How To Scale Nonprofits with Kathleen Kelly Janus #245 #EEP Entrepreneurship Elevated Podcast

In today's episode, we're going to talk about taking your nonprofit business and actually getting it into a successful status and not taking a profit, but being successful. And you know who's going to teach us, Kelsey?

Yeah.

Who?

Kathleen Kelly Janet.

That's right. You nailed it. You're about to hear that and so much more on today's episode of Entrepreneurship Elevated. I love this song. Listen to that. Oh, dang it, I hit the button. I'm so into it.

Dang it, Mike. Dang it.

Dang you, Mike. I'm Mike Michalowicz. I am the author of Profit First and Clockwork and Surge and others. And listen, I am on a mission. I am jacked. You should have seen how jacked I was at today's presentation. I was just getting so fired up. One person was rolling their eyes. I'll tell you who it was in a minute. But I'm on a mission to eradicate entrepreneurial poverty. There is this misperception. J Bone, you started that business, the meat rubs and stuff, right? The dry rubs. I bet your friends are like, oh my God, you own a business now? You're a millionaire.

Yeah, there was one of my friends who's a teacher was telling his students about it. Yeah, like I was like making millions of dollars. Yes, but I was not making millions.

No, the perception is entrepreneurs make millions the day you start a business. The reality is struggle. It is freaking hard. That's what we fix on this show. No more entrepreneurial poverty. We're getting rid of that. And I'm joined in studio by Kelsey Ayers, which we discovered is 80— I'm sorry, 800 S's at the end of your name.

Yes.

But you and your family decided to abbreviate that for American ears and just put one S. Yeah. Interesting. Very interesting fact. Tell us about yourself.

Yeah.

I mean, like, tell us about this.

Well, you can find us on iTunes, Stitcher, TuneIn Radio, Spotify, iHeartRadio, or entrepreneurshipelevatedpodcast.com.

Yeah, the worst, longest domain we could find. It's literally the longest name I've ever heard. Surprisingly, it wasn't taken. No, I know. And we're doing a bribe. Here's the bribe. If you will do a review of our podcast on any of these podcatchers, wherever you listen to, TuneIn Radio would be great, iTunes would be fantastic, etc. Take a screenshot of it, email it to Kelsey, Uh, it's K-E-L-S-E-Y at MikeMikalewicz.com. Send us the screenshot and then also include the mailing address for you. You gotta be in the US and we will mail you a copy of the book of your choosing. So you gotta pick, do you want Profit First or Pumpkin Plan or, or Clockwork?

Clockwork.

Yeah.

Mm-hmm.

Um, so we were talking off air about this issue with asphalt. So we're, I mean, we're really playing into it a little bit too much. It's getting a little bit beaten down, but Jeremy said there's a solution.

That's like your forte.

He goes, that's your forte, Mike, is asphalt. He goes, there is a solution and we need a superhero, uh, that comes in, swoops in to fix businesses. Because we had a cartoonist on last week and we're like, oh, maybe we can have a cartoon superhero. So I'm thinking Profit Man or, you know, Money Man or something. And, uh, Jeremy's like, yeah, he's gotta have wads of cash on him. And my suggestion is he—

Or if, I mean, if his specialty is asphalt, he could be like the prophetologist.

No, no, no, no, no. Asphalts is the enemy.

I mean, that's his specialty, is to avoid it, right? So he defeats it.

He doesn't avoid it. He managed to be flying in. Oh my gosh, Lex Luthor! Avoid him!

Vocabulary is very important.

Let's run away, everyone! Run away! No, he confronts it. So Prophet Man confronts the asphalt.

I invite you to write a different kind of narrative for your comic hero.

Well, it's a horrible one. He's like, I'm here to save— uh-oh, no one. I'm out of here. Let's avoid this. I'm Avoidance Man. Horrible. So we're developing this superhero. What have you been up to, Kelsey? Segues.

Yeah.

Not much. We got our first snow a couple of weeks ago.

Yeah.

And I met my neighbor for the first time.

Oh, man or woman?

Man.

And give me his details. Is he safe?

So he is safe, and he was super nice because I was like out shoveling, and you've been to my house, it's kind of like a long driveway.

Yeah, it's long and it goes downhill and it keeps going down.

And it's gravel, so it's like hard.

You hand shovel that?

I started to, and then this wonderful fella who lives two doors down came by with his four-wheeler and plow.

No!

Yeah, and he was like, hey, you want me to do that for you? I was like, that would be amazing.

What kind of four-wheeler? Like an ATV type?

Yeah.

See, I know— I knew you can plow it with an ATV.

Yeah, of course.

So that's something I'm hoping to achieve one day. I've been saving— I've literally been saving for a— what's called a UTV, which is the two seats are next to each other, because our house is surrounded by 1,500 square acres, which I know when you hear New Jersey, you're like, are you sure? Yeah, New Jersey actually has woods and forests. It's actually shocking.

Yeah.

Well, I want to go back there with the ATV, because there's trails and all this different stuff. And I was like, oh, I wonder if I can use the plow in my driveway. You've been in my driveway. It's a long one too. And, uh, someone's like, no, they won't push enough snow. But he clearly did.

