← What the Fundraising
What the Fundraising
257: From Scarcity to Strategy: Building Financial Resilience in Nonprofits with Karen Houghton
00:27:53
Loading summary
Transcript24 lines
- [00:00]
Karen Houghton
Living in the scarcity mindset is exhausting. But we also anyone in the nonprofit space, like, yeah, been there, right? We know that. I've been there, you've been there. We all start there. I think where we start to come into trouble a little bit or limit ourselves is when we can't see past that moment and we're not visioning and building towards something more.
- [00:27]
Mallory Erickson
Hey, my name is Mallory and I'm obsessed with helping leaders in the nonprofit space raise money and run their organizations differently. What the fundraising is a space for real and raw conversations to both challenge and inspire you. Not too long ago I was in your shoes, uncomfortable with fundraising and unsure of my place in this sector. It wasn't until I started to listen to other experts outside of the fundraising space that I was able to shift my mindset and ultimately shift the way I show up as a leader. This podcast is my way of blending professional and personal development so we as a collective inside the nonprofit sector can feel good about the work we are doing. Join me every week as I interview some of the brightest minds in the personal and professional development space to help you fundamentally change the way you lead and fundraise. I hope you enjoy this episode, so let's dive in.
- [01:21]
Podcast Host
Welcome everyone. I am so excited to be here today with Karen Houghton. Karen, welcome to what the fundraising.
- [01:28]
Karen Houghton
Thanks so much. I'm glad to be here.
- [01:30]
Podcast Host
So I've been loving learning more about Infinite Giving and you and your work. Why don't you start just telling everybody a little bit about you, what brings you to our conversation and the work that you're doing today?
- [01:41]
Karen Houghton
Sure. My name is Karen and we are building really a fascinating opportunity for nonprofits, particularly small to mid sized nonprofits, to grow and change how they think about finances. So Infinite Giving is a registered investment advisor and we come alongside them as a fiduciary partner who helps them receive donations, manage donations and conservatively grow them. And then kind of the other side of that, what a lot of people I think really enjoy talking to us is that we have a lot of nonprofit expertise. So yes, we serve hundreds of nonprofits all over the US and love to get in the nitty gritty weeds of how do we think about cash management and where are reserves? Do we have any? Do we have too much? Do we want an endowment? But all of our team has been in their shoes and so I've been a nonprofit executive director and founder and I've been the fundraiser and I serve on multiple boards and I think because of that experience it's Allowed us to really create a company that serves nonprofits in a way that really makes sense and solves pain points that they live in every day. But people outside the industry don't always even understand exist.
- [02:57]
Podcast Host
So I want to dig into that because I'm curious what some of those things are for folks who might even be in the sector. Not necessarily realizing there's so many things where we're just like, well, that's just the way it is. And we don't even know that there are problems or challenges to solve. So. But I'm curious before we dig into that, about you, like, what makes you passionate about doing this work? Why is this sort of your focus for nonprofits?
- [03:25]
Karen Houghton
I've always been connected to nonprofits. That's just the condition of my heart and who I am. It's. I've been a young life leader for years. I've been on church staff. I created a nonprofit called the Do Good Initiative. So spent a lot of time in East Africa for many years, met my husband through ministry and nonprofit work. So that has always been a big part of, of my journey. I also made a very interesting leap from my nonprofit world into the tech world. And so I have also had a 10 year career in technology and then in venture capital. And I think the exposure to both sides of those industries, which are incredibly different, I kept finding many times I would pause and say, I wish that the nonprofits and like, what I knew then, what I know now, right? Like, I wish more nonprofits could have the access and opportunity and kind of mindset like some of these businesses do. And then on the other side, I'm like, I wish these venture capitalists and businesses had more of a philanthropic mindset. And so I think there's a lot of opportunities where we can learn from each other. But when you kind of start to pull at that thread, often it is about access, right? And so it's an element of why did 90% of nonprofits not have a brokerage account? Well, it's because it's incredibly difficult. You and I as like business owners or retail clients, like, which is just individuals. We can go online, we can open a brokerage account in a few minutes. No big deal. A nonprofit, it can take six to 12 weeks, wet ink, snail mail, like it's a huge application process, right? Or something like an FDIC suite program for our cash in the bank or. That's really common, right? Actually for small to midsize nonprofits, it's not. It's very common for business and retail, but for A nonprofit to get access to a sweep account is a lot more rare. Rates that are offered at banks are not always the rates nonprofits get. So there's a lot of discrepancy in the financial world that don't always give equitable access to nonprofits. There are a lot of good reasons. There's a lot of complex compliance requirements around that that have a lot of friction in how these traditional financial institutions need to serve them. But when you have somebody like us who from the ground up was created to serve only tax exempt entities, it's allowed us to really create a lot of transparency and access where there may not have been otherwise.
