24 Apr Redefining ROI: Moving from a Transactional to a Transformational Mindset
Reframing ROI for Nonprofit Organizations
We’ve all been there. You go in to meet with a potential investor, begin to outline your strategic plan and funding needs and are having a great dialogue. Frankly, you’re in the zone and loving it. After all that great banter you get the all too familiar question, “So, what’s my ROI?
This is where the great separate themselves from the good through some terrific fundraiser ‘kung fu.’ (You’ll get what I mean in a minute.)
Let’s break this down.
They’ve asked you for a return on their investment. Fair. After all, this isn’t charity, right? Exactly. So, instead of simply rattling off metrics and measures of a traditional ROI, what you’re going to do is move them from their idea of ROI to a slightly different one.
Hang with me.
Since the work that you and your organization are doing is truly transformational work for your community, you must move your potential investors away from an all-encompassing transactional, “dollar in/dollar out” mentality. After all, you’re not asking them to invest in a stock that pays dividends; rather, you’re asking them to invest a stock that can/will grow over time to a value that is far greater than any one dividend paid out on its performance. Think about investing $100 in Apple in 1980 and what that stock would be worth today.
In other words, you need to shift their mindset from only looking at the immediate return on investment to looking at their ROI and our ROI… your organization’s, the investor’s and the community’s. To do this, you need to change the ROI paradigm so that they understand why a community first approach will ultimately help their business grow more than the traditional, transactional mindset. You want to add an “ROI” in their mind that speaks to Relevance, Outcomes, and Impact
I think this might be one of the most (unfortunately) overlooked talking points when presenting your strategic plan/initiative to potential investors.
When we say relevance we mean, show them how their investment in your plan has relevance to their business growth and the community’s growth. In other words, connect the dots. Because rest assured, when the CEO is presenting this huge investment to his/her board and/or the CFO (who will undoubtedly have plenty of tough questions), they’re all going to ask how this investment is relevant to their plans to grow as a company.
The more you can show them how your plan to grow the community by adding jobs, growing GDP and/or improving the business climate has an immediate impact on their ability to grow their business… you’re in business.
Investable Outcomes™ answer your potential investor’s question, “How are you going to spend my money?”
You’ll be much more successful if you highlight relevant outcomes in your discussions rather than the outputs of your plan. Outcomes matter in this discussion so don’t shy away from them. They don’t only need to move the needle for the community, like adding jobs or attracting talent, they need to move the needle for the investor. The power company probably wants to sell more electricity, the water company wants to sell more water, and the bank definitely wants more deposits; how will your outcomes accelerate the investor’s plans for growth?
The final, big-picture result. How do those individual program outcomes work together to transform your community as a whole?
This is the coup de grace. I love talking about impact because we see it all around us. We see cities and states roaring with economic growth where 20 years ago there was stagnation. We see skyscrapers, cranes, houses, and new roads being built. We know this kind of growth didn’t happen by chance; it happened by choice. Public-private partnerships driven by chambers of commerce and/or economic development organizations are the catalysts for this growth that the business community, and the community at large, all benefit from when the plan is created, funded, and executed. Beautiful, isn’t it?
By having this kind of transformational versus transactional conversation around investment you’ll see a shift in your investors’ mindsets. The conversation becomes about the long-range, “What’s in it for me?” This is where we start seeing increased funding in campaigns that are both worthy of it and in critical need of it. I think we’d all agree that this conversation is much more productive.
For more help understanding ROI for nonprofit organizations, check out ROI For Nonprofits: The New Key to Sustainability. If you are in need of a nonprofit partner, Convergent Nonprofit Solutions is here for you. Contact our nonprofit experts today to learn more! Wondering where your organization is on the path to financial sustainability? Take our free Fundraising Reality Check Quiz to find out if you are on your way to fundraising success!