Fundraising for YourNonprofit Organization,Part I Thomas P. Holland, Ph.D., Professor Institute for Nonprofit Organizations University of Georgia
Presentation will cover • Sources of income for nonprofits • Cultivating relationships with donors • Preparing the board • Approaches to fundraising • Earned income • Special events • Grants and contracts Part II will focus on • Annual & capital campaigns, planned giving - Making individual solicitations, “The Ask”
Total Income for All Nonprofits • Fee for services 50% • Public (government) 30% • grants & contracts for restricted purposes • Private Contributions 20% • individuals give about 70% of that • foundations give about 10% • corporations give about 10% • bequests, wills, trusts, endowments 10%
Fundraising is Vital • Nonprofit organizations live by donations from supporters. • The board is ultimately responsible for the life and well being of the organization, including its income. • Board may ask staff for assistance with specific tasks, but not pass off to them all responsibilities for financial health of the organization.
Many Approaches to Fundraising • Fees for users of services • Face to face solicitation • Telephone solicitation • Mail requests • Special events • Contracts (usually with public sources) • Grants (foundations, corporations) • Collaborative programs with corporations • Sales of products and services • In-kind solicitations
Importance of Diversification • Over-dependence on any single approach carries risks • Reduced autonomy • Goal displacement • Volatility • Multiple sources and approaches help counteract those risks • Rate of growth in earned income is greater than in all other approaches (donations, grants)
Over 80% of All Adults Give.Reasons why they do in rank order: 1. I was asked to give by someone I trust for a cause I believe in. 2. I believe those with more resources should help those with less. 3. I get personal satisfaction from giving. 4. Because of my religious beliefs or commitments. 5. I feel that I benefit when I help others. 6. Sustaining a family tradition. 7. Giving sets a good example for others. 8. Giving helps my community. 9. Gift in remembrance of a loved one. 10. Gift is tax deductible. 11. Giving is encouraged by my employer.
Giving and Asking • People give money because they want to. • People don’t give unless they are asked. • People give money to people, not programs. • People give money to opportunities, not deficits. • People give to successful organizations, not to distressed ones. • People give money to make a change for the good.
Most Nonprofits Have TWO Key Constituencies • Clients or consumers for whom the organization exists and to whom goods and services are provided, and • Donors and volunteers who provide the majority of resources necessary for the organization’s services to take place. • Sometimes these overlap (membership association) but more often they do not (homeless shelter). • Dual constituencies make operations complex, as the needs and interests of both must be addressed.
Organization Needs Friends To Survive • Community points of view, needs & interests are vital to our successes. • Most staff are internally focused, concerned with quality of projects and programs. • The external environment is increasingly competitive, demanding responsiveness. • Other organizations that are more attentive and responsive will successfully compete for our constituencies and resources. • So we must find out what potential friends want, in what forms and ways of delivery.
Friend-raising • There must be some degree of current interest in the topic for people to respond to overtures from the organization • Information presented must be compatible with listeners’ prior values and attitudes for them to be receptive • People respond in differing ways to the same material, and their response depends on their beliefs and attitudes • Seek to understand each one’s interests and tailor your approaches to match them
Motivations Differ • Learn potential donor’s interests • Engage them with program • Demonstrate accountability • Build involvement and trust • Offer opportunities to provide input and support • Ask what form of recognition is best
Fundraising Involves Adding Value for Sponsors • Each party in the transaction should sense that they are receiving more than they are giving up. • The nonprofit must understand what target constituencies want and how it truly provides them their expected benefits. • The nonprofit must satisfy efficiently and effectively its half of the transaction • Are we truly adding value for them? • By building on its strengths, the organization can better serve constituencies and strengthen their loyalty.
Exchange • Cultivating sponsors involves identifying how to get the desired response from those individuals and groups the organization wants to engage • People voluntarily give up something (time, money) in exchange for benefits they see as more valuable (recognition, involvement, friendship, worthiness, satisfaction) • There are costs and benefits on both sides. They must be in balance to create satisfied stakeholders and a successful organization.
Relationships are Primary for Any Approach • Begin with friends, volunteers, former users of services, alumni, and any others with history of engagement with your organization. • Do not waste time or money buying lists from vendors. You won’t raise money by calling or writing to people who don’t already know you or the organization. • There is no substitute for relationships. • Share your excitement and satisfaction with others. • Invite them to participate in ways that interest them, and listen to their responses.
