ROI and Grant Proposals

12 Sep 2019

Arts and Culture

ROI and Grant Proposals Tips for Nonprofits

Grant proposals typically involve some type of ROI proof, but I often find that nonprofit executives struggle with this step in the grant-writing process. Determining ROI does not always come naturally, though the term itself is overused. Everyone from hotel chains to health insurance is proving ROI these days to try to get your business. Unlike the for-profit world, though, typical metrics such as market share, return on equity, profit margin, and number of units sold don't translate easily to nonprofits.

We see this as a good thing.

It allows you the advantage of being able to define your ROI metrics within your own mission. Here are a few tips for framing your ROI discussion in grant proposals and your fundraising in general:

Conventional wisdom on emotional motivations

‘Giving is an emotional act.’ This conventional wisdom is still prevalent in the nonprofit industry. However, when writing a grant, emotional involvement is much more difficult to document. I would propose that the 'sweet spot' for investments is actually with a combined emotional and rational appeal. In writing a successful grant, showing credible ROI will help you successfully prove the rational side, and you can use your language and tone to convey the emotion within your impact and outcomes.

Define ROI on your own terms

Grant proposals often have a built-in evaluation component to ensure the money will be well-spent. As discussed in my book ROI for Nonprofits: The New Key to Sustainability, these can be complex and composed mainly of industry jargon. A few examples I have seen include:

Assumed the role of catalyst for pursuing regional responses
Served as a neutral party in fostering collaborative partnerships.

Now, what do either of these phrases mean? And, more importantly, what was accomplished by achieving them?

I call these soft versions of ROI. A more definable ROI is needed for a grant proposal and beneficial for your overall fundraising. This is where you should use your nonprofit's terms and mission to drive your metrics.

The most promising areas for ROI include your organizational impact, societal costs avoided, special/shared services, societal outcomes enhanced, or future projections. These all show what we call Investable Outcomes^TM, or quantifiable impacts on primary customers' lives. The 'investable' portion of this phrase implies that you are choosing values that have an acceptable return and at which you have a reasonable chance of succeeding.

Developing your Investable Outcomes

The first step in developing your outcomes is to be sure you're answering WIIFM (What's In It For Me) from the perspective of your investor. You also need to ensure that you're showing actual outcomes, not just activity or outputs.

Which of these would you say are actually investable outcomes?

We served 100 meals last year.
10,000 people visited our museum.
We built 10 houses.
We vaccinated 500 children.
1,000 jobs were created.
Our material influenced 100,000 people.

Sorry to say... none of them! They show efficiency for certain, but not ROI-driven outcomes. These are all soft returns at best. Here's an example of a nonprofit we helped take to the next level of ROI through investable outcomes:

As you can see, proving ROI using investable outcomes demonstrates that your impact has value to the grant investor you're targeting. But this is only the start. At Convergent, we recommend continuing this same message in your collateral material, annual reports, investor relations, and major 'asks.' Contact us if you'd like help in determining your investable outcomes or achieving sustainability through capital campaign fundraising.

About The Author

Tom Ralser, CFA

Principal & Director of Asking Rights

Department: Team

“Why should I give your organization money?”

When I began in this business in 1995, this is the question I was first asked to answer. Not only was this asked in my first feasibility study by a prospective donor, but from a company perspective, it became the driving question that would allow us to become leaders in the industry.

Since then, I have strived to not only address this question but improve and refine the answer. In the early days of economic development projects, it was relatively easy to answer. Since then, I have applied my approach to answering this question to virtually every type of nonprofit. The narrower term “ROI” has given way to the broader “OVP” (Organizational Value Proposition®) which is more appropriate for social missions and my focus on outcomes delivered has led to a revolution in addressing the motivations of givers, transforming them from nominal donors to major investors.

My work is not yet done. As investors in nonprofits become more sophisticated and demanding, the bar is continually being raised. Stay tuned.

Tom has worked with organizations of all kinds, from Chambers of Commerce to religious organizations, national museums to rural health networks, and local youth organizations to international research institutes. He pioneered the concept of applying return on investment (ROI) principles to nonprofit fundraising, and fundraisers have described his work as the “silver bullet” that justifies larger investments in nonprofit organizations.

Hundreds of organizations have utilized Tom’s sustainability planning techniques to ensure they can thrive in a tight money environment. He holds the Chartered Financial Analyst (CFA) designation, which provides the framework for his Investment-Driven Model™ of fundraising, and led to the development of the Organizational Value Proposition®, which is widely used by corporations, foundations, and individuals as confirmation that the nonprofits in which they invest are truly delivering outcomes with values. His specialty of utilizing for-profit concepts and methods in the nonprofit world has helped nonprofits raise over an estimated $1.6 billion in the 22 years he has worked with them.

Tom is a frequent and highly acclaimed speaker, addressing topics about attracting new funders, outcome-based sustainability planning, and delivering value to investors.

Summary of Experience

Personally involved in over 600 nonprofit funding projects in all 50 states.
Author of the books ROI for Nonprofits: The New Key to Sustainability, Asking Rights: Why Some Nonprofits Get Funded (and some don’t), and the companion workbook, Developing Your Asking Rights.
Holds the Chartered Financial Analyst (CFA) designation, ranged by Economist as the “gold standard” for investment analysis.
Session leader and/or keynote speaker at dozens of conferences throughout the nonprofit sector and country. A sampling includes:
- Planet Philanthropy (2016) Keynote Speaker.
- National School Foundation Association Annual Conference (2016, 2017) Presenter.
- Association of Healthcare Philanthropy Big Ideas Conference (2017) Presenter.
- Council for Advancement & Support of Education’s Conference for Community College Advancement (2017) Presenter.
Founding Director of Western Colorado Bureau of Economic and Business Research at Colorado Mesa University, where he was a tenured professor.
MS in Finance from the University of Utah and BS in Marketing from Illinois State University.