By: Jessamyn Shams-Lau
What if you could calculate the value of the time you ask of your grantees? Would knowing the value of their time change what you asked of them? What if you found out they are 'spending' more than they 'earn' going through your grant making process?
A few weeks ago we attended a workshop run by Jane Leu (PF Advisory Board), of Smarter Good. Jane was speaking mostly to Executive Directors and fund raisers of Bay Area based organisations, trying to impress upon them the importance of spending time on realistic fund raising prospects, rather than on hunting down and trying to build relationships with funders that don't fund where they are at, or what they are up to. She referenced a tool she learned from a fellow social entrepreneur, the founder of Room to Read.
"I learned this from John Wood, who is a venerable fund raiser. Take the number of hours you have in a year. That's about 2,080 hours. Maybe you spend 50% of that fund raising, so halve it to 1,040. Now divide the total you have to raise this year by those hours. This is how much your time is worth. Now make sure you spend it with the funders who realistically are likely to fund you."
Putting a dollar amount on your time could be a daunting thing as a fund raiser. It can also be an empowering process when you pair it with a well thought through fund raising dashboard that helps you establish the likelihood of a fit with each of your prospects.
But it's much more than a tool for fund raisers to assess the value of their time. It's a simple way for funders to assess the value of their grant. Let’s turn this into two basic equations:
For example, say a foundation is doing due diligence on an organisation with a $1.2M raise. The organisation is still small and does not have a development person, so the ED is doing all the fund raising and spending about 50% of their time on it (if the fund raising is split between the ED, dev dir, or other staff, give it your best guess how much time is being spent in aggregate). By Jane's calculation, their ED's fund raising time is probably valued around $1,150 per hour.
$1.2M/1040 hours = $1,150 per hour
If the due diligence process for a $25K grant takes 10 hours of their time (very conservative estimate of meetings, prep, creating/updating documentation), that's $11,500 worth of their time.
$1,150 X 10 hours = $11,500 worth of time on due diligence
That ED is just on par with their fund raising, and that's *if* they have a good program team so they can spend 50% of their time away from actually running the program they operate. Then there's reporting. Let's put this at the average hours spent reporting on a $10K-$25K grant: 22 hours*. That's another $25,300.
$1,150 X 22 hours = $25,300 worth of time on reporting
Hopefully you're just asking for one report a year, so our grantee is 'spending' a total of $36,800 to secure and report on your grant for one year. If that's for a $100,000 grant that makes more sense. A $50K grant is better, but not ideal. But for a $25K grant, it doesn't make sense, does it? It doesn't make sense for anyone to spend that amount of time on a $25K grant, so should funders be asking for it? Not if we want our grantees to succeed.
$11,500 due diligence time + $25,300 reporting time = $36,800 ≤ grant amount
Of course, we hear funders tell people all the time, "Entrepreneurs find that going through our DD process is helpful, even if they don't get the grant." What we don't hear often from grantees is "That DD process was so helpful that I didn't even care that we didn't get the grant.". If you do hear that from entrepreneurs, do you honestly think that for their organisation it was worth $11,500 of their time? Or the value of time you're encouraging their fund raisers to spend?
So, next time you're doing due diligence on an org take a moment to do a couple of back of the napkin calculations.
And if it doesn't make sense, why doesn't it? Is it an org that's too small for your funding? Or is your due diligence overblown for the size of grant you're considering? Could you make a decision by using less of the grant seeker's time? Can you leverage other funders' due diligence and reporting?
There are lots of ways to improve these ratios. Let's start being a little more cognisant and a lot more efficient, or we're all just wasting each others' time.
*According to research from Smarter Good's Grant Reporting Landscape analysis, Feb 2014