better spent studying?
• Won’t the school if successful, seem to be unfair competition for small local businesses?
You may find these all areas you have already thought about while working on your plan. Having clear answers ready and at your fingertips will give you the confidence to respond to critical questioning
d. Selling your school and its educational model
With its well-developed plan based on a tried and tested model addressing multiple social issues, ‘selling’ your school should be simple! Whether your school is aiming at full financial self-sufficiency within a fixed time period or seeking to develop a few income generating programs to improve educational quality and raise resources, the model of Education That Pays For Itself sells itself in several ways:
• Educational value
• Developmental value
• Financial sustainability
• Environmental sustainability
• Social sustainability
• Scalability
• Replicable
• Network effects
1. EDUCATIONAL VALUE
♦Problem: Much of what is taught in traditional schools is overly academic and not relevant to students. Skills education is often poorly linked to the needs of the market and fails to address how to maximize income earned from competencies acquired.
♦Solution: Learning for earning. Academic teaching is integrated into practical lessons, which also include entrepreneurship education. The result is young rural entrepreneurs who have the academic qualifications required for further education, technical skills demanded by the market and enough business experience to start their own profit making enterprises.
2. DEVELOPMENTAL VALUE
♦Problem: The existing education system fails to sufficiently address the root causes of poverty or expand the opportunities available to its students.
♦Solution: Teaching students how to run successful business allows them to lift themselves out of poverty. This opens the three doors to success in further education, employment, and self-
employment increases the opportunities available for individuals to fulfill their potential.
3. FINANCIAL SUSTAINABILITY
♦Problem: Education programs continually fail to produce a long term impact because they are forced to stop when the funding dries up.
♦Solution: Education That Pays For Itself. Benefits include institutional independence, improved facilities, increased staff motivation, all of which lead to increased educational quality and capacity.
4. ENVIRONMENTAL SUSTAINABILITY
♦Problem: Environmental degradation has multiple long term negative consequences for poor communities risking the natural resources they depend upon.
♦Solution: Through teaching sustainable agriculture, sustainable energy and natural resource management from a business perspective, students learn how protecting the environment can contribute to increasing their earnings.
5. SOCIAL SUSTAINABILITY
♦Problem: Urban drift and lack of education for marginalized groups reinforces poverty in rural communities.
♦Solution: Teaching students how to earn a good living in the rural environment holds communities together and increases their wealth. Targeting marginalized groups and increasing gender equity in education reduces relative poverty and increases social cohesion. Emphasizing co-operative working at the school level builds social capital as well as human capital.
6. SCALABILITY
♦Problem: Many education initiatives are successful in terms of quality but fail to have a sizable impact because they cannot be easily increased in scale.
♦Solution: The same design principles used to establish a Financially Self-Sufficient School make it straightforward to scale-up a given school capacity and to increase the number of such schools serving an area.
7. REPLICABILITY
♦Problem: Many education initiatives succeed because of specific features of their local environment which makes it hard to replicate this success in other areas.
♦Solution: The Financially Self-Sufficient School approach provides a framework, rather than a blueprint, for school design. This allows for replication of essential features across different geographies and cultures while adapting to local needs. Ultimately this increases its potential impact.
8. NETWORK EFFECTS
♦Problem: Stand-alone local initiatives internalize the costs of developing their approach reducing their relative impact.
♦Solution: The FSS School approach is backed by an international network of institutions committed to shared learning. This reduces the costs of trial-and-error to maximize impact.
e. Benefits of your plan
To raise finance effectively it is important you are clear on the specific social issues, which your plan addresses and the outcomes you expect. These outcomes are one of the most important factors potential funders will consider when deciding on whether to finance your plan. Are they realistic? Do they represent good value for money? These should be the key selling points that distinguish your school from other organizations seeking funding. It is helpful to think about these in terms of the following:
1. EDUCATIONAL OUTCOMES
• How many students will your school educate each year?
• Will they receive nationally recognized qualifications?
• If so, what increase in performance in these exams do you anticipate for your students compared to their peers at other schools?
• What additional capacities will your students have gained compared to students at regular schools?
• How will you assess these skills?
2. DEVELOPMENTAL OUTCOMES
• What will be the developmental impact of attending your school on student’s families?
• How will you assess this?
• What will be the expected increase in income of graduates relative to their peers at other schools X years after graduation?
• What will be the expected increase in formal employment amongst graduates relative to their peers at other schools?
3. FINANCIAL OUTCOMES
• Will the school aim for full financial self-sufficiency?
• How long will it take?
• How many free or subsidized places will your school generate each year?
• How much better paid will your teachers be compared to the average?
4. ENVIRONMENTAL OUTCOMES
• What specific sustainable environmental practices will your students be educated in?
