FORGE's Financial Crunch

Right now, FORGE is facing a budget shortfall that could potentially cripple our services to 60,000 refugees. To pull out of this shortfall, we must raise a minimum of $100,000 by the end of February 2009 to meet our overall budget of $400,000.

In the spirit of transparency, FORGE Founder and Executive Director, Kjerstin Erickson, has been blogging about FORGE's position and inviting the feedback and advice of the public.

Here’s the full story:

"We're in Trouble"

So, conventional wisdom says that a nonprofit should never put all of its cards on the table - that showing your weaknesses is akin to shooting yourself in the foot. In order to be strong, you must appear strong, or so the saying goes. If you reveal your vulnerabilities, people won't have faith in you and won't want to invest in you.

Well for FORGE, it's time to send conventional wisdom to hell. The truth is that though our programs have never been stronger, our bank accounts have never been lower. We're in trouble… and I can't sit back and act as if everything is okay. For the first time in 5 years, I'm kept up at night not by how to improve FORGE's impact but by how to avoid laying off 150 of the world's most vulnerable people and shutting our doors. It terrifies me.

Since this economy will be hard on a lot of us, I've decided to share my story of how FORGE is trying (if not yet succeeding) to fight through this. We've decided to throw discretion to the wind and bring our struggle to the public. If we're lucky, it will draw more people to the importance of the cause. If we're not, at least we'll go down swinging. Either way, we hope that what we learn can help whoever listens.

In the posts to come, I'll be talking about how we got to this unsavory place, what we'd do again, what we did wrong, what we're doing to fix it, and the pain of the actions we have to take to stay alive. I hope that this will help some people who are going through similar struggles, or help others to avoid them completely. Nobody said this job was going to be easy...

"How We Got Into This Crunch"

And the 4 main lessons we've learned along the way...

The first question that everyone has been asking is "why?" - why are we struggling to meet our baseline budget of $400,000, when there are trillions of dollars out there in the world. Sparing you the obvious answers, I'll use this post to elucidate the 4 main lessons about things we've done wrong and things that have worked against us:

1) We changed our impact model, and with it lost an income stream.

The Story:, As I've blogged about before, this past year FORGE changed its model from one that used college student volunteers, to one that puts the control of designing and implementing projects directly in the hands of the refugees themselves. We made this decision based on its potential to exponentially increase our impact, and the results have been better than we hoped for. Unfortunately, along with the positive change in outcomes, we lost a huge amount of guaranteed revenue every year. Our American volunteers were each required to raise a minimum of $5,000, and through them we would raise at least half of our funds every year.

The Lesson: We made the decision to change our model consciously, thinking that we had built the structure we needed to survive the transition toward increased impact. Unfortunately, I think we were judging ourselves by the wrong criteria: we thought that the thing that would allow us to bridge the gap was the four years of results that we had built. As it turns out, while results are very important, we should have been asking ourselves whether we had built enough relationships and connections with potential funders. We've learned that results and a track-record aren't enough, and that any organization that is considering taking the risk of a substantially-increased fundraising burden should ask themselves first and foremost if whether they have the relationships to jump the gap.

2) Hard to categorize

The Story: A big part of the problem that we encountered this past year was that we were much more confident with our ability to fundraise through grants than turned out to be realistic. The problem wasn't so much being turned down for grants as it was being able to find grants whose criteria and RFPs we fit. Of course, finding international grants is hard in the first place, but the major roadblock that we ran up against was that FORGE's mission and programming just didn't seem to fit any of the predetermined categories set by grantmakers. The problem is simple: because FORGE put the control designing the projects in the hands of the community itself, it's almost impossible to categorize exactly "what" we do. When RFPs out there are calling for health projects, or water projects, or post-primary education projects, we can say "we do that, when the community prioritizes it", but we can't simply say "we do THAT." It's made finding grants that we qualify for extremely difficult...

The Lesson: As collaborative and community-driven approaches to project planning and conflict recovery are still quite new and yet growing in regard and academic support, my hope is that over time the philanthropic community will catch on and funding will move toward a more open model. So my belief is that this problem will eventually become a strength. In the meantime, though, any organization which is similarly difficult to categorize should do a lot of investigation before making grants a large part of their funding strategy.

