73 tips to negotiate nonprofit funding agreements

Through Nonprofit Law Ontario (NPLO) ONN offers sessions on reading and negotiating funding agreements. Inspired by the sessions, here are 73 tips to negotiate your funding agreements more effectively. Although focused on funding agreements with the Government of Ontario, the vast majority of tips apply across a wide range of funding agreements.

You can negotiate and it’s worth it!

1. Negotiating is a collaborative process of finding solutions to shared problems together. It doesn’t have to be adversarial.
2. Even small gains today add up when you consider they may last over decades in your funding relationship. 
3. A funder who says no but recognizes you’re justified will be motivated to make it up to you, so it is still worthwhile to make your case.
4. Funders want to see their projects succeed, so they may be very grateful when you identify problems in the agreement to the success of the project. 
5. You do not have to call what you are doing, negotiating. Asking reasonable questions about what provisions mean and whether they make sense is just being curious.

Finding the right time

6. When you negotiate it affects your leverage. When deciding when to start the conversation ask yourself: what do I have to gain by waiting (e.g. more info)? What could I lose (e.g. cash flow urgency)?
7. Transfer payment funders are obligated to consider changes to agreements when there has been a significant change in circumstances or laws governing a fundee.
8. When a funder requests a change to an agreement, you are entitled to ask for changes you would need to enact their request.
9. Make your own agenda for funding agreement meetings. Write down your questions and the points you want to get to.  
10. Requesting a bit more time in meetings enables more creative discussions.
11. Always ask “is this still a good time to talk?” when phoning a funder. If they are rushed or stressed, they’re more likely to say no. 
12. Make time in the meeting to build rapport. People who connect on a personal level are more willing to collaborate to find solutions.
13. End meetings with a summary of what has been agreed to and next steps. This confirms mutual understanding and makes sure you are moving forward.

Understanding who is negotiating

14. You are negotiating with a human being. Institutions can be intimidating, but the human being across from you has probably chosen that job because they want projects like yours to succeed.
15. Speak to your negotiating partner’s needs. Understand what their incentives and needs are and justify your requested changes in terms of the impact it will have on them.
16. Understand who has discretion to change what. If higher approval is needed, you must win your counterpart over as your champion to make your case internally.
17. Empower your nonprofit’s representative appropriately. Constantly reporting back and seeking approval leads to delays, broken telephone, and duplicative meetings.
18. Those not in the room can be an important part of your negotiating team. For example, you could say, “I don’t mind this provision, but I know my board is going to have concerns with this. Can you say again why it has to be in there?”
19. Identify who holds the information you need. An informed negotiator is a successful negotiator. Identify who in your organization has the data you’ll need to justify your asks.

Set the stage for successful conversations

20. Send email summaries following oral conversations. This ensures common understandings are properly documented to ultimately capture in the agreement.
21. Bring funders to your site when you can. They will see your great work. You will feel more comfortable. However, government funders are limited in allowable travel.
22. If possible, offer to go to their offices to talk. Though more time consuming, it allows you to connect with their colleagues, show your confidence, and connect in person.

90 per cent of successful negotiation is preparation

23. Understand the norms of negotiating with this funder. Speak to others who have been funded by this funder before. You may be surprised by what’s possible.
24. Gather as much useful information as you can. For example, review the funder’s strategic plan to understand their priorities or past negative experiences to know their anxieties.
25. Check your assumptions. You probably think you know the funder better than you actually do. You may be sure that the funder will say no to something, but it’s beneficial to avoid making any assumptions when negotiating. 
26. Your funding application is your opening offer. Budget on the assumption that they will try to haggle you down for it.
27. Identify your walk away point. Funders rarely hear “no”, so when they do it’s even more powerful. Identify the terms of the agreement that would simply be unsustainable.
28. Identify your best alternative to a negotiated agreement (BANTA). This may be another funder or diversifying your revenue sources. The better it is, the more leverage.
29. Identify the funder’s BANTA. Nonprofits overestimate the alternatives funders have. If you are having this conversation with them, it means you’re their preferred option. 

