Imagine two pro-life Pregnancy Help Centers.
Each receives a total investment of $100,000 from pro-life benefactors.
PHC #1 uses its $100,000 and saves 10 lives from abortion.
PHC #2 uses its $100,000 and saves 20 lives from abortion.
Which PHC would you invest in?
I hope you said PHC #2, because their business is twice as effective as PHC #1 at getting the result that matters most to the pro-life investor – lives saved from abortion.
You may be thinking, “Brett, that’s so obvious. Why are you wasting my time on this?”
Good question.
What Result Are You Investing In?
So let me reveal a little more detailed information about PHC #1 and #2.
If you look into more detail about how PHC #1 uses the investment capital it received, you see this:
50% invested in Program (“Program” in the non-profit world is the “Product” or “Service”)
50% invested in Marketing/Overhead
And for PHC #2, you see this:
25% invested in Program
75% invested in Marketing/Overhead
So, of the total philanthropic capital it received from pro-life benefactors, PHC #1 invested much more of the money into its “product” than did PHC #2.
What is your initial emotional reaction to that?
A very common reaction to those who give money to non-profits is to think that PHC #1 is a better investment than PHC #2.
Why?
Because PHC #1 invested more of the money it received into its “product” (aka “Program”) than did PHC #2.
Do you see the problem here?
The problem is that many non-profit investors have a built-in assumption that an organization’s investment of funds into “Program” equates to results.
Of course, this assumption is not necessarily accurate, any more so than the assumption that a for-profit company that invests more into its product than its competitor will therefore earn higher profits than that competitor.
How Precious Funds Get Misallocated
Interestingly, the financial document available to the public that non-profit organizations must file with the IRS every year – form 990 – requires an organization to submit details about how it used the money it received from benefactors (% breakdown between Program, Fundraising, Administration), but does not require an organization to report on results achieved with that money.
Making an investment decision based solely on PHC #1 and PHC #2’s form 990s would lead many pro-life investors to give their money to PHC #1, and not to PHC #2.
In other words, investors would be putting their money into the PHC that is earning a return on investment of 1 life saved from abortion per $10,000 ($100,000 / 10 lives saved), instead of putting their money into the PHC that is earning a return on investment of 1 life saved from abortion per $5,000 investment ($100,000 / 20 lives saved).
PHC #2 is earning double the ROI of PHC #1, yet investors believe they are making a “better” investment decision by putting their money into PHC #1.
This “misallocation” of philanthropic investment capital is widespread in the non-profit universe, and that includes the Pro-Life Business Industry.
Tomorrow, we will return briefly to look at ThriVe Express Women’s Centers again, and see how their ROI shapes up for pro-life investors.
Regards,
Brett
