Funding eRiding

eRiders, technology consultants who work with nonprofits, are becoming a more popular means of providing technical assistance to organizations throughout the world. eRiders, called "circuit riders" in the U.S., work with a number of organizations in a particular region or nonprofit sector. They provide technology exertise, training, communications strategy, management consulting, and more.

The most common questions asked by organizations looking to create an eRider program (and funders who support these efforts) is, "How do we pay for this?" and "Is sustainability possible?" As the eRider movement spreads to Europe, Asia, Africa, Oceania, and Latin America, organizations are looking to the successful circuit rider programs in the U.S. to see how they sustain themselves.

What's clear is that there is no one model for success, and sustainability may require understanding the parameters and needs of your particular operation.

Several financing models dominate among circuit rider organizations in the United States, each rooted in the unique circumstances, strengths, and mission of the organizations themselves. The models outlined below are intended as general guides for sustaining an eRider program's ongoing costs. It must be noted that these models do not account for the start-up costs of an eRider program, which can be significant, and include:

• Developing a business plan
• Setting up an office/workspace and hiring staff
• Specialty equipment, such as servers, PDAs, zip drives, etc.
• Training staff
• Monitoring and evaluating the initial program

The costs for start-up should be identified and considered as a separate, one-time expense, and not as part of the running costs of the program.

eRiding Models

Membership Model

In this model, clients pay a membership fee for services. This may be a yearly fee, and the type and amount of services may be limited. Additional services may require additional fees. Fees are consistent, and a client can easily plan and budget for eRider costs associated with this model. Sometimes, the initial membership fee is higher than subsequent years, since a new client receives more benefits in the first year.

The appeal of this model is that it is designed for long-term self-sufficiency. However it does require significant administrative and start-up resources.

Shared Costs Model

In this model, the costs of the program are divided among the eRider's clients. Some fair system is established in advance, and the clients agree to the payment system in order to receive services. The clients would be billed monthly or quarterly, and the charges usually vary from period to period.

Here's an example of how this might work. An eRider program has three clients. Client A has a staff of 20 people, client B has a staff of 30 people, and client C has a staff of 50 people, a total of 100 shares (TOS). If the total annual cost (TAC) for the eRider program is $20,000, then the cost for 1 share would be TAC/TAS or $20,000/100 or, in this case $200 a share. So client A would pay annually $4,000 (20*200), client B would pay annually $6,000 (30*200), and client C would pay $10,000 (50*200).

A problem with this model is that clients can't anticipate the yearly fees, and budgeting for this expense becomes problematic. If client C, for example, drops out of the program, the share costs for the other clients would go up considerably until other clients join the consortium.

Fees-for-Service Model

In this model, the client pays only for the actual eRider services it uses. The eRider program establishes either a fixed fee for services or a daily rate for service. For example, if the client would like the eRider program to help it design and deploy a simple Web site, the eRider program might charge a fixed fee of $2,000 to do the project.

In another example, an eRider program might charge a rate of $100 per day. A client might have an eRider visit its office once a week, for the entire day, to do various tasks like training, virus updates, and workstation repairs. Based on a 50-week year, the client would end up paying $5,000 a year for these services. If an emergency happens that requires extra time from the eRider, those fees are billed based on the appropriate daily rate.

Mixed Mode Model

In this model, the eRider program covers its expenses by using several methods. For well-funded clients, it may charge fee-for-service based on a daily rate that is higher than the normal daily rate of the eRider. For other clients, it may offer a discrete list of services under a membership model. For poorly funded clients, the eRider program may subsidize its services by providing them at rates lower than actual costs.

Funded Model

In this model, a funder (or multiple funders) supports all or part of the entire eRider program, and services are provided to clients free of charge or at a low cost. This model presumes that a funding community -- either private or corporate foundations -- will serve as informed and willing partners in the provision of technology services to the nonprofit sector. Often, the services are provided for a limited period -- one or two years -- to allow the client to make best use of immediate intervention, but without burdening the funder with a long-term commitment.

Frequently, the clients are grantees or partners of the funder; they would have received the funds directly to pay for these services if the eRider program did not exist. Funders see running their own eRider program as a way to cut costs, avoid redundancy, and insure quality services for their grantees and partners. Another common example would be a foundation supporting an eRider in a particular city or neighborhood in which many of its grantees are located.

As noted above, these descriptions are a general guide to financing models in use. Many eRider organizations continue to adjust their funding strategies, in concert with their funding partners, to forge support solutions that are affordable, sustainable over the long term, and that meet the technical needs of the nonprofit sector.

It should be noted that in the developing world, these running costs are substantially lower than their counterparts in the developed world. But likewise, the revenue brought in from client support is also less. When start-up funds come from the developed world for an effort in the developing world, we often find that the potential for a successful program is increased.

The start-up cost of an international program can often be one-tenth the cost of an equivalent program in the U.S. That's good news indeed, and one of the reasons why the eRider models are so compelling.