• How will you quantify the positive environmental outcomes of your school locally?
• How will your school minimize its own negative impact on the environment?
5. SOCIAL OUTCOMES
• How will the local community gain from your school?
• How will you quantify the positive social outcomes of your school locally?
6. GROWTH OUTCOMES
• What will be the future plans for expansion of your school if you succeed in your immediate efforts?
• How many students will you teach in the next 10 years?
• How many individuals will indirectly benefit from your school in the next 10 years?
THE FUNDING MARKET
The objective of this section is to help you to understand the multiple paths to funding that exist and to clarify how they differ from each other.
When you start out developing your plan, just working out how to make the initiative technically viable represents enough of a challenge. Then when you start considering where you will find the finance to actually make it happen, suddenly your previous technical concerns can seem small in comparison! Fortunately despite the scale of this challenge, there are many tried and tested approaches to it.
a.Finding the funding: donations, social investment and finance
The funding market can be broken down in many ways:
1. SOURCE OF FUNDS
• Individual donors
• Fundraising events
• Corporate donors
• Trusts and foundations
• Government
• International Non-Governmental Organizations (INGOs)
•
Thinking about the funding market in terms of potential sources of funding is useful for examining what motivates these sources in their giving.
2. LEVEL OF FUNDER
Local and Regional
• Community
• Local business
• Local and regional government
National
• Trusts and Foundations
• Corporate
• National government
International
• International Financial Institutions
• International Non-Governmental Organizations
• International Trusts and Foundations
• Multinational Corporations
• Overseas governments and non-resident communities
3. TYPE OF FUNDING
• Grants
• Loans
• Donations in kind
• Earned income
Finally by considering the funding market in terms of the type of funding leads to an appreciation of what is expected from your organization in accepting each of these types of finance.
b. Source of funds
1. INDIVIDUAL DONORS
The range of individuals who support non-profit organizations is almost as broad as society itself. While donations from the wealthy make the headlines, far more is actually given by ordinary members of the public although it is a lot more effort to attract contributions in these numbers. Even in developing countries it would be wrong to underestimate the cumulative value of large numbers of small donations.
Motivations for giving amongst individual donors are also extremely varied ranging from genuine concern about an issue to more personal rewards such as public recognition of their generosity. Research shows time and again that the main reason for people not giving is that they are never asked. Conversely one of the most powerful factors behind individual giving is personal experience of the problem.
Success with individual donors relies on identifying people expected to be sympathetic to your aims, creating the right message and making sure that message gets delivered to those people.
2. CORPORATE DONORS
Companies exist to make money for their owners or shareholders. Aside from family companies, which can have greater discretion and can therefore behave more like individual donors, there normally needs to be something in it for the company itself. Typically this is either the opportunity for positive publicity for example within a community, internally with their staff or a chance to increase sales through capitalizing on the goodwill towards a given social cause.
Some common rules apply. Corporations generally prefer projects which:
• Benefit their local community
• Are based in a market where they operate or sell
• Have a link to the activities carried out by the business
• Involve members of their staff
Education projects which focus on entrepreneurship have a natural business angle, which constitutes an opening for approaching companies which are receptive to supporting social causes.
3. TRUSTS AND FOUNDATIONS
The motivation of trusts and foundations for giving is simple. They are structures specifically established to give money to support charitable activities. This doesn’t however mean they support all causes and increasingly trusts and foundations are highly selective about the type of activities and the type of organizations they give money to. It is only worth approaching trusts and foundations whose interests match at least some parts of your school project’s aims and cover the geographic area in which you operate.
4. GOVERNMENT
Overseas governments and each level of government within a country will have slightly different motivations for giving. Overseas governments often have historic or strategic reasons for deciding on the countries they support. Varied reasons for supporting specific activities within those countries such as meeting internationally agreed objectives for example the Millennium Development Goals.
National, regional, state and local governments normally bear primary responsibility for providing education to their citizens but in many cases are able to support non-government education initiatives if they believe there is a cost advantage or political advantage!
5. INTERNATIONAL NON-GOVERNMENTAL ORGANIZATIONS (INGO’S)
INGO’s like trust and foundations exist to provide support to social projects, which are in line with their interests. Part of their motivation in fostering such partnerships is to give control to local organizations to lead local development efforts. This reflects a recognition that local organizations are likely to have a better understanding of local issues and are often more accountable and more cost effective than running such operations themselves.
6. LEVEL OF FUNDER
As you’ve already seen within each funding bracket, from a local to an international level, we find many of the types of funders outlined in the previous section. Looking at the funding market in these terms however, reveals the need for a higher level of sophistication from the recipient organization.
