The Annual Report may be your ministry’s best communication tool.
By Randon Samelson ~
The single most important communication tool that a ministry has is an annual report. Why?
If you invest the time and prepare your annual report with excellence, your ministry will reap many of these benefits:
- Builds community with donors and other constituents
- Connects with the left-brain dominant donor
- Enhances ministry focus and effectiveness
- Builds confidence with donors by transparently reporting in a familiar format
- Distinguishes the ministry in the minds of donors
- Enhances the probability that the key message will be heard
- Creates a ministry history available for new donor prospects
- ?Reveals the ministry’s cumulative impact over three or more years
- Creates an optimal “take-away” for donor presentations
5 Critical Elements
When you prepare to produce an annual report, remember that there are two different ways people process information: the right-brain way, which involves emotions, pictures and stories, and the left-brain way, which focuses on numbers, logic and facts. Your annual report should include both types of information to reach both types of people.
Here are the five critical elements that produce a meaningful annual report.
1. CEO Annual Letter
The CEO’s letter should be thorough, meaningful and transparent. Here’s a tip from Warren Buffett: Imagine you’re writing to a family member who has been out of the country for a year. Bring them up to date as thoroughly as possible. Don’t be afraid to share the good, the bad and the ugly. The letter should also authentically reflect the CEO’s personality and character. After a few letters, readers ought to have a sense that they know and share a personal connection with the CEO.
In your letter, state your most important message early and clearly — ideally in the first two sentences. If you could convey only one message to readers, what would it be? Whatever that message is, capture it in the first paragraph and then repeat it, year after year.
Also include an update on what happened with your organization during the previous year. Discuss how well you met — or did not meet — your goals. Never be afraid to share what didn’t work out the way you had hoped. Such transparency is a critical element in building confidence.
Offer a clear description of three to five goals for the year ahead. It’s always a good idea to include goals that have measurable outcomes, so everyone knows exactly where you’re going and exactly when the goal has been reached. Then, succinctly describe the most important opportunity or obstacle the ministry faces. This is a great way to advertise to your community where they could impact the ministry in the most powerful way
2. Ministry Focus
For many left-brain readers, this may be the most important section of your annual report. Left-brain donors often believe that ministries either lack focus or struggle to articulate their focus. Such a perception can undermine the donor’s confidence in your ministry.
Thus, I encourage ministries to have no more than three operating “silos.” This will demonstrate that your ministry is clearly focused. Dedicate one or two pages to each of your operating “silos,” explaining what they do and where.
3. Relevant Financial Information
Obviously, you need to disclose pertinent financial information. This section should include a balance sheet and a cash flow or income statement. Also offer a pie chart detailing the percentages of funds dedicated to administrative, fundraising and program costs. These disclosures are especially helpful for people like me who believe financial documents tell important stories.
Donors like to know who is leading the ministry — not just the CEO, but key executives and board members too. Include brief bios so donors can see individual qualifications as well as a board’s diverse skill set (bankers, lawyers, pastors, etc.).
5. Relevant Graphs
Beyond these essential sections, there’s plenty of room for pictures and creativity, and plenty of space to discuss the ministry’s vision, mission, history, interesting case studies and donation requests. You can also sprinkle in graphs that detail the critical metrics of your ministry that your community can watch over three to five years.
First, commit to creating an annual report for at least the next three years. Don’t expect just one annual report — regardless of how well it’s done — to produce the kind of community you desire. An annual report that arrives regularly and maintains the same general appearance will soon feel like a “letter from home.”
Finally, everything about this report should communicate excellence. It should look and feel like an important communication. This alone will tell the recipient that you’ve created something special that deserves their careful consideration.
Such an annual report can be the first step in truly building community with your constituents. It’s a win-win for everyone, and it might just be the most important step your ministry can take to advance the kingdom.
Randon Samelson is the founder of COUNSEL & CAPITAL, a nonprofit “investment bank” serving Christians pursuing biblical priorities, free of charge. He has 40 years of investment and nonprofit leadership experience. Samelson is the author of Breakthrough (Counsel & Capital, 2014) and the monthly e-letter Investing for Biblical Priorities. This post is an excerpt from the 2015 Fall edition of Outcomes Magazine.
Attention all nonprofit ministries!
Christian Leadership Alliance is pleased to announce COUNSEL & CAPITAL is offering a $50,000 cash prize to the church or ministry that produces the Best Annual Report. This contest was designed to inspire Christian ministries to build bridges of confidence with donors by producing a transformative annual report. By doing so, ministries will dramatically increase their effectiveness and kingdom impact. Today’s post gives you an excellent guide to all the components that make up a great annual report.
Learn how to enter this contest HERE.