Optimism

Today was a good day.  Early this afternoon I hopped on my bike for the 8 mile ride from our office in downtown Providence to the Elizabeth Buffum Chace Center in Warwick.  It was one of those rides where you want to just open your arms and embrace the soft breeze; where you can't help but smile and feel optimistic about the world and good about life.

I was at the Chace Center, an agency that serves women affected by domestic violence and other forms of abuse, to talk about our products and services and ways in which we can collaborate.  In attendance were a group of court advocates and other case managers, all of whom immediately recognized the relevance of our work: so many of the women they serve face severe financial barriers as they overcome their circumstances.  For instance, the legal costs of divorce, custody disputes and eviction--costs that many domestic violence survivors must incur to move on with their lives--can be prohibitive; women are left with the choice to take out predatory debt or forgo the expense.

The caseworkers asked phenomenal questions and, I hope, got good answers from me; but what most inspired me--indeed, what gave me chills--was the feeling that here was a group of people committed to serving vulnerable women and their families, coming together to identify their needs and how to meet them.  There wasn't a question of why women need loans, why we charge interest, or why we don't do grants; the focus was entirely on how this will help the women, what they need to apply.  The participants were eager to start referring their clients, and I was equally eager to serve them.

As I stood up to leave I thanked everyone for the work they do.  They reminded me that the six main domestic violence agencies in Rhode Island serve about 10,000 women per year, and that that is but a fraction of the people in need.  For a state of just over 1 million people, well that is simply astonishing.  We have our work cut out for us, to be sure.  And it will take a lot of presentations to caseworkers, a lot of loan referrals and loan applications, a lot of counseling services, court advocacy, education and legal services, and a lot of funds for all of this, but at the end of the day we have to succeed: for the 10,000 women, for the thousands more in need, and for the soul of a nation stained by so much violence and so much pain.

On the ride back my heart was heavy, yes, but again I felt the cool air on my skin, felt the clear sky clearing my thoughts, and despite all the bad news around us I smiled, pedaled and allowed myself to feel optimistic about the world and good about life.

Loan Portfolio Performance--By The Numbers

Following up on my previous post about our revenue growth, I'd like to share some data on our loan portfolio performance (current as of August 25, 2014):

• 129 loans disbursed year to date totaling $129,216.  Of these
• 15 are for energy-efficiency upgrades ($53,969)
• 33 are "standard consumer" loans ($39,273)
• 79 are payday loan alternative, or emergency, loans ($35,974)

* Standard consumer loans range from $700 - $2,000, carry an interest rate of 20% APR (fixed) + 4% closing fee, and can be used for a variety of purposes, including a security deposit, vehicle repair, applying for US Citizenship and paying off high-interest debt

** Emergency loans range from $300 - $500, carry an interest rate of 30% APR (fixed) + a 4% closing fee, and are often used to catch up on rent or utilities, pay off a payday loan and make minor vehicle repairs

Growth--By The Numbers

I was just preparing for a presentation when I came across some interesting numbers vis-a-vis our growth over the past few years.  Specifically, I wanted to generate a report on how much we've raised each year, starting in 2011, as well as what percentage of that has been earned income (e.g., interest on loans and fees we charge for Coaching, as opposed to grants or donations).  Here are the numbers:

2011

• $167,000 in total income
• 6% of that was earned income

2012

• $306,000 in total income
• 13% of that was earned income

2013

• $393,000 in total income
• 13% of that was earned income

2014

• As of July 23rd, we had already raised $368,000
• Of that, 24% was earned income
• Since July 23rd, we have secured over $200,000 in new grants ($125,000 from the US Treasury, $75,000 from Rhode Island Foundation, and others), putting us on track to raise over $600,000 for the year

Our year-over-year growth, then, has been quite good.  From 2011 to 2012, for instance, we grew 83.2%; from 2012 to 2013 we grew 28%; and from 2013 to 2014 we will see growth of 65% (assuming total revenue of $650,000).  Equally importantly, the percentage of our funds coming from interest and fee-for-service income has increased by 18% since 2011.  We are especially proud of this because, in absolute terms, the dollar value of the earned income has gone from a measly $10K in 2011 to a projected $125K this year.

