Surprise! If you follow our newsletter and the vicissitudes of our management changes, you may not have expected to see me writing newsletter introductions now that I am “leaning back” (last month's newsletter discusses this). In fact, Rickard — our fabulous, recently-promoted Executive Director — will write some of these going forward, and I will write some as an active Board member.
Alert: The below is a bit dry, but it hopefully answers a question that we get asked a lot, especially now that we are asking for donations to The Life You Can Save’s new 90/10 Fund and to The Life You Can Save itself on our homepage and “Best Charities” page.
“Why does The Life You Can Save ask for donations for its own operations and marketing when our goal is to raise as much money as possible for our recommended nonprofits?” The short answer is that, while our resources are always free to use, they cost money to operate, and we have to pay our non-volunteer staff and all the other expenses of running our organization and marketing. But, more importantly, funding The Life You Can Save itself enables us to do even more for our recommended nonprofits, which is always our top priority. Perhaps the illustration below will help explain how.
If you take the money we raise annually for our nonprofits (the numerator if you recall your elementary school math) and divide that number by the money we spend operating our organization (the denominator), you get what we call our “leverage.” On average, over the last six years, the money raised for our nonprofits divided by the amount we have spent on our operations has been equal to 12. That means our “leverage” is 12x.
This leverage is a very important metric for our organization. It helps us measure our effectiveness. The Life You Can Save’s consistently high leverage is the reason that my wife and I donate a very large percentage of our charitable donations each year to its operations and marketing. We think capitalizing on this “leverage” is a great way for us to “do the most good” precisely because we love our recommended nonprofits and want to grow the money we raise for them each year — for instance, by spreading Peter’s message to people who have never heard of him. Our goal is to grow the amount of money we raise for our nonprofits dramatically over the next 10 years. But we can’t do that without spending money, even more money, than we have in the past, on our operations (primarily marketing and staff). This costs money just like selling suits or housewares :)...
Our promise is that we will only try to raise the amount of money for The Life You Can Save that we can sensibly spend to grow the amount we raise for our recommended nonprofits. That means we always want to maintain a high “leverage” number. I hope that is clear even if it is quite dull :)!