Capacity-Building Grants: Learn to Be a Self-Sustaining Nonprofit, Part 1

[Editor's note: This is part 1 of a two-part series. Check back next week for part 2.]

Currently, there are more than 1.6 million registered nonprofit organizations in the U.S., and more seemingly pop up every day. But for every large, well-known organization like the Salvation Army or ASPCA, there are literally hundreds of small organizations struggling to stay afloat.

One of the big reasons for that, says Tom Gagen, CEO of Sutter Medical Center, Sacramento, is that many "small [nonprofit] agencies start up because of a special need in the community, but they have no idea what they're doing in the first year or two and just get way in over their head." Their intentions are pure, but they don't have the resources, training, time, staff and/or understanding to sustain their missions.

That's why Sacramento, Calif.-based Sutter Medical Center developed what it calls a capacity-building grant specifically geared toward promising nonprofits in its region that need to learn how to become self-sustaining for the long haul.

"There were people in the community that we wanted to collaborate with because they were either doing a good job or had the potential to do an excellent job but were lacking in some particular area — maybe they didn't have a strong board, maybe they didn't know how to market themselves, could have a been a number of different things," Gagen says. "… We wanted to make sure that we were investing our funds most appropriately. It wasn't just to give money. It was to help the community and help these organizations become self-sustaining."

To do that, Sutter — which provides several grant opportunities for nonprofits in the Sacramento area — decided it would provide a $50,000 grant to help smaller organizations become self-sustaining. However, Sutter didn't just hand over a $50,000 check. Instead, it teamed with local full-service nonprofit marketing agency 3fold Communications, which then would help the grant recipients implement sustainable solutions. The plan is that after the grant runs out, recipients are set up for the long term and no longer need Sutter Medical Center's help.

Here, Gagen and Holly Harper, director of community benefit for the Sutter Health Sacramento Sierra Region, describe some of the keys 3fold Communications assists nonprofits with to become self-sustaining:

• Establish strong leadership. "Strong leadership, a strong board of directors and a strong executive director are crucial to the success of this grant," Harper says. "Because if you give a capacity-building grant to someone who doesn't have the capacity already at a certain level to sustain it once 3fold steps out, it can fail."
• Learn how to market.
• Develop a philanthropic program.
• Diversify funding. "Determine how to get additional grants from a variety of foundations, and don't rely on one resource for the bulk of funding," Gagen says.
• Identify and track key metrics.
• Develop a strategic plan in concert with a fundraising plan.
• Understand your organization's objective and communicate it. "If we're going to give people money, we want to understand what their end objective is and what their metrics are so that we know whether they've met their objective or not," Gagen says. "We're not necessarily here to help set what their objective is, but we do want to make sure that they've used any money that we contribute wisely."

To date, the capacity-building program has been a success. Each of the first three recipients — Youth Development Network, River City Food Bank and Cottage Housing Inc. — has seen significant improvement in the short term and is better positioned for the long term.

"We want to treat these organizations like small businesses — not just small agencies that get handouts — because they are small businesses. So we're going to ask them for things," Gagen says. "Do you have a board of directors? Do you have a website? Do you have collateral materials? Do you embark on PR campaigns? Do you have or are you developing a philanthropic campaign? These are the types of things any fledgling business would want to do."

Check back Monday for information on how the capacity-building grant helped the first three grant recipients, as well as insights on the grant and self-sustaining practices from River City Food Bank Executive Director Eileen Thomas.