The local community, businesses and government may already be aware of your organization through first-hand experience. This means that despite their lower level of resources, they may at least be in a better position to base their giving decisions on this knowledge of your work. In terms of meeting funders' requirements, which are likely to be more understanding of the local operating environment and taking into account the greater opportunity to build up trust between parties, targeting the local level represents a good place to start for small and new organizations.
At regional, national and international levels the size of potential support grows significantly. However the level of capacity required within your organization in order to access this funding is also greater. Good governance, a strong track record of success, individuals with strong communications skills and sufficient resources to support relationship development costs are all required just to get your project looked at.
If your school plan is ambitious, it is likely that the funding required to make it happen will require accessing finance at least at the regional or national level.
c. Type of funding
1. GRANTS
Grant funding is the preferred form of finance for non-profit initiatives for a good reason - it is risk free. As long as the money is spent on the agreed activity, there is little risk other than loss of reputation to the recipient organization even if agreed outcomes are not achieved.
Because grant funding does not have to be repaid it is the only real form of funding available to new projects that have no existing revenue streams. It is also the most suitable option even for income generating projects where there is significant uncertainty about the financial outcomes.
2. LOAN FINANCE
Whereas grants do not have to be repaid, loans do and normally with interest. This makes it both expensive and risky relative to grant funding and explains why non-profits have traditionally been reluctant to use debt as a form of finance. For income generation initiatives loans represent a viable means of attracting larger amounts of finance in a shorter time frame.
This is only the case however, if you are fully confident that your expected income will be more than sufficient to cover interest and loan repayments. You can expect some difficulties in persuading traditional sources of loan finance that your initiative would be able to make such repayments, however there may be individuals or foundations able to make low-interest or flexible loans that could be worth considering.
3. DONATIONS IN KIND
Whether in the form of free labor or donated land, donations in kind could make a substantial contribution towards funding your school project. In addition to the immediate benefits in terms of cost savings, such donations can bring additional rewards such as a greater sense of ownership by the local community where these have provided the land or labor. This connection might be translated into further support at a later stage if needed.
4. EARNED INCOME
At the heart of the Education That Pays For Itself model is the idea that if schools are able to teach skills of genuine commercial benefit, they should be able to demonstrate this by successfully running profitable businesses. Although the purpose of this would normally be to cover a school’s running cost where there is a strong market and real expertise, it may be possible for schools to manage larger scale enterprises. Profits from these would be used to invest in building further school businesses to meet financial self-sufficiency goals.
d. Source of information
If you have access to the Internet it can prove an unrivaled source of information for finding funders. As well as using regular search engines such as Google, a number of specialist fundraising directories exist. Although many of these charge fees others are free to use and new services come online all the time.
Although the Internet has made it easier than ever to find out everything you ever needed to know about well-established international donors, for many local and national organizations other sources may be equally important.
For researching local companies you might find the business press useful as well as trade and telephone directories. Other options include contacting local chambers of commerce and business networks such as Rotary Clubs and Lions networks.
For most countries there are government departments, which are responsible for maintaining relationships with civil society organizations. These officials can be an invaluable source of information on which agencies are operating locally and who is supporting education initiatives.
To find out about local and regional government support for non-government organizations contact the equivalent of your District Education Officer Most government schools should be able to help you locate such individuals.
RESEARCH OPTIONS
Once you feel you understand the finance and funding market sufficiently you should have a good idea what type of finance will best meet your needs. The next step is to start looking at which specific organizations or individuals exist that are able to offer this type of finance.
The more widely and deeply you are able to research these potential sources the better positioned you will be when it comes to actually developing your finance strategy. If you’re looking mostly at the local level you’ll probably need to spend a considerable amount of time talking to people in other non-profit organizations and local government.
If you’re targeting international funders, the Internet is a great place to start and some of the sources of information listed in the previous section should hopefully prove useful. Remember many international funders aren’t able to fund organizations in developing countries directly. Make sure you check this information first before spending time trying to understand their interests and procedures!
FUNDING STRATEGIES
The objective of this section is to help you devise a strategic plan on how to raise funding.
a. Developing a strategy one step at a time
The real value of your strategy is to provide a focus to your work. While it is important to remain open to opportunities that suddenly present themselves, without a clearly defined strategy you are likely to waste time, achieve poorer results and become more easily demotivated.
STEP 1: SETTING YOUR GOALS: HOW MUCH?
The first question to ask is how much you can realistically aim to raise? Write out your targets for the next three years. Next to this work out what proportion of your current expenditure this represents.
Be realistic! If your organization has no experience of fundraising you’re not going to find it easy to double your income every year consistently, at least not unless you have some secret weapon up your sleeve!
Targets should certainly be set to be ambitious, but if they’re genuinely unachievable the most likely result will be disappointment. In the case of fundraising past performance really is quite a good indicator of expected future success.
