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.
Receive expert advice. Direct to your inbox. Subscribe
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.
Find out how we can help you achieve your fundraising goals with world-class consulting and custom training.
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.
Not so!
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.)
BOTTOM LINE
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!
Gail, From my perspective you scored ten out of ten. I only wish you had alluded to the “uniform gift hypothesis,” i.e., the all too common common notion that that best way to raise $100,000 is to get one thousand people to donate $1,000. Thanks for this stimulating summary.
Oops. I meant one thousand people donating $100.
Hi Joseph, thanks a million. I sure hope this post helps my fundraiser colleagues communicate with their boards and bosses! Great point about the “uniform gift” notion – it’s total bunk!
There are so many issues to discuss in this “Underdeveloped” report. Thanks for tackling a few of the issues in your straight forward and thoughtful way!
Thanks Beth Ann- I hope this generates some interesting discussion among board members!
I totally agree with all of these, 8 and 10 especially! And they relate to each other, keeping your fundraising staff consistent makes it easier to cultivate your current donors. That’s not so easy if they’re being contacted by new people every year.
Hi Jessica, just wish we could get the board members to understand this!
You had me until point # 10. Retention is not based exclusively on financial compensation, and perpetuating that myth isn’t helpful to our non-profit sector, which typically can’t afford to give out pay raises. There is a lot that organizations can do to improve retention of fundraising staff – participative management, cross-functional job opportunities, educational stipends and time away, flex time, additional vacation…. the list goes on for a long way before pay raises appears.
Gail, invaluable collection of really important concepts. I may be stepping into a new role with a growing organization so this is timely and appropriate for the major players to see. Fortunately the principal who founded the organization gets this – no small wonder since he’s a financial professional.
Marla, so glad you are tackling these issues and ideas. Get everybody on board with this way of thinking and your path ahead will be much smoother!
Well i am just quoting Penelope Burk’s studies that the #1 reason fundraisers leave their jobs is to make more money. I agree there are lots of other factors that impact retention!
Great tips. I guess #8 would be the same for businesses too. Better to make the ones who are already customers happy than to spend your time and money getting new ones. So women are twice as generous as men. Hhmm….
Julie, that one about women IS really interesting, isn’t it. It makes the men in my audiences scratch their heads too! :)
Fabulous post Gail. I say “AMEN”! All of these are important. If I had to choose, I’d hone in on the changes that the digital revolution hath wrought. Donors encounter us differently, so we must respond in kind. They are often 2/3s down the path towards engagement with us (or away from it) before we know they exist. We no longer control the communication flow. So we absolutely must figure out how to become a part of that flow and, hopefully, how to gently guide our donors so that they flow in our direction. For this to happen, absolutely everyone in the organization has to be part of the conversation. The donor only sees ONE organization. They don’t care about our siloed departments.
There was a lot of commonsense in this post. Good job.
HI Carolyn – thanks and I sure wish every single nonprofit board member would read this! Gail
Hi Gail! We are starting to fundraise at my children’s school so I read your article with great interest. Some of it went over my head(ha!) but most made perfect sense to me. My biggest question is how to dive in and start fundraising! We live near many chemical plants that like to give back to the community, but I don’t know if a letter or a brochure would be best. Was also thinking an Open House but I see here that it might not be as cost effective. Do we send them a “wish list” of projects and the cost of each? It is very overwhelming because I don’t want to blow it.
Take care,
Lisa
Hi Lisa, first make friends with the folks who run the big plants locally. Go see them to find out what their giving policies are, and what they are looking for. Look for the long term relationship not the quick ask, ok??
Hi Gail! Love the article. I am currently dong some support work for a woman who has just received non-profit for an animal rescue. She claims she knows the difference between a sole proprietorship and a non-profit. I am a retired lawyer and so some things she has said make me nervous. She said ” rescue) is mine and will always be mine; the bottom line is mine so it will be done my way; I want to find a place to live with kennels on the property among other things. She wants to approach donors but the money goes into an account (her own account, I believe) with only her signature required. She does not have a professional Board – she just slotted in names of 5 friends. She still refers to “my dogs” and “my rescue”. All this sets up a red flag for me and I cannot risk non-compliance as I have a nursing and law degree to protect.
Carrol, I’d stay away from this lady. She doesn’t understand “nonprofit’ – or the idea that a nonprofit is not just one person’s project. And the handling of the money really scares me. This is absolutely not appropriate.
Loved the article, perfect sense, I am trying to get my manager to understand that donations received from a newsletter recipient ( e.g. as a business that was receiving it as part of a mailout to corporate contacts) is corporate income rather that using it to offset the cost of the newsletter. ) Otherwise what incentive do I have as a fundraiser to keep these contacts alive…,
Surely the newsletter should be a marketing budget cost and used as part of an overall ( or audience focused) ROI calculation..
appreciate your response..
Sounds like a policy question. How and where is revenue from the newsletter recognized, measured and incentivized? Sorta a philosophical question about how the organization wants to measure ROI. I’d start there!
