#TBT: Take This Money at Your Own Risk
Happy #TBT. To celebrate, we’re sharing an oldie-but-goodie post from Jim: The 4% Rule.
For nonprofits in the live entertainment business, I’d like to suggest that no donor make up more than 4% of your total budget. This is a percentage that a lot of wealth managers set as the maximum you should hold in any one stock, and while there’s nothing magical about this number, you’ve got to put a line in the sand somewhere, and here’s where I suggest it goes.
Because if no one accounts for more than 4% of the money coming in, no one gets to call the shots, except management. Getting 10 million dollars from the Ford Foundation might sound great (and in a way, it is), but if that represents too much of your income the organization slowly, but almost certainly, becomes “about” making the Ford Foundation happy with its investment.*
Might you get fewer dollars now? Yes, you might. But you’ll probably also get better at finding supporters in more places and finding a message that’s more robust. It’s always better to be able to produce singles and doubles than to have to hope for a grand slam.
*I’m not singling out the Ford Foundation at all. It’s just a name people know.
- Cost Doesn’t Have Anything to Do With Price
- A Nonprofit Doesn’t Have to Lose Money
- What Do You Mean, Price Gouging?