STEP 2: WHICH SOURCE IS FOR YOU?
Having conducted some initial research, you now need to decide which of these is most appropriate in the context of your project’s scope and time frame as well as your organization’s experience and contacts. Again, be realistic! If you work for an unregistered grass roots organization run by volunteers, you won’t be able to apply to the World Bank for funding on Day 1 of your new finance strategy.
However a strategy that starts with local sources and gradually extends its scope to larger funders as your organization grows might just get you there after a few years.
Focus on your strengths, build on your existing skills and experience. If you’ve worked in the corporate sector and understand how businesses think, maybe you should target these rather than institutional donors.
Don’t spread yourself too thinly, it is tempting to try to hit all possible targets to see what works. In reality its better to concentrate on a few carefully selected opportunities and pursue them thoroughly.
STEP 3: GETTING APPROVAL
Searching for finance takes time and has associated costs. If you are to be successful you will need to agree within your organization how much time the individual responsible for seeking finance should dedicate to this activity and then make sure this time is allocated wisely.
For organizations, which do not have dedicated full time fundraisers, it is easy for these costs to become hidden but this doesn’t make them go away! When you draw up your strategy, work out how much you aim to raise, and how much time you think you’ll need to dedicate just to fundraising, then double it. Fundraising always takes longer than you think!
It is not only time that costs. Stationery, postage, phone calls, internet access, travel for meeting with funders, networking events, training days, and conferences all have their costs but without them raising funds becomes even more challenging.
Include a clear budget as part of a fundraising strategy paper to be approved by your board or senior management. Be prepared to justify these costs, both based on your expectations for success and later in light of your results. Make sure the strategy paper also covers your fundraising objectives, targets and the methods you will use as well as your planned timescale.
b. The value of contacts
There is an extremely high correlation between those organizations that are successful in financing their plans and the number and quality of contacts that an organization has. This is no coincidence, opportunities don’t just happen, you have to create them! Developing your contacts has much broader benefits than just supporting your fundraising activities and should really be viewed as part of your organizational development.
Nonetheless, every contact developed can provide you with extra ideas and leads that will ultimately feed into your success at fundraising. Take every opportunity you can to get out there and meet your peers and of course potential funders. Try to understand their work from their perspective and what drives their decisions, successes and failures.
TOP TIPS:
1. Get yourself a supply of business cards so that the people you meet will find it easy to get in touch with you later.
2. Make sure you follow up on interesting leads as soon as possible with a quick hello phone call or email.
3. If you look for opportunities to help your new contact in their work, it is amazing how often they’ll come back to you with some prospect that might just help you out.
4. Be yourself, be relaxed and be amazed how you suddenly discover all sorts of opportunities you’d have never otherwise come across.
c. Finance and the plan
So far in looking at developing a financing strategy we have taken your existing plan as fixed. In practice it is sometimes necessary to be a little more flexible. This means creating some room for your growing understanding of financing possibilities to in turn change elements of your project plan.
For many organizations, once they start examining sources of finance, they may realize they won’t be able to attract sufficient resources to cover all aspects of their project in the short term. This means the finance strategy will influence and perhaps lead to an adjustment in some of the more fundamental project planning. While for the success of the project overall it is important not to be ‘donor driven’, it is worth being pragmatic about the order in which different aspects of the project are attempted.
If the centerpiece of your FSS School is a hotel facility, which will generate a third of the income needed by the school, it would be very tempting to try and fund this element of the project first. In practice however there might be several good reasons for leaving this part of your larger project till later.
1. Investment needs of establishing such a hotel are likely to be high
2. It is an ‘all or nothing’ activity i.e. a half-built hotel will yield no income whereas a dairy herd half the size of the original plan should at least produce something approaching half the planned income.
Even when all the necessary finance is available, the lead-time till it starts generating income is likely to be long. By re-examining your project plan in light of your finance strategy it might make more sense to start with a lower return activity with lower costs and faster implementation time. Moreover this could allow you to demonstrate your organization’s ability to make a success of its plans, which should assist in attracting finance for the hotel facility later.
d. Community support
Finally, even if your organization has the skills and experience to target larger scale and international funder there are still a number of good reasons to include community support in your finance strategy:
• Flexible financial support: Although small scale it can be flexible and fast, even in poorer areas there can be pockets of wealth.
• Non-financial support: Skills and energy of local people can make an important contribution. Once people have had a positive involvement they acquire a sense of ownership are more likely to help out again and also act as ‘ambassadors’ to tell others about your work
• Accountability: Local funding even when it is only modest, increases local accountability which can help improve the results that funds achieve.
HOW TO PREPARE A FUNDING PROPOSAL
The objective of this section is to guide you in putting together high quality funding proposal.
