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 nonprofits—the 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.
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 him on Twitter @andycarrollexpo, and check out his Catalytic Philanthropy Podcast.