How SecondBite, a rapidly expanding non-profit, sowed the seeds for a secure future.

For a non-profit, planning for future sustainability is rather like asking a family hard-pressed to put food on the table to start saving for retirement. It seems impossible, and is possibly ill-advised.

This was the dilemma facing Melbourne based non-profit, SecondBite which redistributes surplus fresh food to community programs at the frontline of food poverty providing meals to thousands of people each day.

Setting up the Future Trust

In 2009, on the back of a large donation, SecondBite founder and chair, Ian Carson had established the Future Trust, a segregated and professionally invested fund to support the organisation’s future sustainability. However competing with the many priorities of a rapidly growing non-profit, the Future Trust had been paid scant attention. While it had its own board, there had been no resources to grow the finances and no strategy for how to. As a consequence, there had been little growth and the fund had sat at $0.7m for some years.

SecondBite founder and chair, Ian Carson: “Imagine if someone left a bequest of $30m in their will, then all of us could spend more time on outcomes.”

“We had a vision for the Future Trust and an initial goal of $5m by 2014,” explained Carson. “However, we didn’t have the bandwidth to get a plan in place to progress it. SVA Consulting’s brief was to develop a comprehensive funding strategy to maximise the Future Trust’s potential.”

…there was concern that promoting the Future Trust could eat into current donations …

At that time, June 2012, SecondBite was going from strength to strength. It had grown rapidly since setting up offices in 2005; it employed 15 staff, oversaw hundreds of volunteers delivering fresh produce from donors to nearly 400 community programs, and managed $2.4m in operating costs—up 62% on the previous financial year. Much of this growth had resulted from signing a national partnership with Coles supermarkets in September 2011 which involved 250 stores nationally. This expanded SecondBite’s  operations geographically requiring more infrastructure, personnel, warehouses, and vans. To meet this expansion, funds raised had increased to nearly $2m, an enormous 44% hike on the previous year. With this pressure on fundraising, there was concern that promoting the Future Trust could eat into current donations and leave SecondBite vulnerable.

Is now the time to grow the Future Trust?

So, the first question to answer was: Is the Future Trust a good idea for SecondBite at this time?

SVA Consulting’s Bertrand Maitre, the consultant on the project, wasn’t so sure. “Clearly the immediate need for fundraising was for operations. Most organisations going through this kind of expansion focus on the short term. And at SecondBite, the existing fundraising manager had enough on his plate raising the $3m needed in the coming financial year.”

Also as the Future Trust was an initiative of the SecondBite board originally, the management team hadn’t been involved and were understandably concerned that it might take valuable resources, and end up cannibalising operational fundraising.

“It was clear that the case for supporting the Future Trust needed to be made,” said Maitre.

What is different about trusts?

Initially Maitre researched trusts^[i] set up by organisations to ensure future sustainability, and the various ways that people provided donations or gifts for them.

What he found was that generally when giving for these funds people were looking to leave a legacy or a lasting contribution and they often did this as a bequest in their will. “Of course, this was different from donations which addressed a short-term operational need. It became clear, therefore, that cannibalisation of the normal fundraising operations didn’t tend to happen when people left a bequest,” said Maitre.

The other differentiator is that this type of giving requires a different relationship. “As opposed to giving funds for a specific project, say a van, or even to build capacity such as funding a warehouse, donating to a future trust requires more knowledge and trust in the organisation and a closer relationship.”

Future Trusts are more difficult to fundraise for as they require a long-term perspective and high level of investors’ knowledge, trust and personal connection.

Maitre continued to research the bequest market, the ways that different non-profits have set up bequest programs and other forms of ‘gifts’.

It was all about making a clear case for support.

Bequests are a large part of philanthropic income in the US and UK (33% in 2003-4), but have been less well tapped in Australia. With the baby boomers in a position to transfer large amounts of wealth to the next generation in the first half of the 21st century, non-profits will likely benefit from significant ‘gifts’ over the coming decades.

Australian research has found that 61% of donors would consider leaving a bequest^[ii]. The average bequest in Australia today is around $60,000^[iii], which for smaller non-profits can make a significant difference. Also, once donors place non-profit organisations in their wills, over 95% are unlikely to change them.^[iv]

Considering these insights, it became evident that this could well be a good time for SecondBite to seek donations for the Future Trust. It was all about making a clear case for support — one that would inspire people to get behind the initiative.

A watershed moment came during a conversation between Carson and Maitre. They realised that if the fund was big enough, then its income could finance a substantial amount of SecondBite’s operational costs. However more importantly, they realised that a larger Future Trust which generated this kind of income would enable the organisation to support something much bigger than simply redistributing a small percentage of surplus food.

“The extra income — even if some was used to cover operational costs — would allow the organisation to trial new things, to do something innovative,” said Maitre. “We could see the potential to address the complex problems behind food insecurity in Australia—­to go further than simply redistributing fresh produce.”