Establishing strong relationships with funders is vital but without a solid written proposal few organizations will put substantial sums of money into a new initiative.
While there is no blueprint for the perfect proposal, the following advice is designed to help avoid some of the common pitfalls encountered in proposal writing and to allow you present your ideas in structured way. The same basic principles will apply whether you’re approaching a grant-making body, a company or an individual.
We cannot guarantee success but your chances of success should certainly improve!
a. Getting the basics right
1. CUSTOMIZATION IS KING
Everybody wants to feel a little bit special and that includes funders. It is tempting to think that you once you have produced a suitably impressive funding proposal for your school, your work is done. This is not true! Organizations, particularly smaller local NGOs who are understandably short of resources try sending out standardized proposals as widely as possible, this is not a good idea.
Unfortunately within seconds a large proportion of these proposals disappear straight into the trashcan. Why? This is because they’re easy to spot, unfocused and show a lack of real understanding of the funder’s interests. People with money are always popular and funders are rarely short of plans for how other organizations could spend their money. What they really want is proposals that meet their own interests and needs.
In business the customer is king. In proposal writing customization is king! There is no such thing as the perfect proposal. Instead you need to work toward the perfect proposal for the organization or individual you are targeting.
Recycling proposals is a valid approach. The actual substance of your project should not change much no matter who targeted the funder is. There are only so many hours you can dedicate to proposal writing in one lifetime! Nonetheless, if you can adapt your proposal so it looks like you have genuinely taken the time to understand what the funder’s interested in and if it is clear from the start that it is not just another mass mailing but a targeted request it might just survive to the next stage – being read!
2. EXCITING AND AFFORDABLE
There are too many genuinely deserving causes in the world and not enough funding to support them all. Neither is there really enough time to read all the many proposed solutions to the world’s problems.
Somehow funders have to decide where to best use their resources. They do this by deciding which proposals should be looked at more closely, so your proposal needs to catch their imagination and to do it fast. This means not only does it have to be clearly targeted at them and match their interests, policies and priorities, but also it needs to have an edge.
Whatever the angle you will not only need to make it clear from the start that your approach is interesting, improved and practical, but you’ll need to justify it.
Even large funders have limits to how much they are prepared to put into individual projects. In practice this limit will be less important than how much they’re prepared to award to organizations of your own size and experience and which will be for them a new relationship.
How much you’re asking for is therefore a basic factor in whether your proposal can be considered or not. This is where your research should pay off. How much have they given in the past to organizations such as your own? One factor to be aware of is that many funders prefer projects rather than providing general finance to support an organization’s work. Supporting projects allows them to identify more clearly the impact their funding is having and to judge whether their resources are being well spent.
With your thoroughly prepared project plan this puts you in a generally good position. At the same time however, financing a FSS School will normally require a large up front investment making it less likely that any one funder will be able to support all the costs themselves.
Think how you can break down the different investment needs for the school into smaller projects with clearly identifiable outcomes. While this means you will need to write a larger number of proposals, it also means you should be able to match a funders expected financing capacity with a discrete project that they can put their name to.
3. FOLLOW THEIR RULES
It might seem like common sense but you’d be amazed how many fundraisers spend time carefully crafting funding proposals, which are never looked at because they haven’t used the right application form or they’ve arrived after the deadline.
Generally rules are created to make a funder’s life easier. If you do not stick to the rules you make things more complicated and the less chance there is that your proposal will receive a favorable reception. Typical requirements often include a proposal format, so use their forms if they ask you to and make sure you answer all the questions and provide all the details asked for. Is there a maximum length? Check!
Delivery format - Can you send your proposals by email or do they want hard copies posted? How many copies? What file format? Read their requirements closely! Have they specified a deadline? Even if they haven’t it could be worth clarifying when they actually consider proposals submitted. This could save you months of expectantly watching your mail!
Do they fund the type of work you do where you do it? If they fund work in India and you’re based in Africa don’t bother applying. Bear in mind that many organizations don’t always expect people from other countries to be reading their materials so they don’t explicitly mention their geographic interests. Check who they’ve funded in the past to be sure.
Limitations on areas of expenditure
Be aware that many funders will not fund certain items of expenditure such as building costs. It is important to be aware of these kinds of restrictions before spending time putting together your proposal. Other areas that funders often look at closely are salaries and office and admin costs. This is to ensure that most of their money gets spent for the benefit of the beneficiaries rather than the organization and its staff. Be clear on your needs and if these expenses need to be covered, make sure you state this plainly.
Limitations on size /requirements for match-funding
Some funders prefer to finance a whole project themselves, others like to see that you’ve attracted sizable contributions from other sources before they’ll agree to provide finance. Make sure you’re clear about this before you start putting together your proposal.
