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Secrets of Success: How to Improve Your Charity Ranking

Posted September 23, 2010 3:50 PM by Dylan Miyake

No matter what size your organization - whether you have major corporate donors or a small army of individual donors - sponsors are the ones who keep the lights on and the doors open. These sponsors expect results and one place they look is Charity Navigator. Tips about improving your ranking are continued below.Every dollar counts and your sponsors are looking to get a solid return on their charitable investments. If your non-profit can show results – and can show that you are wise stewards of the money donated to your organization – you're more likely to see steady or increased funding. Non-profits that cannot demonstrate key metrics of success are likely to lose sponsors and face drastic cuts in their services. One of the most influential ratings services for non-profits is Charity Navigator. This website evaluates thousands of non-profit organizations using financial data to point out which organizations are financially sound and which ones are less effective. If you want a way to excite your sponsors, getting favorable ratings on Charity Navigator is a good way to start. The Balanced Scorecard methodology can be helpful in improving your organization's performance in the areas that are most important to the Charity Navigator rankings. Some of the specific areas reported are detailed below. These areas do not capture your entire business model but it's worth comparing and possibly aligning your goals to maximize your online ranking. Fundraising efficiency: Charities that are efficient are able to raise substantial funding without excessive marketing costs. How does your non-profit stack up? Are you devoting too much of your budget to fundraising, or paying big fees to "for-profit" fundraising organizations? This could drive down your ratings on Charity Navigator, and could also be a sign of potential problems for your organization. Program expenses: Efficient charities are able to devote the bulk of their budget to spending on programs and services – the day to day mission that is the reason the organization exists. If a non-profit is devoting too much money to non-program expenses like conferences and auxillary expenses, it will fall in the ratings. Administrative expenses: While it's important to hire and retain good people to run the organization, non-profits need to keep their administrative expenses at a reasonable level. Charity Navigator measures the overall administrative fees as a percentage of each organization's budget, and compares this percentage to benchmarks at peer organizations. Organizational capacity: This category measures how successfully a non-profit has sustained its programs and services over time, and evaluates the organization's financial strength and prospects for continued success. In this category, slow and steady performance are ideal. Revenue growth versus program expenses growth: How fast is your non-profit growing? How much money do you have coming in each year, and how much of this new money are you spending on additional programs and services? High-capacity charities know how to grow their services in proportion to increasing funding. This measure attempts to show if an organization has the people, systems, and processes in place to successfully convert new money into expanding their mission. Working capital ratio: This is a measure of a non-profit's financial strength, calculated by dividing the organization's amount of working capital by its total annual expenses. This is a way of showing how long the charity could sustain its current programs without new revenue – it's kind of like calculating a charity's "rainy day" fund; even if no new money was raised, how long could the charity stay in business? Now that you have a better understanding of Charity Navigator and how it evaluates non-profits, you can use the Balanced Scorecard methodology to focus on the objectives and measures that motivate your organization, predict success, and excite your sponsors too! We have considerable experience helping non-profits become more aligned and effective organizations. Should you have any questions or need a trusted advisor along the way - we are just one call or email away!

The nice people at Charity Navigator reviewed this article and would like to add the following information so everyone knows what to expect in the near future. Thanks for the insight CN!

"It is important to remember that a financial rating by Charity Navigator is not the final word on the value of your organization. In fact, Charity Navigator believes that there are three components that donors should consider before supporting a charity:

(1) its financial performance,
(2) its commitment to accountability and transparency, and,
(3) its outcomes.

Of these three components, Charity Navigator currently addresses the first, began to include metrics that address the second this summer and hopes to tackle the third in the very near future. You can follow the evolution of their methodology towards a three dimensional rating system on their website ensuring that you are up-to-date on the types of information donors require from charities before they commit their support."
# Posted By Jeremy S | 9/26/10 9:58 AM
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