- [06:02]
Podcast Host
So when I'm going back into my, like, seat when I was running a grassroots organization and really kind of living paycheck to paycheck in the nonprofit life, like both personally, but also in terms of running the organization in a lot of ways, maybe not quite that severe, but how do you think about or what are some of your recommendations around folks who, you know, are feeling that kind of like, we're just trying to get by a month, maybe they're experiencing a lot of scarcity mindset. The idea of like, financial success or security or even that level of kind of like advanced future future planning feels out of reach to their, like, mindset, at least for how they're thinking about their organization's financial future. What are some of your, like, top recommendations for those folks, both in terms of maybe busting those limiting beliefs, but then where do they start?
- [06:59]
Karen Houghton
Living in the scarcity mindset is exhausting. But we also, anyone in the nonprofit space, like, yeah, been there, right? We know that. I've been there, you've been there. We all start there. I think where we start to come into trouble a little bit or limit ourselves is when we can't see past that moment and we're not visioning and building towards something more. So I know we're all tired of hearing it. I say it sometimes too. Like, you have to move from scarcity to abundance, but it's almost like a mindset. But it's almost like you have to move from a scarcity mindset to a strategy mindset. And the idea is just like for our home, right? We don't all have savings accounts, but we know we should, right? So it's like, how do you do it? Well, you just start putting a little bit away every day. And a lot of that is just thinking about you're starting new programs, you're doing this crucial work. But what happens if you run out of Money. And if every month you're worried about running out of money and you stop those programs, are you doing more harm than good in those communities? So that's where then if you start to pull that thread, you're like, all right, sustainability and the ability to show up is really important to the mission at hand. How do we ensure that we can show up each month and care for these people and to do it in a way we're not worried, right? That if one donor, like, who usually gives, doesn't come through, we've all experienced that. Or like, hey, you're hoping for this grant, it doesn't work out, things happen. And the idea of having a reserve fund is usually that, like, key financial sustainability, like, you've got to build it up. It's pre Covid, you would hear three to six months of operational reserves on hand. Post Covid, you hear six to 12 months. Because many of us felt it for the first time. Wherever you land in that, having that savings, keeping it and stewarding it well, and keeping it out of your checking account, right? Putting in a money market, doing something with it, it's conservative. But then that way, when that emergency happens, which it will at some point, a lot of us have experienced those points even in the last six months, great. You pull it out, you spend it, it keeps your sustainability, and then as you can, then you start to build it back up. Don't have that. It can take the smallest thing to throw you off and then to threaten the work that you're doing. So I would say start by making sure you can build a reserve fund. You're not going to come out of the gate and be like, great, we're just going to put all this money over here. But just like you do for your family, right? The idea is like, what if I lost my job? Or what if this happened? We got to have a savings account. Every organization has to think that way because that is about a strategy and the continuity of your important work. Probably the other side of that, that I would also say for smaller organizations is we get stuck in, like, every credit card donation. Oh, I got $100 today. I got $100 there. But I would challenge that kind of early mindset of also saying you have big donors. There are major donors out there who are looking to give more large gifts into direct, like, smaller community nonprofits. But we've done a lot of data and a lot of research with these major donors, and they are looking for organizations who have the systems and the ability to receive these larger gifts. So Sometimes that scarcity mindset works against you when you're trying to get the bigger gifts, but then you need the bigger gifts in order to. And we've heard that from donors where it's like, oh, I was going to give this organization, no, I wanted the tax efficiencies of a stock gift. And I reached out to them. I was going to make a six figure gift. They didn't have a. They said they could, but then he said it took so many weeks, I realized they didn't actually have a brokerage account. They didn't know like what to do with the funds. I was like, hey, where are you going to put the funds? And they were like, right. So there was just these elements of. What we have to remember is the major gifts come usually from very savvy business people who are going to ask some of those questions. And if they don't feel you have the infrastructure in place to handle