Oh yeah. Yeah, it was awesome.

What have you been up to, J. Boner?

Uh, I got a new motorcycle.

Really? Oh, is it electric?

It is electric.

That was your dream.

Yeah, they were too expensive. So instead I went for something half the price, but it's—

Have you seen this thing? It's probably badass, right?

No, it's not. It's, it's the 650, but it's just, uh, it's fast. It's pretty fast.

So you know what he does? He puts on his helmet, he puts on his chaps, grabs the— revs the engine, and he puts on his favorite song, Nasty Boys by Janet Jackson, and just goes racing around. You see him hauling down the highway 90 miles an hour. Like, that guy, he is badass. What's he listening to?

Well, and Nasty Boys, the chaps. They protect against asphalts.

Oh, totally.

On long rides. Yeah.

You know, I've worn chaps.

Talking about nasty weather, are you going to shave that mustache?

Oh yeah. So I've been growing this mustache. Can you see it? What are you saying? So I've been growing this mustache because it's Movember. But the thing was, I started— you can't see it? Get closer.

No, I can't see it.

Here, get a little closer.

Well, if you guys want to see, you should check it out on YouTube.

Oh yeah, I see a little bit.

There. Got too close. So it's Movember. So I'm like, I'm going to start growing facial hair. Now, I started this last Movember, just so you know. It's been a year and it's right here a little bit. That one hair, that's the mustache. You can't really see it. Yeah, it's horrible.

I can't see it.

It's because I'm blonde and I can't, I can't grow good facial hair.

This is horrible. Look at this.

Because you're blonde?

Yeah, because you can't see blonde hair.

I beg to differ.

What do you mean? What are you talking about?

The top of your head is not blonde.

Well, not there it's not, but the bald spot— no, it's not blonde. I think I have black. Is my hair black? Is it black?

No, it's not black, it's brown.

Yeah. My facial hair's blonde.

There is one PR picture that you have where it's like silver.

Yeah, there's a lot of gray coming in. There's a lot of gray coming in.

No, there's not a lot.

There's some on the sides. Yeah, there's a distinct—

Very dignified.

Do I feel it? Yeah. Yes. Yeah, until you hear me talking, you're like, this guy's an idiot.

Yes.

What listener mail do we have?

We have— So this comes from Sralief, another iTunes review. They write, while I only recently found this podcast from a suggestion from another podcast host, while there seemed to be a lot of podcasts covering similar content, this one sounds really crisp and the banter gives me the feeling of a morning radio show, which I love. Makes me keep coming back for more when a new episode pops up on my feed. Keep up the good work.

Thank you, Sralief.

Yeah, thank you.

Or Straw Leaf. Or maybe it's how it's spelled here. It looks like—

Senior A?

Senior A, yes. Senior A Leaf.

Sen-yore-ay?

Maybe that— What was your name again?

Sen-yore-ay Leaf!

You're like, "Oh, thanks for plowing my driveway." He's like, "No problem." You go, "What's your name?" He's like, "It's Senior A Leaf!" Well, I love him even more. Okay. So, let's get to the business at hand, Teri Kells. Mm-hmm. Uh, we have corporate partners that make this show a reality. It's, uh, Nextiva and Receipt Bank. We will share more details on them in a little bit. They are phenomenal corporations. We actually use both their— both their businesses, and we like to make a little bit of fun of them, but that's because we love them. And, uh, if you have a business that you want sponsored, we've never actually sought it out before, and we realized, oh, we should actually invite people. So if we want— if you want us promoting your business, send Kelsey an email, and, uh, maybe we can work something out for a few episodes or many episodes. We'd like to see the impact it has. Uh, anything else I need to do before we roll? Okay. Her name is Kathleen Kelly Janice, and she is a social entrepreneur, author, and lecturer at Stanford University on the West Coast there. Did Stanford get affected by the fires? I know Pepperdine closed down.

Oh, really?

Yeah, yeah, yeah. So sad. It was— oh, they don't even let me go.

Now they're having mudslides.

Yeah, it was so funny. So my wife's from California, and then these fires go tearing through, and she still has family out there. And then there was news that the rains were coming, and someone here said, oh my gosh, I'm so glad it's raining. And Chris is like, that's the worst thing you can have. Because we have this ignorance on the East Coast, like, oh, rain puts out fires. It also causes mudslides when you have no vegetation left, and that causes more devastation. So it's really horrific what they're experiencing out there. Um, well, that's on that high note. Yeah. Uh, Kathleen is an expert in philanthropy, millennial engagement, and scaling early-stage organizations. She's a co-founder of Spark. You know Spark, right? The largest network of millennial donors in the world. Based in the heart of Silicon Valley. That's San Jose, right? Silicon Valley? Is that right? Am I right? Yeah, it is. Her forthcoming book, Social Startup Success, features best practices for early-stage nonprofit organizations based on a 5-year research project interviewing hundreds of top-performing social entrepreneurs. Kathleen, welcome to our show.

Welcome, Kathleen.

Thank you so much for having me.

So, um, Silicon Valley is San Jose. Is that right? Is that the heart of it?