3) Driving traffic to our website

The Story: This year, we built what I (yes, with obvious bias) believe is one of the most real and informative sites on the internet: www.FORGEnow.org. The website was designed to introduce people from across the world to the sites, sounds, tragedies, and hopes of an African refugee camp, and allow them to give directly the projects that most speak to their passions. Through photos, videos, blogs, and monthly unedited progress reports direct from-the-ground, the site is built for international donor transparency beyond any site we know of. We are vastly proud of the way it has turned out, but have been disappointed in how little traffic we've been able to drive to the site. While we knew that we couldn't count on an "if you build it, they will come" mentality, I think we underestimated just how much it takes to get people to come! Therefore, we just haven't had the kind of site exposure we need to raise the funds we're looking for.

The Lesson: If you are going to depend on a web-based fundraising strategy, you better have the manpower to promote it! As it is, we have only 3 full-time staff in our US office, and we are responsible for a lot more than just fundraising. We probably need 4 full-time marketing people to meet our goal of fully funding all of our projects in the next 4 months. Building a website, no matter how over-the-top awesome, will not be enough.

4) It's the economy (no... I won't call you stupid)

The Story: We sent out our annual mailing to past donors at what turned out to be a historically bad time - right in the middle of the meltdown. On average, people have been giving about 25% of what they've given in the past! Yeah...that's really bad. Partly, it's bad timing on our part. Partly, you can't blame people for being scared right now.

The Lesson: If you can hold off on a general campaign, do it! If you can't, be prepared for a very concerning response. We haven't cracked how to respond to the economy right now, and unfortunately it's come at a time that we are least prepared to deal with it. Ideally, we'd have a few people ready to back us financially should things go really wrong macro-economically. It's too bad that the worst effects of the economic fallout are going to be felt by the people around the world who are the least prepared to deal with it...

The above areas encapsulate the big failures and problems we've run into, although there are surely a lot more things I could add. I hope that this proves helpful to some people out there. In the next section, I'm going to cover about what really concerns me: what we're doing to move out of this financial crunch and into long-term sustainability and impact growth.

"Tough Decisions in a Time of Crisis"

In short, FORGE’s 2008 operating budget is just over $400,000. To date, we’ve only raised $300,000 of that, primarily through individuals and one large event we held in Boston in August. Below is the breakdown of our income sources thus far in 2008:

So by simple math, you can tell that we have a good $100,000 to go by the end of the year. Problem is, we’ve run out of wind in our sails. When our (highly-personalized) direct mail to past donors was a flop, right in the middle of the economic meltdown, we realized that we were in big trouble and at risk of not making it through the end of the year. Earlier in the year, we’d been forced to spend the modest reserves we had on increasing salaries and stipends for our on-the-ground staff, who were suffering through the results of the global food crisis which had almost doubled the price of many commodities. Combined with the increase in fuel and plane tickets prices, these unanticipated items left little cushion in our budgetary requirements.

So what have we done? It’s been rough - we had to make the difficult decision to ask our Project Managers to make their existing project funds last through February, rather than through December as planned. This will give us more time to raise the capital necessary to continue beyond February, but is excruciatingly painful for the staff on-the-ground. Those who can least afford it are losing their jobs or seeing their income cut in half just as the seasonal rise in food prices is hitting its peak, and the 20,000+ people who rely on FORGE’s services each month will be forced to deal with severe cutbacks. Right now, we are the only provider of educational and skills training services in most of our camps. Can you imagine your community losing all of its educational and self-advancement opportunities at once? As a manager and as a human being, it’s very hard to stomach. We know how much good our work brings in both the short and the long-term. We know that our model works. We just need to communicate it better.

Right now, all eyes are on the three of us (Annelisa, Abby, and I) in our small office in Oakland – hundreds of people are putting their faith in us to be able to find enough people to believe and invest in FORGE’s mission and capacity. The pressure can sometimes feel overwhelming, especially as people are making the sacrifices now for hopes of the future. Through it all, I find myself taking solace in what I’ve always taken solace in with tough decisions: that the pain now is for the best in the long run. If all goes well, these few hard months will give us both the time and the gut-check that we need to come back stronger, savvier, and more hungry for change than ever.

'til then, Kjerstin

Want to learn more about FORGE’s mission and our approach?

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FORGE's Mission & Strategy

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