Why Your Net Grant Matters - Exponent Philanthropy
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Why Your Net Grant Matters

Photo by Karolina Grabowska

What is a net grant and why does it matter? Well, time is money and grantees incur costs while applying for grants. For instance, think about how long it could take a nonprofit to customize their financial documents to your specifications, and language to your unique questions and formatting.

According to Project Streamline, nonprofits can spend hours completing an application for one funder. Given that, since nonprofits typically apply to dozens (and even hundreds) of grants, the hours can quickly add up to a major expense. As an illustration, when you make a $10K grant, the value to your grantee may be $9K. For a $20K grant, the value could come out to $17K. Obviously, this diverts resources from a nonprofit’s ability to meet their mission and build capacity. 

For small community-based nonprofits with limited staff, these costs can be overwhelming. Moreover, since smaller, grassroots organizations tend to serve communities of color, they are usually affected disproportionately.

Calculating Your Net Grant

Project Streamline developed a simple way to calculate the proposal-writing costs incurred by nonprofitsthe net grant.

The net grant is the total amount of your grant minus the cost of time and labor the nonprofit spends to apply.

To calculate your net grant, you need to know how much time an organization spend completing your application. Ask a sample of your grantees in phone conversations or email surveys. Some foundations ask a consultant to gather the information or choose anonymous surveys, such as our Grantee and Applicant Perception Survey. Undoubtedly, this tends to generate the most accurate data.

Once you have the data, share it with all your board and staff. The results can be surprising and open doors to conversations and solutions.

Eliminate Pain Points on Your Application

Common pain points on funder applications include:

  • Character limits that require applicants to edit language they created for other funders
  • Special formats for financial information that require reformatting existing financials
  • Unique evaluation measures that force nonprofits to reconfigure data

At this point, ask grantees which of your requirements take the most time. Do you really need that information to make a decision? What’s its value versus the cost it imposes? For smaller grants, you might consider a one-page application, or even a phone call. After all, beyond verifying current tax status, the IRS requires no process or documentation for grants to public charities.

On the other hand, if certain data is important to you, consider adding several thousand dollars to your grant to cover the cost of gathering it.

Build Your Knowledge and Expertise

By and large, the most impactful funders scan the landscape of their community or chosen field. In particular, many go on listening tours to talk with nonprofits, government agencies, business leaders, and area residents. Having a strong knowledge base can help you know what to look for in grantee partners, thus reducing the need for documentation down the road.

Earn Trust

Spending time meeting grantees and potential nonprofit partners, and demonstrating that you want to learn from them can break down barriers and reduce the power dynamic inherent in philanthropy. The resulting trust and familiarity may reduce the need for many requirements and paperwork, lowering transaction costs.

Create a Board Culture

To make funding go further, foundations must be more aware of the costs nonprofits incur, and take steps to reduce them. Tell your board that your processes create costs, and apply the concept of the net grant in all grantmaking conversations.  You might designate one trustee to play the role of internal catalyst to help the foundation pay attention to grantee relationships and grantee needs. Rotate this role every 12 to 18 months. You might also consider compensating grantees for application costs by adding to a grant award acknowledging their time and effort.

The simplicity of the net grant embeds a greater degree of self-awareness and intention throughout your foundation’s work. The first step is knowing what your process costs.


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About the Author

Andy Carroll advises staff, trustees, and donors of leanly staffed foundations in leadership, advocacy, and catalytic philanthropy. He works to empower more small foundations to leverage their unique position and assets to catalyze change on important issues. Andy has an MBA from the University of Michigan Business School and 30 years of experience in management, training, and program development for nonprofit organizations. Follow Andy on Twitter.


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Comments

  1. Allen Smart

    This article has a really powerful underlying question. What do funders do with the information they collect? What about on an annual basis- take 10 proposals- and have the utility of each section/question given a grade/score by program staff, grants management, senior leadership, fiscal and Board Committee members(if applicable). Dump at least one question a year and dont replace it unless there is a real need! If you have little in the way of staff, call upon some of your funder friends for the same exercise. When you get rid of a question or replace with a different question, publicize why!

    • Andy Carroll

      Allen,
      This is a terrific idea for nurturing a continual process of self-awareness and self-assessment at one’s foundation. Thank you for sharing it with our community.

      Andy Carroll

  2. Mr. Patrick DeMoon

    Andy, thanks to our membership in Exponent Philanthropy
    We at The Kara Foundation learned early on the importance of helping our grantees to eliminate unnecessary labor and paperwork when requesting grants from us.
    Aside from their proof of nonprofit status we always suggest that they use their own words in three pages or less to tell us what they NEED, not just want and how we can help them achieve their goal. Over the years there have been only a few instances that we asked for more in-depth information.
    On feedback from our grantees we learned that they do appreciate the fact that we are aware of the dollars and time that is saved with this process.
    Thanks for bringing it to the forefront again.
    Pat
    Patrick S.DeMoon
    President
    The Kara Foundation

    • Andy Carroll

      Pat,
      It is wonderful to hear from you, a longtime leader in our field, teacher, and friend of Exponent Philanthropy. I am not surprised that you approach your requests of grant applicants with sensitivity and intention. Thank you for modeling and championing this mindset.

      Best,

      Andy Carroll

  3. Dan Ringer-Barwick

    This is a nicely straightforward explanation of the net-grant concept. One additional perspective: thinking of net grants in this way doesn’t acknowledge that applicants receive grants from only some of the funders they apply to. If we say 1 in 3, then that gross $10K decrease to net $9K can look more like net $7K. That’s why incremental decreases in admin burden are so important.

    • Andy Carroll

      Dan,
      I couldn’t agree more. Thank you for extending the thinking and pointing out the multiple, unfolding costs faced by nonprofits, as they complete foundations’ application requirements.

      Andy Carroll

  4. Ron Wegsman

    Many nonprofits couldn’t tell you how much time they spend preparing a specific grant proposal. As a grantseeker I often find myself rushing from one proposal/phone call/meeting to another. I don’t have time to record how much time I spend on each.

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