It's part of it.

It's part of it. Okay. So that, put it aside. Why are nonprofits struggling so? I know so many people, even my mother-in-law decades ago tried to start a nonprofit because she wanted to do good and the business was a financial disaster. Why do so many nonprofits struggle?

You are absolutely right that nonprofits are struggling. I think that as a as a society, we have developed this mentality around nonprofit starvation that nonprofits have to solve some of the hardest challenges that we are facing in today's world, whether it's climate change or increasing inequality on a shoestring budget. I really believe that we need to shift this mentality and to invest in nonprofits to solve these issues that we all care about so much so they don't have to, to, to suffer so much.

But why does the nonprofit have to solve the world's challenges? Can't for-profits do too?

Well, I think it's got to be both. But the reality is that there are problems that the market has created, market inefficiencies, that if it were profitable to solve these problems, companies would have done that a long time ago. If it were profitable to bring clean water to the millions of people in in this world who needed it, Coca-Cola would have done that a long time ago. So what nonprofits do and the role of philanthropy is to fill that gap, to support social problems that aren't necessarily profitable but that we all care about, whether it's human rights, democracy, justice, and it's a very important role that they play.

It's a critical role. Now I see that clearly. Thanks for the explanation. But they need money to do that work, bringing purified water. Climate change is, is a really massive problem that I don't see a profit opportunity there, but we all need it or our survival is done. So how, how do we get them the money? Is it just people that are do-gooders, or is there a more sustainable way than that?

Yes, this is something that I have been really passionate about over the past 5 years. I engaged in this massive research project to try and understand how is it that the best nonprofits succeed? What are they doing differently than other nonprofits? Because it turns out that 2/3 of nonprofits are struggling. They're at $500,000 and below in revenue and on this treadmill to raise money every month for payroll when they should be focusing on the impact of their work. And so I went out and I surveyed hundreds of organizations and I I interviewed 100 top-performing nonprofit leaders from Charity: Water to Teach for America, many organizations that you'd know. And one of the keys that I found to sustainability is the idea that the best nonprofits don't just draw their income from philanthropic dollars, that they also, when possible, bring in sources of earned income in order to sustain their efforts.

So I gotta learn how they do that. I remember I was traveling through— was I in Guatemala? Guatemala City? Does that sound right, Kelsey? I was. Okay. So I was in Guatemala and I met a company. Was it EnviroTec?

Yeah.

How do you remember this stuff?

It might not have been EnviroTec, but it was something like that.

Yeah. So there's a company, it's called EnviroTec. And to your point, Kathleen, they, they first went out to do good. It was actually the purification of water. But the owner of this nonprofit realized that's not sustainable. They couldn't raise enough funds to have the impact they wanted. They then turned it to a for-profit model. And what they did is they developed these clay pots where you can pour, let's say, dirty water, because I don't have a better term for it, but dirty water in it, and out comes purified water. And what he realized is these poor communities that needed it the most can't afford it, but he said he started charging them something. And found that right now how they were trying to purify water was by buying a cord of wood or whatever, a bundle of wood, and then boiling it. So he figured out what a bundle of wood costs and says that has to be the price. And he figured out how to make these clay pots for the price of wood. And that was the turning point that people started buying it. Secondly, he then found that there was another opportunity, and I wonder if this is where you're kind of leaning toward, that wealthier communities wanted to also buy this. They want purified water too, but they had greater means. So what he did was he had local artists start painting the clay pots on the outside to have this beautiful presentation. He was able to mark up the price 10 or 15 times more to wealthy communities and use that money to help fund his other work. Long story, but that opened my eyes to a way to— for his not-for-profits to sustain.

Mm-hmm. I love that story because it's also about this testing process. Yeah, you know, it's not like every single organization has to come up with their own revenue model. There's no one-size-fits-all funding model for nonprofit organizations or for for-profit businesses for that matter. And one of the things that I saw again and again is it's this testing process, just trying out different forms of revenue that helps you get to sustainability. An organization that I features Hot Bread Kitchen, a job training organization in Harlem, New York, which brings low-income women into the food industry. Jessamyn Rodriguez, the founder, said, "I'm going to make this business 100% sustainable on bread," which she realized later was a terrible idea because bread has razor-thin margins. You can't just make a bunch of bread and sell it over the course of the year. You've got to sell it in 3 days because it's perishable. She was able to make a a business out of selling the bread that the women made in the training program. She sold it to Whole Foods and JetBlue. She had a café where she sells it in Harlem and she developed an incubator program where she was able to charge fees to small business owners and allow them to use the space to generate income. So she had all these really creative ways of earning money, but she found that actually she was selling the program short by not accepting philanthropic dollars. So this gets back to your question of why is philanthropy necessary. Philanthropy was necessary necessary to make the program better when it might not be the profitable thing to do, but it was the right thing to do for the women. So for example, giving them childcare during the program so that they could actually participate and not worry about where their kids were going to be, making them stay in the program longer even though it might not be the profitable thing to do but was ultimately the right thing to do for them in the long run. So this is the challenge that every entrepreneur has to deal with and I think that too often nonprofits in particular get stuck in one way of fundraising and the best organizations really begin to think outside the box and that's what I'd love to see more nonprofits doing.