Status requirements
Whether they only fund religious groups or they never fund religious groups, there are endless variations that they might include in the small print. A requirement for your organization to be registered with the local authorities is common, as is a requirement for your organization to have been in existence a minimum number of years. For example: U.S. Foundations, whether or not you can demonstrate your 501c(3) equivalency status i.e. your not-for-profit status may limit their ability to fund your work.
Supplemental information
Even if it is not explicitly stated, most funders whatever their size, will want to see a recent set of accounts preferably audited. Keep a copy handy!
To make life easy we’ve created some rules of our own:
►Rule 1: Research the rules
►Rule 2: If you can’t find any public information about the rules – ask!
►Rule 3: Stick to the rules!
Stretching the rules:
The only area where we would suggest that rules can be stretched a little, is when it comes to unsolicited applications. For a range of reasons but chiefly because the number of initiatives looking for funding is so high, some funders decide not to accept any applications at all and prefer instead to search out their own partners. The unfortunate consequence of this is that many worthwhile initiatives with low public profiles never get a chance to be considered and funds keep flowing to the same more established organizations.
If this is the case for a funder you have identified as a good match it might be worth in rare cases stretching the rules. Rather than sending a proposal try sending an introductory email with no more than two paragraphs explaining who you are, why they should be interested in your work and demonstrating that you understand their organization and interests. Attach to this a one or two page summary of a ‘typical project’ i.e. your FSS School in case they’d like more information.
If your two paragraphs capture their imagination, they might even read the attachment – and you might even get a reply or invitation to submit a proposal. If they hit ‘delete’ you’ve hardly wasted any time at all.
b. The proposal content
The following structure provides a useful format for structuring your proposal. For funders that require you to use their own application forms you’re still advised to make sure these areas are covered but the sequence and focus will need to be adapted to answer the questions being asked. In all cases your challenge is to make sure that the key points that make your project exceptional for the given donor stand out.
EXERCISE:
Before you start writing your proposal for real, list the top five reasons why this funder should finance your project. Come back to this list once your proposal is complete and check how strongly these points stand out in your final version.
1. SUMMARY
Even for short proposals (under 5 pages) it is worth having a paragraph summarizing what the project is about. The summary has to be as hard-hitting as possible. It needs to grab the reader’s attention and make them want to read the full proposal. This is no easy task! For longer proposals the summary might be up to a page long and contain a short paragraph covering each of the major sections of the application.
2. BACKGROUND
If the summary exists to arouse their interest, the background section exists to persuade them that you are a credible organization whose suggestions deserve serious consideration.
You need to explain who you are, what you do, how and where you work and how your experience or qualifications that will help you to succeed in the project you are proposing.
Any relevant information that establishes your organization as trustworthy and professional should be included such as the previous major donors you've worked with or any endorsements from third parties for example prizes for achievements or independent evaluations.
For major applications this section can be supported by additional information provided in appendices for example greater detail on your organizational history, previous work undertaken, details of board members, senior management CVs, organizational structure etc. Although establishing your credentials is important, it is your project that’s the interesting part of the proposal so keep the background brief.
3. THE PROBLEM / NEED
This is where you explain the social issue that your project is designed to tackle. Relative poverty and poor educational quality are issues everywhere including in the ‘developed’ countries. You should aim to provide detailed information about the specific region you will be working in and the socio-economic groups you’ll be working with to demonstrate a) that the need is genuine and substantial and b) that you have a thorough understanding of what the need is.
How you choose to frame the problem should match the interests of the funder but without changing the nature of your project! As an example if your school has a high proportion of AIDS orphans and you are targeting a foundation that supports HIV/AIDS work, this aspect will be more relevant than its environmental benefits.
4. THE PROJECT
What are you planning to do? Describe your project in such a way that even someone who is not knowledgeable in your field can understand. What are your aims? What methods will you use? How long will the project run for? How will you manage your activities? Will you collaborate with any other organizations? Do you have the community’s support?
As you describe the features of your plan, don't just explain what will take place but also why. For example your project may involve establishing a school vegetable garden, you then need to explain why i.e. whether this is for research purposes, nutrition, income, education, or all of the above!
5. OUTCOMES
For funders it is vital not only to understand what the project involves but also what the outcomes of the project will be, what results do you expect to achieve? These outcomes should ideally reflect a decrease in the need, which you previously identified as being important. This is a real area of weakness in many funding applications where outcomes are defined in overly general terms such as ‘students will learn many useful skills’.
In addition to describing the broad outcomes of your project you should also include some ‘SMART’ outcomes – Specific, Measurable, Achievable, Realistic and Timebound. For example annual school drop-out rates for girl students will decrease to less than 5% within the first two years. Income from school owned businesses will cover 100% of annual operating costs within 5 years.