that kind of gift, they will give it where they can to somebody else. And our Dr. Russell James, most of us are probably very familiar with a lot of the research he does out of Texas Tech, but he did a huge study that showed that nonprofits who ask for stock gifts in addition to cash gifts on average raise 55% more over a five year period. And I'm like, 55% more is a lot. Yeah, like, oh, I hear a lot from small organs. It's like the chicken and the egg problem. They're like, no. No one's ever never asked me about a stock gift. And I'm like, the people who are giving no's are going to your website. Do you make it easy? Do you have the infrastructure? Do you have the ability to receive? If you don't, they'll give you a smaller gift, but they're going to make the large gift with all the tax efficiencies to another org. And what you see is that kind of tension. And then that's why large organizations continue to be large and small organizations continue to be small. So a lot of what we do at Infinite Giving is we're like, how do we bridge the gap? How do we come alongside you in a way where some of these smaller organizations have the infrastructure and the systems and the fiduciary partner who's like, yes, we can handle an endowment gift. It doesn't have to be billion dollars. You can have a really meaningful million dollar endowment and try to value that so that they continue to grow and achieve that financial sustainability.
- [12:39]
Podcast Host
I so appreciate that. And there's this other, like, I'M sitting in my nonprofit seat too piece here that's coming up around the fear that nonprofits have about asking for too many different types of things. So I love that metric because I, I think there's this. Well, we already mentioned this in a campaign or we already said our goal is this. Like they don't know how to manage kind of the complexity. And I think I really felt this way as a nonprofit ed too and fundraiser. Like how do you position optionality in a way that doesn't over complicate an ask and kind of get that donor in like overwhelmed to the point where they kind of don't get over the action line. I don't know if you have suggestions there. What your team has seen, like you offer so many different, different ways for non cash assets to support non profit giving as well. What are some strategies your team encourages and how those are positioned in the nonprofit world?
- [13:37]
Karen Houghton
We have to remember that money is not a dirty word, right? Like no money, no mission. You've got to have the funds to do that. So you can't be shy about it. Totally appreciate. Like we don't want to overwhelm the donors, right. And there's a certain art and science to how we do that. I think the biggest way to think about it is that when you are talking about non cash gifts, that's where tax efficiencies come in and that's where your savvy donors want those benefits and it's a double win for you. So it's really, we're meeting the donors where they are and you're giving them options and it's helping them, right? So it's like, hey, I know you usually give a check gift or we're so grateful, I want to let you know now we have these opportunities. Did you know could save up to, you know, almost 30% in capital gains taxes by giving a gift of securities. And you have to remember that high wealth donors and high capacity donors, major donors, the majority of their wealth is not in cash. So if you're asking for cash that's coming from their smallest bucket of funds, right. And they're going to look at, oh, this is where our bill pay and our mortgages come out of. And this is what we're doing. Yes, we can cut you a check. When you start talking about assets, that's where 80 to 90% of their wealth is typically held. And so a major gift starts to feel a lot more doable, especially when they're saving 30% on taxes from that. So a lot of it is about meeting the donor where they are, reminding yourself that you are helping the donor. Right. By saving money and helping them save on taxes. And it's just also remembering that bottom line of the average online credit card gift is $128. The average stock gift is $8,000. While it's less people. Right. Cash is king. You still, you need to ask for all of those small gifts and recurring gifts and they add up. And those are great stock gifts. You can have a much smaller pool of people, but the generosity and the size of that gift is usually large enough that it's quite impactful. And we're seeing the same with crypto, right? It's even less common than securities, but those gifts often tend to be very large. And we always tell our clients, you don't have to like crypto. You don't have to understand it, but it doesn't hurt to ask for it because there's somebody in your community that has it. And IRS treats crypto just like securities. They avoid long term capital gains taxes. Crypto's at all time highs right now, right back next week. You never know with crypto. We don't allow you to buy, we don't allow you to hold it, but we sell it immediately. Right. And it's kind of just opening those pathways where you're meeting your donor. Where they are is always a helpful conversation that is not a pressured conversation. Shouldn't be.