[Speaker:BRIAN] To wrap up that EnviroTech story, one thing I heard back from this guy after I built a relationship with him, we emailed back and forth and he had this fabulous finding and there is some organization, another nonprofit who measures the pollutants coming out of different different areas, industry and so forth. And they use satellite technology to do this. They've been monitoring this area where they're installing these pots. The pollutants have dropped tremendously because now people aren't burning wood every day. So they said, we actually want to acknowledge the impact you're having in reducing pollution. And he had no idea. That goes— it goes to your point, Kathleen, of, of the importance of measurements. Why are measure— why is measuring so important? Important, and then how do we go about it for our businesses?

Yeah, this is really a big finding from my research that the best organizations from my survey said that they began measuring their impact from day one. They said that this was important not just to prove that what they were doing was working but to improve their work as they grew their organization. You see this when I went out and talked with these entrepreneurs, it's like embedded embedded within the DNA of their organization. They want to know that what they're doing is actually working. I remember Tess Reynolds from an organization in San Francisco called New Door Ventures, which is an employment organization for youth. She said, "It's really hard to raise $1 million. I need to know that that money is actually being used as effectively as possible." So this is the rigor that people bring. I think the biggest challenge that organizations face is that people get into nonprofit work because they care about the causes. Data scientist, right? And so what you see is that while 75% of nonprofits say that they collect data, only 6% of them feel like they're making good use of their data.

Wow.

So nonprofits are really struggling in this area, and it's something where I think that nonprofits could do a lot better.

You know, another challenge I heard nonprofits have is, uh, sometimes people will give money to the organization, but they'll have a specific required use of those funds. And now you have this tracking responsibility, right? Like, you can only— you have to allocate this money only to this one purpose. And so you could be sitting on cash for a purpose, but the organization can't even sustain, right?

100%. I think this is the biggest challenge that the nonprofit industry faces. Going back to this issue we were talking about, the nonprofit starvation cycle, 80% of philanthropic giving in the United States is restricted. So So what does that mean? That's like going into a restaurant and saying, "I'll pay for the food, but I'm not going to pay for the time of the chef to prepare it or the server's time to bring it to me or the lights that are on while I'm eating it." We would never do that, and yet somehow we feel entitled in the nonprofit sector to pick and choose what we pay for. We say we'll pay for the program that teaches the kid how to read, but we're not going to pay for the teacher's time in the classroom. Whether to figure out whether that lesson was successful, which is exactly what nonprofits need to be doing in order to be successful. So I think as donors, we need to begin to invest not just in the causes that we care about, but in the incredible leaders who run these organizations, because we have to take into account the entire cost of doing business. I mean, imagine on the business side if you said that you would pay for, you know, as an investor, I'll pay for the product, but I'm not going to pay for the CEO's salary.

Right. Or any of those employees, the line workers. Sorry. Yeah, it sounds absurd. But also, do the nonprofits have a responsibility here to educate the donors?

Yes, absolutely. It's got to be both. I mean, nonprofits have to educate donors, but somehow this myth has become this overhead myth of this idea that nonprofits should have as low overhead costs as possible has become super pervasive, and it's, it's really hard for, you know, nonprofits to, to educate donors. So I think we all have to, to do our best in evangelizing this, this message.

Well, the shame is, I think, when, when the news breaks about a corrupt nonprofit, which is an absolute rarity, but it happens, it's, oh, 99% of funding was going toward this administrator, administrative work, and the CEO. And so then we presume wrongly from the outside that, oh, that's how nonprofits operate. So I have to take the other extreme and say this money can only go, um, and shame on me because I've done that. Like I've been a benefactor of, of a thing that I now donate to regularly, but I restrict the funds to only give to what I benefited from because I know that drives a true benefit. But I never thought about the impact I'm having on the organization by not including that. Well, were you gonna say something?

No, no, go ahead.

I want to know about stories because, you know, this— the communication's critical. And you were arguing off-air that you, you have to have a great story for all elements of your nonprofit to be successful.

Absolutely. Storytelling is so critical to any entrepreneur. You cannot sell a mission, a vision, without a great story. And I think that oftentimes people underestimate this. They hear a great TED Talk or we hear a great political speech and we think, wow, that person is just a natural. But that's not how it works at all. When I went out and talked with these social entrepreneurs, they were making storytelling a priority. I talked to one social entrepreneur, Nadine Burke Harris from the Center for Youth Wellness, who talked about storytelling as her Olympic sport. She knew when she had to go out and make this TED Talk on adverse childhood experiences and how they result in toxic stress outcomes for children, that this was her opportunity to build a movement in the United States around toxic stress and to try and get pediatricians all over the country to be screening children for toxic stress. And so she literally practiced that TED Talk for 6 months and said by the end of it, her husband could have given the TED Talk for her. She had practiced it so many times. So that's the level of commitment to storytelling that we're talking about. And if anyone wants to be successful in pitching donors and pitching media and getting people's attention for partnerships or for other advocacy opportunities, they've got to be able to master that story. And it's not just the person at the top, it's got to be at every level of the organization because the best organizations realize that anyone in their organization can be a brand ambassador for their cause.