This section should also contain details of how you intend to monitor progress and evaluate success to provide evidence that the outcomes of your project are being achieved.
6. RESOURCES AND FINANCING
To successfully implement your plan you will need sufficient resources, both financial and non-financial. Every proposal should include a clear budget covering the projects projected income and expenditure. The level of detail should depend on the who the proposal is intended for.
Short applications might just contain a summary budget broken down into headings such as infrastructures, salaries, training, communications, transport, equipment etc. Longer proposals will need to specify more precisely what is included under each of these headings.
Also be aware that most funders spend so much time looking at expenditure, they could easily miss your income projections. Make these clear and provide some justification for these figures, even in short applications.
If other funders have already committed to supporting the project, make sure this clear in this section. Likewise if you have secured in-kind support from the local community make sure you specify what form this support will take and its estimated value. This will not only give funders a clearer picture of where your resources are coming from, but suggest to them that your project is valued locally – a key factor in any project succeeding.
7. WHY THEY SHOULD BE INTERESTED
Throughout the content of your proposal you should make sure you include information on any areas you have identified as being of particular interest for the funder in question. Nonetheless, it is still worth adding a few paragraphs to the end of your proposal making it explicit how your project matches their priorities.
Most funders have a real interest in sustainability because it ensures their money continues to have an effect even after the initial funding period is over. This section therefore also represents another chance to stress that by investing in a Financially Self-Sufficient School they will create a sustainable source of funding able to assist year after year of students to benefit from a high quality education.
8. APPENDICES
How much information is needed in the appendices will normally be specified by the funder. At the very least audited accounts should be provided, ideally along with an annual report. Other attachments might include organizational and program budgets for previous and current years and more detailed income and expenditure breakdowns for the project.
• It is not just what you write, it is how you write it. Making your writing understandable and enthusiastic will increase your chances of success. • Keep sentences short • Keep jargon to a minimum and make sure you explain it. • Include lots of space – dense text is hard to absorb. • Use bullet points for clarity. • ‘Signpost’ your text with section headings, and bold to make important points stand out.
9. GET FEEDBACK
Finally, despite all the fine advice we can offer you, there are no guarantees of success in fundraising. Asking for feedback however can help you to learn from you failures and ensure that later efforts generate the results you’ve been working so hard for.
FINANCING A FSS SCHOOL: A CASE STUDY
The following section demonstrates to you fictitious case studies based on real-life examples from schools that have successfully managed to start down the path to improving not only the education they provide, but also their own financial security and autonomy.
The challenges of developing a FSS school from a regular fee or subsidy-dependent structure are substantial but they’ve been overcome before and with creativity and persistence you can do the same.
FINANCIALLY SELF-SUFFICIENT SCHOOL CASE STUDY
Yala Skills For Life Group and the Omotombo Community High School
Background
The Omotombo Community High School (“OCHS”) is a rural high school in East Africa with 300 students and a staff of ten including the headmistress.
As a community school government makes a contribution towards the cost of teachers' salaries but provides no additional funding. The school charges fees to cover the remainder of its operational costs and investment needs. Although low in absolute terms, parents find it hard to pay these fees as well as providing their children with the basic supplies needed in the class. Drop out rates are high particularly among girls.
Yala Skills For Life Group (“YSLG”) is a local NGO founded by Charles Ototo in 2002 with a focus on and expertise in, sustainable agricultural education. Although their annual budget is very low and varies considerably each year, their small part-time staff of four have spent years building up a network of contacts with local and international NGOs operating in the region as well as local government officials. Through their membership of the Teach A Man To Fish network YSLG receive regular news about schools around the world that are using school businesses to improve their teaching as well as their finances.
When the headmistress complains one day to Charles that the school is falling down through lack of funds and that some girls cannot afford the fees and are missing school, he suggests a solution.
Planning and Development
Together they begin sketching a plan through which the school should be able to reach full financial self-sufficiency within five years. The headmistress calls a meeting with all the staff of the school who agree to give their support to the scheme.
Over the next few weeks everybody from the school's governing board, the Parent Teacher Association, local community groups and even the students are consulted for their views. Many concerns are raised, which are almost all taken into account as initial plans develop but generally everyone is happy to try this new approach.
The Pre-Project
Although everyone is excited by their plans and wants to start seeking funding from international donors straight away, Charles injects a note of realism.
Having considered the position of OCHS he thinks that with no business experience among the staff and no evidence to suggest the school is capable of running successful enterprises at the school, their chances of attracting funding from anyone are slim. He suggests they should first run a small-scale pilot project. If they can manage this activity profitably for a year he concludes YSLG will help them to seek funding for a full project.