Still, in order to get to our five-year goals of scale, impact and significant earned income, our growth rate will have to remain strong.  In fact, our five-year plan calls for year-over-year growth of 47% next year and 26% by year five; this is compared to growth of about 7% for well-established companies.  And of course, the larger the budget, the harder it is to grow: going from $167K in revenue to $306K is a lot easier than going from $1.5 million to $3 million.

What do you think about these numbers?  What kind of growth are you seeing at your company?

Two More Thoughts On The Ice Bucket Challenge

My last post on the Ice Bucket Challenge focused on what I think is the key question: how do we transform nonprofit giving from a zero sum game (there's only so much money to go around; what I give you I won't give to another org) into one of abundance (total charitable giving, as a percentage of GDP, increases each year).

This morning I read the best article on the subject that I've seen: Why the Ice Bucket Challenge is bad for you (Maclean's).  The author, Scott Gilmore, makes two phenomenal points:

"First, ALS research is not an especially great need in public health. It is classified as a rare disease and, thankfully, only about 600 people die from it every year in Canada. That sounds like a lot, but that is not even close to the top 20 most fatal diseases according to StatsCan (the top three being cancer, at 72,000 deaths per year; heart disease, at 47,000; and cerebrovascular disease, 13,000).

Live By The Spreadsheet, Die By The Spreadsheet

Image Credit: CraigMoulding

I can't imagine what life was like before the spreadsheet, but it probably required a lot of Advil and Kaopectate!  We use 'em for loan evaluation, financial projections and budgeting; Microsoft Excel is our new pain reliever.  But that's not the end of the story.  Just because it's easier to build a financial projection doesn't mean that the projections themselves are any more accurate.  If anything, the spreadsheet--that beautiful array of rows and columns and built-in formulas--is a kind of Siren Call, luring us to believe in her calculations.  Alas, whether done on paper, tablet, phone, cell phone or rock, calculations are only as good as the assumptions built into them.

Put another way, if you live by the spreadsheet, be ready to die by the spreadsheet.  I've long contended that almost all projections are wrong, but I'd like add my own aphorism: the more complicated the Excel sheet the more likely it is that it contains errors.  I'm specifically thinking about the work Libby Kimzey (VP of Coaching & Systems) and I are doing to determine at what point we can become profitable.  To do this, we have built a fairly large (and pretty!) Excel file containing all manner of assumptions about, among other things, average loan size, number of loans per loan officer, repayment rates, and customer acquisition costs.

My Take On the Ice Bucket Challenge

Yea, I'm Jealous. I Admit It!

Ellen Ford, CEO of People's Credit Union

I'm going to say it up front: I am jealous of the success of the Ice Bucket Challenge.  The reason should be obvious; for every hundred thousand nonprofits like Capital Good Fund--racking our brains just to raise that next dollar--there is but one wild viral success story.  You may recall the Kony 2012 video put out by Invisible Children, which raised tens of millions for the organization, and the Ice Bucket Challenge has already poured (pardon the pun) 50 million into the coffers of the ALS Association.  Unfortunately, these are outliers.  Aside from responses to natural disasters and attacks such as 9/11, the 2010 Haiti Quarthquake and Typhoon Haiyan (click the links to donate to these causes), nearly all nonprofit fundraising campaigns are limited in ambition and even more limited in their impact on the bottom line.

Predicting The Future

The Weather--And More
No one can predict the future, of course, but statistical analysis can make estimates with varying levels of accuracy about the future.  And we rely on these estimates all the time in our lives: the weather, risks associated with certain behaviors (smoking, eating fatty foods), the likelihood of a sporting team or political candidate winning, the ups and downs of the stock market.  Still, as we go about our days it can be easy to forget these probabilities; our most profound interaction with statistics, after all, is usually deciding whether or not to bring an umbrella to work.

In business, however--and especially in the social impact / financial services business--we are constantly making guesses about the future.  As a recent incident has highlighted, hiring an employee can be a crapshoot; when all is said and done, the interview process is all about reducing the risk of a bad hire to the lowest level possible. The challenge?  People are complicated.  They are hard to judge, and each person has different judgement.  One person may seem lackluster on paper and phenomenal in-person, only to turn out to be unreliable and irresponsible.  Another may receive a tepid letter of recommendation yet thrive in a particular role: maybe it's the new environment, maybe it's the tasks associated with the position, or maybe it's something else.