But say we're the brand new startup. I bet you someone listening right now has always had a vision for a nonprofit. I want to do this. How do you even get started? How do you get that first donor in the door?

You know, you got to play to your strengths, and for everyone that's going to be different. And this is, this is a question that comes up a lot. One of the questions I get most frequently is, should I be a nonprofit or should I be a for-profit? And so often it depends It depends on where are your connections, where are you going to be able to get the best forms of capital. Is it going to be from individual donors and foundations or is it going to be from investors? So starting with your own personal contacts and maybe you don't have contacts to donors or investors, but that's where you can get your circle of champions around you. Get your individual board of directors and get those people to help make connections for you because you can't get funded without tapping into your network.

Do donors mean wealthy people alone or not at all?

It can be, but actually the most significant funding comes from smaller donors. The average household in the United States gives somewhere around $2,000 in donations a year, and actually proportionately people who earn less give a bigger percentage of their money than wealthy people.

That's actually interesting.

And this is something that we learned at Spark. I mean, one of the reasons why I co-founded Spark, this organization of millennial donors, is because when I was starting my job and my career in my early 20s, I would pull together $250, which felt like a ton of money to me at the time. And I would feel like I would donate it and it was just a drop in the bucket for these bigger organizations like the Red Cross or even the Boys and Girls Club or something. We started Spark to bring donations together and show young people that yeah, maybe $250 is a drop in the bucket, but if we all put in $250, we can actually raise thousands of dollars and that is meaningful to organizations. This is what Obama did during the 2008 campaign. He was able to show that you can raise millions of dollars off of $5 donations. Actually, that's going to be a much more effective way to generate excitement about your cause because then all of those $5 donations, then donors feel invested in the cause. So this gets back to the testing process for fundraising and figuring out what's going to be the best form of revenue for your organization. If you're tapped into a lot of people who can give a little, well then maybe that's going to be your best way to raise money.

Wikipedia is a nonprofit. Did you know that?

No.

Yeah. So they, uh, on their website it says, uh, once a year they do this, they do their annual raise. They say, many people don't know this, we're not a for-profit organization. We're asking for $3 donations, and if every person reading this gives $3, we can sustain for yet another year. And I, I actively give to Wikipedia because I use it so frequently, and the ask is so small. Like, if they say, could you please donate $2,000? I'm like, oh my gosh. But $3.. And then what I do, I gave $25 or $50.

I was wondering what that charge was.

Thank you. Seriously? That was a donation to Wikipedia. How much was it? Was it $25 or $50?

Yeah, I think it was $25.

$25. Yeah, and NPR does this so effectively and so many nonprofit organizations. So starting small can be a great way to raise money.

Yeah, and they're great names. Wikipedia has a big impact on people. NPR is an amazing, amazing outlet. Benefit to learn from and to be entertained with. Absolutely. So, okay, what about if things aren't working for a nonprofit? They've been trying for the longest time to get this thing off the ground. It's just failing. Is there a way that— some common steps to turn this around, get it back in order, or is there a certain point where, like, you know what, it's time to call it quits?

Well, this is where measuring impact is so important because you have to know whether you're you're having an impact. If you're not, you need to either course correct or close your doors. I think that that is a problem in the nonprofit sector. There's 1.5 million nonprofits in the United States. Many of them should probably close their doors. There's no— unlike businesses where there's a clear market incentive, either you have customers and you stay open or you don't and you close. In the nonprofit sector, there's this weird dynamic where you can have donors funding programs who— they're not actually the beneficiaries of those programs, so they don't have the direct connection to know whether those programs are actually impactful. So the onus is on the nonprofit to see whether their programs are having an impact, and if not, to change them or to close their doors. The only way that you know that is by collecting data.

So I got a big question, and maybe I, I don't know how to answer this myself from any perspective. I don't know if you'll be able to, but impact— that you use that word impact. How do I— if I want to start a nonprofit or any kind of business, how do I know the impact that I want to have, that, that, you know, one was called to do, or purpose? How do you find that?

Do you know? Well, you have to be clear about your vision and I think the challenge that most nonprofits face is they're really good about talking about their programs. They know what they're doing. They're really good about talking about their vision on the other end of the spectrum, what the world that they want to see. Not so good about connecting the dots between the two to try and see, well, what are the outcomes that we need to see from our programs in order to determine whether we are on track to achieving our vision? And I'll give you an example. There's an organization in San Francisco called One Degree is a Yelp-like platform for social services. It's helping connect poor people online with social services. And so when they first started, they put their technology up, they created their website, and they were super excited. Within the first year, they had 40,000 visitors. And they realized very quickly that these were vanity metrics, that that was telling them nothing about whether those people coming to their website were actually getting social services as a result. Of coming to the website, whether those social services were actually having an impact on their lives and helping their long-term life outcomes. And so they had to start getting more rigorous about their tracking to not just look at the outputs or the number of people who were coming to their website, but the, the ultimate outcomes. What were those programs actually doing for their lives? And this is something that I think most nonprofits don't do well and can do a lot better.

