By Jim McCarthy Sep 27, 2010 2 comments

The 4% Rule

For non-profits in the live entertainment business, I’d like to suggest that no donor make up more than 4% of your total budget.  This is a percentage that a lot of wealth managers set as the maximum you should hold in any one stock, and while there’s nothing magical about this number, you’ve got to put a line in the sand somewhere, and here’s where I suggest it goes.

Because if no one accounts for more than 4% of the money coming in, no one gets to call the shots, except management.  Getting ten million dollars from the Ford Foundation might sound great (and in a way, it is), but if that represents too much of your income, the organization slowly, but almost certainly becomes “about” making the Ford Foundation happy with its investment.*

Might you get fewer dollars now?  Yes, you might.  But you’ll probably also get better at finding supporters in more places and finding a message that’s more robust.  It’s always better to be able to produce singles and doubles than to have to hope for a Grand Slam.

*I’m not singling out the Ford Foundation at all.  It’s just a name people know.

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