- [16:27]
Podcast Host
So. Okay, this brings me to another, another hesitation that I hear from folks that I'm curious. Let's like, sort of like, yeah, but the, the what might come up here. Something I hear sometimes from leaders. And this is true for things like stock and crypto gift, but also things like planned giving. They worry that the financial expertise needed to really help a donor navigate a decision is outside of their knowledge. So they feel nervous to mention stock or mention crypto or mention plan giving or daf because they're like, well, I don't really understand the financial model or the tax. What happens with taxes? And did that just change? How do you suggest folks like really work with their donors to provide enough knowledge and resources so that it really is that offering and that partnership that you're talking about here without the fundraiser feeling like they have to have an answer for everything?
- [17:27]
Karen Houghton
I would say you are not expected to be great at everything. You're not expected to be a financial expertise, but it is about having the resources available. So that's where for infinite giving, we tell our clients, we're like, we are here for you. We talk to donors on behalf of our clients. Right? It's like, hey, that's a great question. You need high level bullet points, right? And we do a lot of educational webinars and different teaching and we give you a lot of tools to help. But it's tax efficient. 30% off capital gains taxes. Boom. That's really like, you can just repeat that. And then when people want to go deeper, be like, you know, we have a really great partner, Infinite Givings, our fiduciary partner. They would love to help you. They have expertise in this area. So we're helping. We had a. One of our nonprofit clients is out in Nevada, and they had a donor who was granting them an endowment gift. So we worked around all the endowment policies and we're like. And the board's like, we're volunteers. Like, what? We don't know. Can we say yes? I'm like, always say yes. Yes. The answer is yes. We worked around, like quasi endowments, so it wasn't restricted. And we wrote policy for them. So for the donor, this small org was like, yes, we would love that. Let's talk to you. We'll get a meeting together. We went through the donor wishes on the back end. We're supporting them, doing everything that they need. When it came time to fund the gift, he was really fun. He was younger and had a lot of success. And he funded it from crypto stock. The owner advised fund in a wire transfer from his bank. And again, the team was like, infinite giving. Can you help us? And we were like, yes. And we were like, great. Here's the platform, here's what you do. If you have any questions, let us know. Boom. It all just started coming in. We handled it all. It went directly into the endowment. You know what the hardest high touch point was? The wire transfer because he had to physically go into his bank. And then the bank made him go through all of these next steps. And we did that. And he was like, I just gave crypto securities and made a donor advised fund grant request. All within like a few minutes yet. I go into the bank, and the bank made my life really difficult. And I was like, not you. It's the process. It's the banking system. But I think that's where they are. A small organization who was able to just say, we may not be experts, but we have the infrastructure and intentionality around a partnership that I'm always like, put us in coach. Like when you don't know and we're here to help.
- [19:58]
Mallory Erickson
Yeah.
- [19:59]
Podcast Host
I mean, that makes such a Difference. I remember the first time I did a wire, how scared I was like a stock. I mean it was the most stressful day. Like $50,000 moving in some stock, liquidating. I don't even know how we did this 12, 15 years ago, but that I. When the money was like nowhere, when they were like, we sent it and then it hadn't appeared yet. I don't know, Those were maybe the worst hours of my life. So I love that and I love like the partnership component because I think it's one thing to say we have a tool for you. Just use this thing. It's easy. And instead recognizing that, like, yeah, maybe it's simple, but it's not easy because it's scary because it's so much outside of what people know or are used to or have ever thought about before. So I just really like that orientation to like the support of the humans who are trying to wrangle these scenarios.
- [20:54]
Karen Houghton
Yeah, we have a technology platform, an award winning one. It's beautiful. We also are a registered investment advisor and a fiduciary and we have a whole team who I'm always like, we'll know you, we want to help you. We literally did a demo call with somebody today and they're like, man, everybody else we've talked to, it's like, well, what are you getting for donations? Qualify, qualify, qualify. And he was like, you guys are just like, hey, how can we help? And I was like, it's because we understand what it's like to be you and we want to help. Let's remove as much friction. How can we come alongside you? And that's how we usually start our calls, is like, thank you for the work you do. How can we be helpful?