With all that research you did with nonprofits, what do you feel the future is? I don't know, the next 10 years from now, where are nonprofits heading as an industry?

I believe that we are living in a golden age of philanthropy. There are more ways to give back than ever before, and we see this with the next generation. I get so inspired by my students at Stanford, they no longer see lines between for-profit and nonprofit. They believe that all business should be in pursuit of the greater good. 55% of millennials are saying that they choose their job based on a company's commitment to a social cause. So if companies want to be competitive in hiring and retention, They've got to get involved in social cause work in order to make that happen. So this presents a real opportunity for the nonprofit sector to get more people involved, but they have to be prepared to harness that energy and that excitement and that enthusiasm to turn it into impact as opposed to letting it just die on the vine.

You heard it first. We're entering the golden age. Her name is Kathleen Kelly Janis. Her book is Social Startup Success: How the Best Nonprofits Launch, Scale Up, and Make a Difference. Kathleen, before we let you go, where can people get your book and learn more about you?

You can find my book, Social Startup Success, at any of your favorite booksellers, and my website, kathleenjanis.com, has a ton of extra resources and information. Awesome. Encourage you to visit.

Awesome. Thank you for joining us.

Thanks.

Thanks for having me. So Kelsey, my favorite bookseller is my mom. So I don't know if the book's carried there at my mom's house because my mom, she promotes all my books. Like my mom, literally when I launched my first book, put signs in her car like you thought the car was for sale. So people like walk up to the car because it said for sale. Like, oh my god, it's only $20, this car. And it said my son's book. Oh, literally. It was the most embarrassing. It was sweet, but it was embarrassing. And she actually sold 2 books that way. Because we were trying to buy the car. They came up like, oh, what's this car for? She's like, no, it's my son's book. Here. And then she forced it upon them. 2 books sold. Thanks, Mom.

That's a sweet mom.

All right, cows, before we discuss what we learned, before we go into our listener mail, before anything, we're going to talk about corporate partners. Oh, nice. Nice. You almost threw your neck out that way. Oh, I found a new pillow. MyPillow, and I don't like it. Oh yeah, so I'm not going to say the brand called MyPillow. Um, so I found my— you ever hear of MyPillow? He says, yeah, I just heard they're having a big sale, so I, I'm returning mine. Listen, I'm not saying it's a bad pillow, it's bad for me. Yeah, first night, pillows are hard. My neck is— it's, it's, it's not working for me. So I found— I went on Consumer Reports and, uh, you can search out for best pillows. I'm like, listen, this is what Consumer Reports said, listen Listen, Mike, um, everyone has a different pillow that they like. Like, some people will love the MyPillow system— system? It's a pillow. Like, you don't throw the word system in there, but they do. Uh, some other people like the gel pillows. I've had a gel pillow. I've had memory foam. They say some people like— and so I'm trying now a combo, gel in the center, memory foam on the outside.

I got— I got your pillow. What is it?

Casper. I'm writing this down right now.

I've had had it for like 6 months. It is the best pillow I've ever used.

I need these.

It's a pillow in a pillow. Ah, it's, it's like, it's like a double pillow.

See, that's like putting ice cream in ice cream. Like, that's genius. Yeah, you can get it at Target. Really?

Yeah, it's expensive, but it's— they offer like $199.

Well, dude, with the money you're making here, you're like, oh, Casper, please, please. Yeah, I'll take 2. But sir, it's only for you. No, I'll take 2. Kels, uh, what— but tell us about our corporate partners besides our pillow sponsor today was MyPillow. That was— they, by the way, they're a sponsor, so if you decide to come and Sponsor will slam you. Yeah, they're not a sponsor. Casper is. We just totally set up for Casper. What, um, what we got for—

well, first we have Nextiva.

Oh my gosh, have you— do we have a Nextiva at your house yet?

Yes.

Oh, we do?

Seriously?

Yes.

Oh, you called me on literally every time.

You know, it's called— it's called feigning surprise. Do you understand anything about the performing arts, Kelsey?

Yeah, but it's like, I am performing. Here's it every time.

I am an artist. I'm a thespian.

And sing.

I'm gonna call you. You're really great at it.

I'm gonna call you at least once a week on that phone just so you remember.

So every other time that you forget details like that, you're just acting, right?

It's all acting. Every time I mess up a word, every time. Gosh, you guys don't know anything. I'm an actor. I went to school for this. Boone High School. I took an acting class. How do you like your phone? Do you ever do much? You don't have to use it that often, do you?

How do you like that True Voice system?

Yeah, the True Voice system. It's— yes, they call it a system.

Do you hear that? Their new function, it's called multi-ring. Do you hear about this?

No, please tell us.

Tell us. Nextiva innovated TrueVoice. It makes your voice sound like your natural, real voice. They are also the innovator of multi-ring, meaning you can set different types of ringtones. You can get a ring or a ring. Either setting is available. They have two options. Ring or ring.

Tell us more about this technology.

Yeah, it's called multi-ring.

They also have this super innovative technology where you can You can make it louder or quieter. No.