Gail, I am trying to learn fundraiser fundamentals and don’t really know what I need to know. I started making bracelets and selling them. An opportunity knocked on my door to donate money for a fundraiser event and I decided to create fundraiser bracelets and donate them instead, for them to sell at fundraiser. They were a hit and everyone loved them. Another fundraiser then reached out to me asking if my bracelets can support their event. I am not the fund, but providing my products for their events, so I know I am a profit business. However, I could really use some advise on fundraiser adequate. What should the split be between me and the fundraiser. I would be the one taking the orders on behalf of the fund, so I would be tracking and shipping the products to each individual. That is how I have it set for now. That may change if I get into bigger organizations. Trying g to figure out how to tackle this end of fundraising. Any advise would be helpful. Thanks. Jenn
Hi Jennifer, if you are operating a for-profit business supplying bracelets to nonprofits, then price your bracelets to make enough profit for you to stay in business and be happy with the bit of money you are making. Charge for your time to track and send bracelets to individuals. The nonprofits will buy your bracelets at the fair price you set. They will then re-sell the bracelets to their folks at a higher price that contains the donation. How’s that?
Gail,
Thank you for your reply! I have set a fair price that I am happy with. I did a 50/50 split with me tracking and shipping the bracelets. I was really thinking more like 60/40 split but this was my first deal and I wanted to be fair. I have done some research and have seen some of the splits that other product fundraising companies give. I think with my next deal I will go with the 60/40 if I will be doing all the tracking and shipping.
Hi, I’d keep the “split” idea out of it. Just put a fair price on it. Keeps it more clean. Unless you are considering yourself in “partnership” with these nonprofits and that can set sticky.
Hi Gail,
I head a non-profit that has resources already set up (website, social media, etc). Up until this point, all of our fundraising has been done grassroots (almost 1 million) in the last two years but its still not enough. The challenge that we face is that we do not have the bodies to actually carry out what could be dozens more methods of fundraising. Lots of ideas and directions that we can go but we cant afford to hire anyone to do in-house fundraising. Is there such thing as a professional fundraising company that will use our resources and do the “heavy lifting” so to speak where they get paid a commission or something along those lines?
Chris, you don’t have to attack every single fundraising strategy out there. Instead choose a few strategies that really work for your own organization. Why can’t you afford to hire someone in-house? Especially if they will bring in money that pays for their salary PLUS bring in additional money.
Reputable fundraising consultants will not work on a commission. It turns the relationship with the donor into something that is much more like a transaction and does not put the interests of the donor first. AND you need to develop fundraising skills in-house, not pay a fortune to other people who will get to know your donors – and then leave you.
Thanks Gail, good insight. I wouldnt know where to look even if we were willing to hire somebody. What is a typical salary for an in-house fundraiser? Do I just put an ad in the paper? On Monster.com?
Do you need to disclose total of fund’s received to the donors
Hi Angela, it would be appropriate to share your fundraising total but it is not required. You DO want to report back to donors on what their contributions achieved!
Hi Gail,
I have a question my group did some individual fundraising to host a buddy walk. I chose to purchase pins (with my own money) and sold them. Now the walk has been canceled do many not being available to help out. My question is what can I do with the money I fundraised can I donate it to another organization such as special olympics.
Hmmm, what was the original walk for? Can you donate the money to that original cause, or something very similar? If not I think another organization would be fine – and might be good if you could get back to the people who purchased your pins and let them know.
Hi gail
Hello Gail, I recently completed a fund drive raising money for a national organization. I am getting ready to try and raise money for a future project that I and a few other people want to do for the residents of our local nursing home. Do I need to ‘start’ a charity to do so? How do I handle the money made for this and future projects we are planning? Thank you for your time and attention.
Hi Anne, by all means don’t start your own nonprofit unless you are prepared to give it a lot of attention. See if you can’t find another organization to serve as a financial “umbrella” for you – run the money thru another nonprofit perhaps. Maybe a religious or civic organization in your town. The local nursing home itself may be a nonprofit – that would be the best solution of all! Good luck!
Hello Gail,
We recently held a softball tournament, 2 car washes, and a Krispy Kreme fundraiser to help towards a a tournament that we are participating in. That made us a substantial amount of money. The problem is..we are not registered for the tournament, we don’t have the certified coaching staff and not enough girls on the team. The head coach (who is not certified ) is refusing to split the money and is still insisting on taking the trip any ways. I really need help!
Hello Gail,
If I were to have a casino-night fundraiser to raise money for a charity in MA….can I get reimbursed for the costs of equipment. I know I can do this but would need to get reimbursed in order to make it fair to me. Can’t spend 4000 and then be in a hole.
Hi Tarik, that is something you’d need to work out with your charity. Just ask for your costs to be covered. I would not do it without their agreement. Gail
Hi Gail, Great article! and great website I’m a graphic designer that has been involved in a few good fundraisers. We designed the shirt graphics and helped gather the sponsors logos on the back. One fundraiser was able to sell over $8,000 dollars through shirt sales and sponsors. We love working on fundraiser projects because we are helping people with art.
Here are s some of the shirts we have made:
http://www.creativepile.com/services/print/apparel/
Hi Gail! Ive just created an instructional for profit organization teaching children and adults sewing. In the past, Ive went over my personal budget funding for my students.Is it professional to do two fundraising at the same time? I was considering,Gofundme and have my students make and sell items.
I am a fundraiser distributor with ABC Fundraiser if any group needs to raise funds please contact me via phone (862)373-7517