The school holds an evening performance by the students to kick start their project and by the end of the night ten chickens have been pledged along with a few sacks of feed and some fencing materials.
YSLG helps with the design and construction of the chicken coop and when the birds arrive, each class led by a teacher, ‘adopts’ a chicken. The students receive a short course on poultry care and it quickly becomes a competition to see which class can best look after its bird.
When the first batch of chickens are sold, more are bought and by the end of the year the school has increased the number to fifty and made a small profit which it uses to support two orphan girls to study for free.
- Project Phase 1
Charles is impressed with how well the school has done from such a modest start and how much the students have learned during the year. Nonetheless he is realistic and knows that it will be hard to explain to international donors why they should be impressed by the school’s fifty chickens.
He talks to one of his old professors at the State Agricultural University. They have been conducting research into higher yielding indigenous breeds with increased disease resistance and are looking to expand their field trials. If OCHS is willing to keep detailed records on their performance the University would happily donate 250 birds and additional material to house them. Charles consults with the headmistress who is only too keen to accept the offer.
One year later not only does OCHS have over one thousand birds but two of its teachers are running weekend short courses for local farmers on achieving increased income through improved poultry varieties. The fees are split between the teachers and the school keeping both happy and helping to repair a severely damaged classroom roof. The school has also started up a few beehives run by students in its after-school young entrepreneurs club.
- Project Phase 2
The State Agricultural University impressed by the school’s performance both in breeding and record keeping passes YSLG the contact details for a U.S. University professor who has visited in the past and might be able to help.
Charles sends this contact a short email introducing himself and mentioning their shared friend at the State University. He explains he has been working with a local school, which is teaching entrepreneurship to its students through school businesses and using the extra income to offer scholarships to girls from the poorest families. Mentioning its remarkable success from a limited start, he asks if the professor would be interested in offering her advice on the proposal they are working on to expand their activities.
The professor replies that she’d be more than happy to offer some advice on it.
Charles considers the school’s project from the professor’s perspective and decides that its goal to increase attendance of girls is probably more interesting in this case than focusing on broader goals of financial self-sufficiency.
As he is not directly asking for support and because the professor is likely to have many other demands on her time, he keeps the proposal short. Just four sides of well spaced out text with clear section headings and key points highlighted in bold. He limits the budget to USD $5,000 which he thinks would make a real difference to the school but shouldn’t seem too large a figure to a U.S. university.
The professor thinks the proposal seems very professional and along with her comments, offers to ask some of her students if they would be interested in organizing a charity event to help raise some funds towards it.
These funds allow the school to set up a range of educational income generating schemes. Two of the school's teachers attend an advanced course on beekeeping from a national training center. Purchasing some woodworking equipment and initial supplies, the school is now able to offer local farmers short courses on beekeeping and sell them the hives to get started.
The end of year project performance report sent to the U.S. professor explains how the outcomes contained in the original proposal have all been met, with scholarships created for an additional 20 girls to attend each year. Charles includes some pictures of the school’s businesses in action, the girls sponsored along with thank you letters from them to the U.S. University’s students.
- Project Phase 3
With strong experience in managing school businesses and credible national and international referees, Charles now feels confident they are ready to apply to some international foundations for further support.
He drafts an outline fundraising strategy covering his suggested approach, the scale of funding sought and what the budget implications for YLSG are and receives approval from the board to go ahead.
Researching U.S. based non-profits with an interest in self-reliance, education and gender issues he finds five foundations, which have a history of supporting local NGOs in Africa working in these fields. After carefully checking their application deadlines and funding requirements he decides to press ahead with three organizations.
Having created a detailed seven-page funding proposal, he carefully tailors each application to emphasize how it matches each NGO's stated interests. He then asks one of his colleagues to check it over before he finally sends it off.
Two of the US non-profits have already allocated their funds for the year, and after a quick glance through it, hit the delete button. An employee of the final organization likes the first few lines and flipping through to the referee’s section, sees a professor from her old college listed. She decides to give it a proper read through.
Two months later Charles receives a mail to say they are being awarded a grant of USD $30,000. The school’s plans for full financial self-sufficiency can now begin in earnest.
AND THE MORAL IS…
Although the above example is fictitious and related in the style of a story, it aims to make some serious points.
Successful fundraising relies on establishing credibility. Once you’ve got a demonstrable track record it is easier to convince other funders that you can do the same thing on a larger scale. Sometimes this can take a long time but it pays off in the end. Cultivating contacts creates new possibilities. The more connections you have the more opportunities to find solutions to the challenges you face. Match your proposals carefully to donors' interests and requirements. A small amount of time spent re-drafting your text to emphasize how well it meets a funder's priorities, is more effective than sending off hundreds of poorly targeted applications.