Yeah.

They're the innovators of that?

Yes. I heard about that.

I thought that was amazing.

Supposedly they're adding buttons to their phones too.

I thought they innovated when you pick up the phone, it answers to the other person. I thought that was their main concept.

I think that was them.

Yeah. I used to do a prank when I was a kid. You do the dial and you call, but you used to prank people on the phone. The prank I did was I call someone and I pick up the phone and they say hello. I say hello. And they're like, hello? I'm like, hello? They're like, who's this? I'm like, what do you mean, who's this? They're like, what are you saying? I'm like, you called me. They're like, no, you rang me. I'm like, no, my phone just rang. And they're like, what?

Remember that time I was trying to find a dog poop picker-upper? Yeah, yeah.

And I couldn't find— Just the backstory, my sister-in-law got in an accident. They have many dogs at their house and there was no one to clean it up. So we offered to clean it up and when I say offered, I called Kelsey and said, hey, can you find someone to clean this up?

So what happened? So they live in an area where there's not a lot of services offered. Um, so I finally found like a Yellow Pages listing, right? And so the first person I called, I left a voicemail and they didn't call me back. And then so I found the second person. Um, and shoot, now I forget what the name of their business was, but it was like something like—

but goofy, right? Yeah.

911. Yeah. Yeah. And so I called, and the guy was just like, hello? I was like, hi, is this, um, are you the, the dog poop picker-upper? And he's like, I'm sorry? And I'm like, is this like Shits to Go or like whatever the name was? And he was like, uh, no. And I was like, I swear I'm not freaking you out.

So you said you tried to un-prank him? Like, this is not a prank.

Even as I was saying, I was like, I was like, this is awful. That really sounds like I'm pranking him.

You got pranked. I bet you the person that put that list—

yeah, exactly. It's like that dude's like, made all the things at hand.

My best friend is Chris. We should do that to him. We should give his cell number in an ad, like Poops to Go. Yeah, that's awesome. All right, so that's our corporate partners, uh, Nextiva. And then we also have Receipt Bank. Receipt Bank is a, uh, it's a scanner for receipts. Yeah, and it scans in, ties into QuickBooks and all these different things. Um, they have innovative functions too. We don't have the time to go into it. Maybe we'll do that next week. Yeah, I want to know what you learned today, Kelsey, and I want to know So what did you learn today? I want to know what your favorite takeaways were.

I feel like there are so many little nuggets. I don't really know what to focus on, but one thing that I really love was that storytelling is critical to any entrepreneur, but I think it's particularly critical to nonprofits because they need to be able to sell their mission, and I think the most effective way is to do that through storytelling. And I also love her example of the woman who said that it was her Olympic sport and that she's practiced it for 6 months. Like, to me, that's just such a great indication of how passionate that she is for her mission. I just love that. I also thought it was super interesting— where was my point? Oh, I like that she said nonprofits, they start because they want to obviously solve a problem, but they're not necessarily data scientists. So they might collect the data, but they have no idea what to do with it. And so I think that there is a need to fill, or an opportunity to make sure that that service is something that they can utilize more effectively, right?

I like that. I think Kathleen's book will help answer it too if you pick it up. I think the one thing that was shocking, two-thirds of not-for-profits are struggling not— they're just trying to cover payroll, right? So these not-for-profits exist to have an impact, but they can't even exist, and therefore they're having no impact.

Two-thirds. Yeah.

Like, here's the thing: when we say 83% of small businesses are surviving check by check, they're still delivering their services, right? Right. So they're still providing what they promised, but they're struggling just to stay afloat. These not-for-profits can't even deliver what they're promising. Yeah.

And I feel like there— it speaks to the business model of nonprofits, right? Because there's not necessarily a product that they're selling. They're selling a mission. And so there's not this clean money cash flow. And then you do have this restricted funding coming in that's really hard. A, it's like super time-consuming to apply for or set up the vessel to acquire them, right? It's like all this work that you're putting in without a guaranteed return on investment. How do you cover that in an effective way? You know, it's like I just feel like there has to be a better way, a better model.

Yeah. But also, here's the other flip side, the positive side. It's like we're in the golden age, and she really has me enthusiastic about this, that the millennial generation is demanding it in their own employment. Like, I'm not going to work for you unless you're having impact. So I think that's cool. And what I really liked was this rise of the small donor, the $3 or $5 donor. And what the takeaway for me was, when people donate, even if it's $5, they feel invested in the outcome. And that's what you want. You want people who are invested in it, promote it to others. They become your marketing engine. And they may come back and up-level to $25 or whatever it is. Those were big takeaways, that there's an opportunity in seeking the small donor. It doesn't have to be these home run hits with, you know, rich gal, rich guy type thing. Yeah. We want to know what you learned also, my friends, and how you can post it is just in our reviews, right? Go in our reviews and say, "This one episode blew my mind." Yeah. I mean, I learned so much about nonprofits. I learned also that Nextiva has this wonderful multi-ring function of two different ringtones. You know, we want to know that, and we'll even take it a step further. We'll bribe review. If you go to a podcatcher, post your review, and then email it to kelsey@mikemikalowicz.com, screenshots, got to be a screenshot of what you did, complete it, we will send you a book. And you got to give us the mailing address and we'll mail you a book.

