Top 10 Things to Understand About How Fundraising Really Works Today
Wouldn’t it be wonderful if everybody in your organization agreed on what really works for fundraising success?
What’s important? What’s not so important? What basic principles can you agree on?
There’s often a philosophical disagreement inside many organizations about how fundraising really works.
Board members, in particular, often have pre-conceived notions about fundraising that are based on their own opinions and not on solid data.
This post is written to trigger thoughtful conversations among board members, your leadership and fundraising staff.
I’m hoping it will help you agree on a smart plan of action that will bring in the robust funding streams that you really need.
Ten Basic Fundamentals for Fundraising Success
1. Your leaders need to be on the same page about fundraising.
If you want robust revenue, then everybody in your organization – all the staff, board members, leaders of all types – need to understand and agree on certain fundamentals in your fundraising approach.
That’s how you develop a culture that supports philanthropy and fundraising. That’s how you develop the money you need to do your great work.
2. Success in fund development takes a long term, consistent effort.
Success doesn’t happen overnight.
Over time, your visibility spreads and your pool of donors gradually grows. The dollar returns build up and generate more and more revenues.
It takes consistency in your communications, and your contacts with donors and potential donors, to develop relationships that will generate bigger and bigger gifts.
This means that: you can’t expect a fundraiser – or a digital vendor – to come in out of the blue and immediately work miracles. They have to have something to work with.
3. Investing in fundraising makes money for you. It’s a profit center, not a cost center.
Fundraising costs are not a black hole into which you pour money.
Instead, every dollar you spend in fundraising actually pays for itself – and brings in a multiple dollar return on your investment.
This means that: generally, investing one dollar in fundraising will probably yield 3-4 dollars back.
I’ve seen plenty of CEO’s squeeze the fundraising budget dry and then are unhappy when contributions drop off. They don’t see the cause and effect. They don’t understand that if they cut their direct mail budget and send out poor quality appeals, then giving will drop.
4. Events are the least efficient way to raise money. Working with major donors is the most efficient.
Smart nonprofit folks consider how much a particular fundraising strategy will cost in terms of time, money and effort, vs the amount of funding it will bring in.
The return on your investment from an event is typically 50%. Half of what you raise is eaten up with costs. Events are not the most efficient or effective ways to raise money.
The return on individual donor fundraising is much higher, only costing 10 cents on each dollar raised.
This means that: when you invest in major gifts staff or in capital campaign consulting, then you will probably get about a 10-1 return on your investment.
5. Fundraising is a specialized business backed up with research.
The professional body of knowledge of best fundraising practices is well established and researched.
We know what works in fundraising and we now have the research data to back it up.
This means that: it’s important to believe fundraising professionals regarding what strategies work best.
This also means that your leadership should not make fundraising strategy decisions based on their own personal preferences and private opinions of what they like. Basing decisions on data is always smarter!
6. Fundraising success requires help and support from everyone in the organization.
Too often board members and the rest of the staff look at fundraising as something that is apart from their own work.
The fund development functions are not integrated with the rest of the organization and its culture. Does everybody embrace the annual event and pitch in to help? Or do they complain and say “that’s not my job.”
This means that: if the whole organization doesn’t embrace and support fund development, your results will really suffer.
This also means that: if you expect a fundraiser to work self-sufficiently in a silo alone, you not will see the kinds of revenue that you had hoped for.
Refer to the Compasspoint report “Underdeveloped” for a more complete discussion here!
7. Fundraising is not about making a “pitch” to a donor.
Some board members are terrified of fundraising because they think it involves an aggressive asking situation.
The larger gifts come from long term happy relationships with donors who love us and who want to be involved. The conversations are gentle and easy, and based on the donor’s wishes.
And smaller donors give because they feel connected and emotionally moved by an organization’s story.
Fundraising is about the relationship with a donor – NOT about the pitch!
This means that: developing a trusting relationship with your donor is AS IMPORTANT as the asking conversation.
8. Retaining your current donors is more important financially than finding new donors.
I know this doesn’t sound logical, but think about it a minute.
Did you know that on average, 50-60% of your donors do not renew their gifts?
If you are like other organizations, your fundraising is a leaky bucket.
You are losing donors as fast as you are bringing in new ones.
This means that: the real high dollar opportunity is to work on retaining your current donors. That’s how you build a sustainable funding base that you can count on year after year.
9. Investing in donor communications also makes money for your organization.
The reason many donors don’t renew is because they lost contact with your organization.
Good communications help prepare the donors for another gift.
Every nonprofit now needs a Donor Loyalty program with warm and fuzzy, regular touches to your donor base.
Then you’ll keep in better touch with your donors, raise your renewal rates, and bring in more repeat, consistent gifts.
This means that: your communications to donors have everything to do with whether they give again. If you cut your marketing budget, you’ll probably see lower fundraising results.
10. Major gifts from donors are now more available than ever before.
We’re approaching the Golden Age of Major Gift Fundraising. With the economic boom of the past few years, the wealthy are getting wealthier.
Look at all these huge collegiate campaigns. You might ask how are they raising billions and billions? Here’s the answer – they are investing in huge major gift operations.
You actually have major donors lurking within your own donor files. But you have not identified them, and are probably treating them like small donors.
This means that: If you make a commitment, and are willing to invest – you can enjoy the biggest payoff of all – robust major gifts for your cause.
(If you need help and coaching, we can help you with our popular Major Gift Coaching approach. – find out more here.)
Hope this article provokes some robust discussion and helps everyone get on the same page about fundraising.
Leave me a comment and let me know what you think!