Reviewing the funding agreement

30. Review the agreement with an eye towards what must change versus what would be nice to change. This will set clearer priorities in negotiating.
31. Review the agreement from the perspective of the funder. What do they actually care about versus what is there because it’s part of the template agreement? 
32. Terms of agreement may have been changed by delays in the application process, don’t be afraid to highlight that the timing or results may also have to change.
33. Check to make sure the agreement includes everything you discussed. Typically agreements will exclude past oral discussions, unless the terms are worked in the text or appendix. 
34. Check the interpretation section to make sure no key terms are missing. Defining a key term, such as “day”, “client”, “best practice” can cost the funder nothing, but may save you time or money or simply create clarity.
35. Where the funder is unwilling to change the agreement, propose non-binding appendices (e.g. disbursement schedules) as psychological anchors.
36. Is the amount of interest in interest bearing accounts worth the admin time it takes to process it? If not, discuss with your funder alternatives (e.g. non-interest bearing accounts). 
37. Calculate whether the allowed financial flexibility is sufficient for the predictable variation in expenses. Provide numbers to back up your projected ranges.
38. Government of Ontario funders must make a business case for flexibility beyond 10 per cent. Provide your point of contact with all the information they need to make that case.
39. Review the definition of conflict of interest carefully to make sure you are not walking into the agreement already offside.
40. You can buy yourself some time by defining the notice period to not include important dates for you (e.g. culturally significant days).
41. For reporting requirements, ask what the information will be used for. Government of Ontario funders are required not to ask for information they will not use. 
42. For recordkeeping requirements, ask whether it is realistic to keep everything. Often funders could assess compliance with far less than “all the documentation”.
43. For notice of inspection, ask yourself if this gives you enough time to prepare to support the auditor. It is typically at the funder’s expense so they have a vested interest in the auditor getting the most in their limited time.
44. For acknowledgement of support, ask whether your own branding guidelines can be included in the agreement. The funder will look better if acknowledgements don’t clash with your existing communications practices. 
45. If a specific level of insurance is required above what you currently have, obtain quotes to identify the marginal costs and factor that into your budget accordingly. 
46. If a provision specifies the funder owns any intellectual property (IP) from the project, ask them what they will do with it. Often if they have no plans or means to use the IP, they will understand why it makes sense for you to own it in the end.
47. For the termination provision, calculate concretely your wind-down period and anticipated costs. The more informed you are, the stronger your position.
48. For the default provision, ask the funder what if they are the cause of the breach (e.g. through payment delays). These provisions often don’t contemplate how a funder may contribute to a breach of an agreement. 
49. For the description of activities, do not volunteer to include more in the description than is actually being funded. Including more than necessary diminishes your ability to ask for adequate funding later.
50. Build in time for the unexpected in every phase of the project. But have a justification for your estimated timeline. 
51. Unless the funder’s policies specifically say otherwise, your budgeted HR costs can include things like pension, benefits, and professional development (PD). Be a decent work employer.
52. The Government of Ontario is required to accommodate your accessibility needs in signing funding agreements. 

Making a negotiations plan

53. Identify three alternative agreements that are equally acceptable to you. Each option will offer different trade-offs on the identified key provisions. 
54. Identify potential objections a funder may have to your requested changes. Be prepared to not get defensive and instead identify solutions to those underlying issues.
55. Ask for the items that you must have or would like to have that are neutral for your funder first. These are low hanging fruit.
56. Focus discussion time on the items that are both important to you and to your funder.

Getting in the room together to negotiate

57. Be bold in your asks but make sure you have a justification. People are less likely to get offended if there’s a rational basis connected to their best interests for your ask.
58. Provide a range of options when you can. This helps to define the scope of discussion and shows you are flexible (e.g. length of time, PD costs, etc.).
59. “No” is the beginning of the discussion, not the end. Don’t be afraid to hear “no”, respond with curiosity about the underlying reasons for the “no” so you can propose an alternative that meets that need.
60. Don’t be fooled by false ultimatums. For example, if they say you must sign by the end of the week, ask why. If they can’t provide a concrete answer, it’s false urgency. 
61. If they don’t give you the full amount, is there a project you could do instead? If you’re afraid to reject their offer of partial funding outright, offering an alternative will both clearly express the project they wanted is not doable for less while showing you are flexible.
62. Ask open ended rather than close ended questions. If you are afraid of hearing no, then don’t ask questions that have “yes” or “no” answers, e.g. “What would you think if we expanded the timeline by 3 months?”
63. Be ok with silence. Especially after you have asked a question, silence is not a sign you should back down, it’s just a sign they’re thinking. On the flipside if they have asked a question or made a statement and you need time, signalling silence may cause them to back down. 
64. Mirror back to them their answer to confirm you have understood correctly. A funder may not realize the impact of their words. By non-judgmentally mirroring back to them what they’ve said, it may cause them to rethink. 
65. Listen both to what the funder says and doesn’t say. Body language including tone of voice are powerful. A funder who says no but doesn’t flinch or sound shocked suggests you haven’t pushed too far and can discuss. 
66. Negotiate in small increments. If you ask for 100 and they say 50, go back to 90 and only give up value in exchange for something. If you give in immediately, your ask for 100 will appear dishonest.   
67. If the person you are talking to doesn’t have the final decision, then negotiate with the goal of recruiting them to your side to be a champion within their organization.
68. Debrief with your team after each meeting. Reflect on what went well and what didn’t to constantly hone your negotiating skills.

Think outside the agreement

69. Your funder likely has a network of professionals that can be useful to you. Feel free to ask for recommendations for evaluators, accountants, and more.
70. Your funder may have separate funds set aside for specific kinds of costs, e.g. AI adaptation, evaluation, etc.
71. If you have multiple funders with conflicting requirements (e.g. in reporting versus privacy) introduce them to each other and highlight the issue.
72. Government funders may be able to champion your purchase of surplus goods or lands from other parts of government.

There are limits to what you can do alone

73. You can gain leverage and shift the power imbalance between you and your funder by negotiating collectively with other nonprofits and engaging in advocacy together. 

If you found these tips helpful and want to share your own or book a workshop, reach out to benjamin@theonn.ca and, sign up to receive NPLO news direct to your inbox.