Okay. Oh, we have listener mail.

Oh, listener mail. You've got mail. Hair and baldness. I'm sorry. I don't know why I had to do the double breath.

So this one comes from Lori Hall. She writes, Lori, I'm starting a new business with 2 business partners. How does Profit First work when other people will be contributing to the business? I haven't shared this book with them yet, but I will. I'm not sure if it will be easy or hard to convince them. What's your suggestion?

Run away, Lori! No partners! No, you have to get them to buy into it. So if you have like 2 or 3 partners in the same business, one person wants to do Profit First and the others don't, sorry, you're going to struggle. So first, have them read the book, yes. Get into it. The technical execution is the owner's compensation account gets distributed based upon what you see as your salary. So say the three of us, J Bone, uh, Sparkle, and I— that's your nickname, a lot of people don't know that— Sparkle, Sparkle, J Boner, and me, we go into business together. And what? Sparkle and J Boner, it's both of our super names. Dude, I don't make this stuff up. It's just your name. I'm sorry, talk to your parents. So, um, and say we go in like J Boner owns 40%, you own 30%, and I own— damn it, yeah, you got— yeah, exactly. And I own 20— I own 30%, so it's 40. That's right, that adds up. Yeah, so J Boner owns the majority of the company. When it comes to profit distribution, say $1,000 coming out, J Boner get $400, you get $300— sorry, I get $300. But we may argue salaries. You may be running the company company, Sparkle, Kelsey, that means we may say, Kelsey's the one who's driving the hardest, she gets a $50,000 a year salary, J. Boner, you're, you're getting $25,000, and Mike, you're never there, you're getting zero. So the owner's comp account is to support your compensation for the work you contribute, and that's negotiated. So you can get the most money, Kelsey, because you're doing the most work, and if we all agree to it, and that's the setting for salary. Salaries. The profit is a profit distribution based upon the equity, 40, 30, 30. So that's how you do it. That's how you do an execution, but you have to get everyone to buy into the system.

Didn't you talk about a, uh, a vesting schedule before, too, or was that—

Oh, wow, dude, you go back old school, so, uh, nice work, J Bone. So if, um— It's Boner. I'm sorry, I apologize, messed up your name. That's like saying Jerma. It's Jeremy. Uh, J Bone owner. So one thing that we could do is say you and I start a business together, we can agree that instead of going 50/50, which most business partners say, oh, let's go 50/50, we're both in this, and then like 3 years later, it's like, I hate you, you don't do anything for the business, I do everything, which inevitably happens. Instead, go into a partnership saying, we're gonna start off with 10%, 10%. So we both own 10% of the company, 80% stays with the business. Based upon performance metrics, how the number of hours we work, the sales we bring in, that has happiness of customers. We pick the parameters. We will then vest in that remaining 80%. So J. Boner brings the A-game, and he's cranking away and works ridiculous hours, has pushed the business forward. He may own 60% more from the 80%. Now he has 70, and I may only get 20%. So I get 30. And that's a way to much more equitably share in the equity of a business. Interesting. Pretty fantastic. Okay. Did we answer all the questions? Did we do everything? Yeah. All right, let's get out of here. I don't have the new music to get out of here, so we're gonna listen to—

Oh, but if you have any questions, just email askmike@mikemichalowicz.com.

Thank you for throwing it in. That's right. We want your questions, so askmike@mikemichalowicz.com, and we may even get you on a video. We started doing a coaching series via video too. Yeah. And we give you exposure, and I help coach you personally. It's totally free. It's great, you know. Yeah. But if you send gifts, I got some great gifts. I got a Virginia Tech— someone sent me a Virginia Tech pen. Yeah. And chocolates. And what was the other gift we got?

I think I saw a pillow out there.

Was that my pillow? Like, someone sent me a pillow? That was funny. I actually fell for it. I thought we got something else recently. I can't remember. Did I tell you John Ruhlin of Giftology sent me—

Yeah, that was nice.

Yeah. So everyone listening to the show, John Ruhlin, The author of Giftology lives the— lives what he preaches. His book is phenomenal, and I said that before I even knew who he was or he sent this gift. But he writes this book about gifting and the method of how to do it, and he heard about me and said, hey Mike, I heard you talking about the book, I want to send you a gift. Sent me Cutco knives. Unbelievable. Unbelievable. Cutcos, dude, you know how good those are? Yeah, they're really sharp. Yeah.

Exactly.

Yeah.

Oh, and if you want to see Mike's mustache, just go to youtube.com and subscribe to our channel.

Oh yeah. Look at this. You can see right now. I'm pointing to it. You gotta look a little closer.

Yeah.

There it is. Right there. It's greasy. Yeah. You want to see what I look like. All right. Uh, we're good, Kelsey? We're good. Okay guys, we appreciate you. Thanks for listening to Entrepreneurship Elevated and we'll see you next week.

Thanks everybody.

In the meantime, bring your A-game. Nice little laughter there.