- [21:31]
Podcast Host
I love that. Oh my God. I hope every tech platform listens to this and starts to show up differently. Okay, I know we're almost out of time, but I have to ask one more question because in addition to everything that you're doing with Infinite Giving, you have a book that is going to come out at some point. Do you want to give folks just a little teaser around what it is, what it's about and if you know anything about release dates so we can stay tuned.
- [21:57]
Karen Houghton
Sure. I appreciate you asking. We are. I've been a little heads down, but yes, I am writing a book. It's called Money with Mission. The publishing date, as I check my calendar, it should be end of October. So we definitely want to be helpful in kind of the end of your giving and getting that out. But it's really a blue ocean where you have a lot of traditional financial folks who don't always understand nonprofits. And you have a lot of nonprofit leaders who are very savvy but don't always understand the traditional financial systems. And when you do have overlap, it's a little bit more rare. And then everything still has the framework of. But we're tax exempt. Right. So it's like a lot of general knowledge can apply, but a lot of it is different. And so that's where we want the framework. Like when you ask people, where do you get your knowledge for nonprofit finance, there's not a lot of resources. And so that's our goal is, you know, we serve hundreds of nonprofits. We're in 41 states. We don't have any full time salespeople. Right. We're just helping and serving. And the word is sharing. And so I think a lot of that is we were like, what if we were able to take a lot of the advice that we give pretty consistently and put it into a book as a resource? Where all of a sudden now all of these, you know, really smart non profit leaders are like, hey, not only am I doing this in kind of my seat, now I can know, hey, here's some standards and here's how nonprofits are thinking about it and how we should consider our finances.
- [23:27]
Podcast Host
Yeah, okay. I'm so excited for that. I'm going to want to read that too. I feel like that really was the class that I feel like I missed, like coming into an ed, you know, a position like really where I had just no experience or knowledge or it was an area of nonprofit I'd never touched before. It was absolutely my biggest artist learning curve. So I love that. I'm so excited for that. Is there anything else anywhere you want folks to go to learn more about you? Infinite giving or any final words you want to leave people with?
- [23:57]
Karen Houghton
I would just say even kind of what you just shared is that's okay, right? You're not supposed to be good at everything. So just finding partners who want to be helpful is really important. Right. It's just a tool in your toolkit. You can find us@infinitegiving.com we would love to chat. We do free consults. You can schedule a meeting whether it's a stock and crypto gift, whether you're wanting a policy written, an endowment, or even just like, hey, what's your money market rate? Maybe we can do better in our bank. The answer is, you probably can, you know, and we'll get into the weeds with you and so just there are more opportunities than traditional banking and traditional investing out there and we don't always know it. And so we would just love to invite you into kind of re reframing and thinking there are other places and people made for us and maybe we have a good and we would say you do.
- [24:51]
Podcast Host
I love that. I love that. Thank you so much for joining me today for sharing all this about you and your work and giving nonprofits the confidence to expand and grow and get curious here. So I'm really grateful for the work that you do.
- [25:04]
Karen Houghton
Yes, thank you so much for having me, Mallory. I appreciate it.
- [25:12]
Mallory Erickson
I hope today's episode inspired or challenged you to think differently. For additional takeaways, tips, show notes, and more about our amazing guest and sponsors, head on over to the to Malloryerickson.com podcast. And if you didn't know, hosting this podcast isn't the only thing I do every day. I coach, guide and help fundraisers and leaders just like you. Inside of my program, the Power Partners Formula Collective Inside the program, I share my methods, tools and experiences that have helped me fundraise millions of dollars and feel good about myself in the process. To learn more about how I can help you, visit MalloryErickson.com PowerPartners Last but not least, if you enjoyed this episode, I'd love to encourage you to share it with a friend you know would benefit or leave a review. I'm so grateful for all of you and the good, hard work you're doing to make our world a better place. I can't wait to see you in the next episode.