Identifying opportunities for a step change in income generation

Background
Ronald McDonald House Charities (RMHC) was founded in the US by the McDonald’s restaurant chain in 1974 to provide housing for families with children in hospital. It 1989 it built its first house in the UK, since when it has built an effective operating model, in particular by leveraging its strong relationship with McDonalds, but also growing income from a range of other sources.

However, there is now some concern that whilst the current fundraising programme can support ‘business as usual’, it is unlikely to provide the additional income necessary to fund growth and innovation. There is also some concern that the Model for Growth (centralising fundraising rather than leaving it to individual houses) hasn’t delivered the hoped-for growth in income. RMHC, therefore, commissioned Action Planning to carry out an Income Generation Review.

Brief
RMHC asked us to explore how a transformational increase in income might be achieved, beyond the strong support it already receives from the McDonalds ’family’ (customers, franchisees and suppliers). “What we were looking for,” said Tony Morton, Director of Income Generation, “was some industry expertise to share an overall picture of potential tried and tested elements of making a step change to where we are right at this moment in time.”

Process 
We spoke to Trustees and carried out an examination of RMHC’s investment in Income Generation and the returns on that investment. We picked up that there were concerns that centralising the finding operation had not worked, but tempered this against the fact that the last few years had seen fundraising in general hit hard by global and social events, such as the pandemic.

In fact, given the circumstances, we adjudged the Income Generation function to have performed well enough to keep faith in the model. We did, however, identify a number of opportunities for development, which we set out in a comprehensive report.

Our report included a list of 11 recommended steps to transform Income Generation. These included some fairly radical and potentially unpopular proposals, such as reducing the marketing budget for raising awareness and investing it in raising money. Another was to abandon attempts to increase general revenues to fund new capital projects and instead draw up specific plans for new capital projects.

Further opportunities for income generation beyond the current core activities included investing in Major Donor Giving and Individual Giving. Our rough estimate of the extra income that could be generated from the 11 recommendations was over £5 million, with costs of around half a million.

Overarching all of this was the recommendation to bring in further expertise before doing anything else, to add specialist charity fundraising experience into the decision making. This coincided with Tony announcing that he would be retiring in 2025, so it reinforced what he and RMHC were looking for.

Outcome
David Saint presented the report to the RMHC Board and talked through all the recommendations. While it challenged the Board’s thinking, it helped to galvanise them into action in several ways. They recruited an experienced charity fundraiser and, as Tony said, “We were looking at investing more in individual giving and this has given us the confidence to do that. We know we won’t see an immediate return, but to hear that from an independent consultant helped to convince the board.

“The bit about messaging as well. We need to have the relevant project to move down the major giving route. If you don’t have the project, how do you ask people for money? I think it definitely will change the way we go about things.”

Consultant’s Insight

RMHC has been on a very logical and sensible journey, but there are now some significant opportunities to take stock, regroup and move to the next level. This is necessary if the charity is to continue to expand the number of houses, and to meet the increasing running costs of that enlarged operation. In setting out these opportunities we knew we would ruffle some feathers but, as Tony said, “The brief wasn’t to keep everyone happy, it was to make difficult recommendations that might not be well received. That’s why we wanted an independent perspective.” Providing that independence is exactly what we do.

We have a mantra: “You can raise loads of awareness without raising a penny. You can’t raise even a penny without raising awareness in the process.” By redirecting and refocusing a sizeable chunk of the marketing budget, there was a clear opportunity to increase income generation and raising awareness as a consequence.