As things stood, SecondBite’s CEO didn’t have the mandate or the support to try out projects that needed research, and trial and error. The Future Trust was a great opportunity to raise the funds to trial new things.

The strategy

Maitre worked with SVA Consulting Associate Lisa Cotton, a specialist in fundraising to help write the case for support and develop the mechanics of how it would be achieved.

While bequests are the obvious way that donors might consider gifting to the Future Trust, the project identified three other ways worth exploring:

• Share gifting — Using a third party, non-profit to cost-effectively sell and then donate small parcels of shares that would otherwise be expensive to trade.
• Equity gifting — Giving equity of a private company, though a new concept in Australia, has strong fundraising potential for a well-connected board.
• Major donors — To reduce the risk of cannibalisation, this option is for donors who value leaving a legacy and funding in perpetuity.

The plan for maximising the Future Trust’s potential comprised four areas:

• Set targets
• Establish new fundraising programs for all four methods of donation
• Develop marketing and communication materials for these programs
• Set up the right structures, policies and responsibilities.

After discussions with Carson and Katy Barfield, then SecondBite’s CEO, about how aggressive they wanted to be with the Future Trust goal, Maitre conducted some financial modelling about what was realistic and proposed a target of $20m by 2025 (calling it 20:25).

In recognition that resourcing was a critical issue, the plan recommended recruiting a Future Trust development manager to drive the initiatives, locate potential prospects, train staff and generally manage the programs, and that this role be funded primarily from the Future Trust’s income – so that it didn’t drain operations.  The role would report to both the Future Trust board and SecondBite’s fundraising manager.

SVA Consulting also made a number of recommendations:

• Appoint a new chair and board members to ensure the Future Trust board had the relevant skills, experience and capacity; and
• SecondBite’s board members, ambassadors and key leaders should all have a bequest to the organisation in place in their will (no matter what size) to give authenticity to their requests of others.

Adopting the plan

Since SVA Consulting’s engagement, the board adopted and began implementing the plan. It has already developed communications around bequests including on its website and has been seeking someone for the role of Future Trust development manager.

What was really powerful was the research of the industry and other organisations.

“We’ve also got a new chair (of the Future Trust board) who has experience with foundations and bequests and recruited a couple of new board members which has refreshed the board,” said Carson.

From his point of view, the plan has given SecondBite a succinct, well-researched, and appropriate strategy.

“What was really powerful was the research of the industry and other organisations,” said Carson. “It’s also helped us to get clear about the relationship between fundraising for SecondBite and fundraising for the Future Trust.”

“Although we had the vision, we weren’t clear about how we were going to get there. A lot of us had different ideas and experience in this area, but the plan has given us a focus and got everyone on the same page.”

“It’s articulated our objectives and the process to achieve them,” said Carson. “It’s also helped us to think about a bigger vision going forward and opened us up to different possibilities and a more sophisticated way of positioning the Future Trust.”

How to ensure long-term sustainability?

It is clearly important to plan for the future sustainability of your organisation otherwise, as Maitre says, you’re always behind the eight ball.

You’re best to start early but do it well with the right strategy and resources.

However when you are embroiled with fundraising simply to keep the organisation going, there’s never a good time.

But, as Maitre stresses, there’s no point pushing it back for later. “You’re best to start early but do it well with the right strategy and resources,” says Maitre, acknowledging that it takes a lot of vision and leadership.

Setting up a trust for the future will work better for some organisations than others.

“It particularly suits organisations where there is a higher purpose and a well differentiated case for support which means your fundraising base will not be cannibalised. Then it can be really compelling,” says Maitre.

“It worked for SecondBite in part because the Future Trust board has the networks and relationships that enables them to approach people and make the ‘asks’.”

It can also potentially help an organisation to break out of the silo mentality when it is focused on short-term operational requirements. “It means looking outside of the organisation and taking bigger risks,” said Maitre.

Because of SecondBite’s rapid growth, Carson feels that running the organisation is like painting the Golden Gate Bridge. “You feel like you never catch up. But the goals and possibilities are endless.”

“I spend all my time on fundraising. Imagine if someone left a bequest of $30m in their will, then all of us could spend more time on outcomes — on actually overcoming food scarcity — rather than fundraising. That’s the idea of the Future Trust.”

Endnotes

[i] A trust is an obligation imposed on a person or other entity to hold property for the benefit of beneficiaries. It is a relationship rather than a legal entity.

[ii] Australian Centre for Philanthropy & Non-Profit Studies, Keep Giving Going: Charitable Bequest & Australians 2008

[iii] The must dos of bequest fundraising, Pareto Fundraising

[iv] About Legacy Leaders’ bequest program, Legacy Leaders