OK, you did it. There you were, pressed by your CEO or Executive Director in front of the rest of the senior staff … how much net income — as in, cash we can spend this year on salaries, rent and program — will you deliver in 2014? [I appreciate that probably he or she actually did say “you” … and you felt yourself out there all alone in the lifeboat!]. So you put forward a number.

How did you come up with that number?

Here are some possibilities …

1. You got the message. Your CEO was looking for the most cash possible in 2014. So you screwed down acquisition (a real money ‘loser’) to virtually nothing, resolved to do as much online fundraising as possible (to keep costs down), crossed off a few ‘cultivation’ projects and mailings (another money ‘loser’), and resolved to send as many appeals as possible to only your ‘best’ donors.

You also resolved to update your resume and bail out of there right after your summer vacation.

2. You initially thought along the lines of #1, but then you remembered all those Agitator posts and decided to include a big push at improving your retention rate. With the higher spend on retention (you put some of that cultivation stuff back in the budget), you forecast maybe a bit less net income for 2014 than #1, but your conscience felt a little better, although you still secretly worried about starving your acquisition to the point where it would probably not replace lost donors. And you promised enough cash that while your boss was grumpy, you kept your job.

3. You initially thought along the lines of #2, but then you dug deep and found the courage to tell the boss that, as sympathetic as you were to giving everyone a 10% raise in 2014 because ‘confidence in the economy was up’ and to adding ten ‘program’ staff to impress the Board (none for you of course), she needed to think longer term. And that meant the organization needed to commit itself to net growth in (quality) donors in 2014 … and every year.

Even more courageously, you noted that the organization declined in active donors in 2013, despite the fact that you raised slightly more net income in 2013 than in 2012. In an especially torturous part of the conversation, you established that this pattern was not sustainable.

And then you proposed a net income target that assumed a modest gain in retention rate, matched by sufficient acquisition investment to at least offset your projected donor loss. With a promise of smarter targeting of special appeals and potential high donors in your house file, you still projected a modest gain in 2014 net income over 2013, but less than #1 or #2; unfortunately, raises would need to be kept to 4% and only three new program staff could be added, if results were holding up by third quarter.

Outcome?

A) Your boss applauded your wise counsel and gave you the only 10% raise. You felt great about your boss, your organization, yourself and life in general. You bought yourself a new iPad.

B) Your boss went for #1 anyway. You know exactly how the year will end and you are planning your timely departure.

C) Your boss was so traumatized that he fired your sorry butt on the spot. But after a week of depression, you got a job offer from a smarter organization determined to grow. And revenge is sweet … the offer was from a nonprofit that currently competes with the dinosaur you’re leaving. You bought yourself a new iPad.

Any of this ring true?

Tom

P.S. This bit of scenario-building was inspired by Jeff Brooks’ post, Invisible trouble in your donor file, which references this post, Unsustainable Trends, from Analytical Ones, with a nifty formula for calculating when your revenue will begin to fall!