Ladder of effectivenessHenry Rosso, Achieving Excellence in Fundraising, Jossey-Bass • Person to person solicitation • Personal letter with phone follow up • Personal phone call with follow-up letter • Personal letter with no follow up • Personal phone call with no follow up • Fundraising benefit (event) • Impersonal letter, direct mail • Door-to-door • Product sales • Impersonal phone call (telemarketing) • Media advertising Most Least
Ineffective Approaches • Failure to demonstrate accountable use of gifts. • Playing on guilt • Flashy campaign, expensive materials • Asking people to bail out deficits • Failure to build trust before asking • Failure to connect person with mission • Pestering • Hoping somebody else will do it
Effort and Results Vary • Face to face appeals to persons already well acquainted with your organization are the most productive. They require long cultivation: friend-raising comes first. • The less the personal relationship, the lower the return--across all forms of fundraising (including grants). • There is no quick, inexpensive, high likelihood approach to fundraising. It takes time.
Fundraising and the Board • The board is responsible for the future well-being of the organization • It sets strategic goals for the future • identifies needed enhancements of organization and programs • becomes knowledgeable and experienced about fundraising • budgets for staff to help board and CEO with marketing, communications, fundraising, advocacy, partnerships, volunteer recruitment and retention • Establishes plans for board engagement in fundraising
Key Principles • The board takes leadership in fundraising, with staff support. • Begin with goals for the organization, not with whatever source seems available. • Search for sources and people who are interested in and share your goals. • Develop relationships with them. • Find ways to engage them with your organization before asking for anything. • Results are directly correlated with the extent of engagement. No shortcuts.
Set Clear Expectations for Board • Write board member job description • commitment to values and mission • attendance and active participation • 100% giving • public representation and advocacy for organization • Fill gaps in group’s skills by • targeted recruitment • board education on fundraising, communications, volunteering • Engage volunteers in special projects • bring in needed skills • watch for potential nominees • Conduct regular evaluations to learn and grow • Demonstrate accountability to sponsors • via financial reports and individual communications
The Board’s Fundraising Committee • Oversees the preparation of a comprehensive, written plan for review by full board • Ensures a realistic appraisal is made of potential support and reasonable goals are set • Develops consistent message for all to use • Participates actively in identifying prospects, cultivation, asking • Enlists every other board member in specific tasks, events, recognition of donors • Reminds every member to give and to complete assigned tasks in the fundraising plan • Evaluates efforts for future improvement
Support Roles for Board Members • Work with staff to develop volunteer opportunities • Host reception or event where CEO or Board Chair gives brief presentation • Introduce friends to CEO or Board Chair • Identify and do background research on potential donors and doorways • Offer to be a speaker at civic organizations • Work with staff to draft case statements, press releases, other approaches to public awareness • Develop donor appreciation and recognition plans • Search for ideas and people with expertise and bring to board education sessions
Basic Steps in a Campaign • Set goals based on organizational strategies • Select board steering committee • Set up record system and recognition system • Identify roles and responsibilities for each person • Develop case statements (why should anyone give?) • Carry out research on potential donors • Find ways to meet them • Engage them with organization • Invite them to help support specific activities that interest them • Recognize and thank them, keep them involved • Repeat and refine this cycle every year
Developing the Case • Begin with the why: what is our mission? • Then state the what: what do we want to achieve? • Then state the how: how will this new project meet a need and fulfill mission? • Then who: who we are and how well we have been serving our constituencies. • Finally, what specific action do you want the reader or listener to take?
Step 1: Spend Less • First way to have money for new activities is to spend less than what comes in. • Set up savings account, and put into it 5-10% of annual income and cash beyond 2-3 months expenses. • Put 50% of annual campaign nets there • Allow organization to spend no more than half of interest income. • Begin right now as time is your best ally. • Move to more extensive fundraising and investment approaches in the future.
Plan for earned income from • Joint ventures or social enterprises • Membership dues • Program activity fees • Admission fees • Sales of products or services • Gift shops • Concessions • Contracted services, such as training, maintenance • Uniforms, supplies, materials
Sales and User Fees • People expect to pay for useful services • Sliding scale for service fees, with top end offsetting losses at bottom end • Builds income over time • Add direct sales of goods or services • For-profit subsidiaries (museum gift shop) • May also be used for leadership development
Examples • Atlanta Justice Project operates a landscaping business where clients are trained for employment. • Habitat for Humanity sells contributed building materials for profit. • Nonprofit in Brunswick prepares people for employment. In addition to training classes, it runs a for-profit café, where food service trainees gain experience and skills. • Another in employment preparation operates a for-profit office cleaning business that makes money and provides skill development opportunities.
More examples • BetterWorldBooks collects and sells books to fund its literacy programs. • Independent Transportation Network operates van and taxi services for purpose of helping people in outlying areas to get to health care and shopping. • Wisconsin Women’s Business Initiative operates catering and bakery businesses for purpose of making loans to women’s micro-enterprises. It employs women to run its retail and loan operations. • Fair Trade imports and sells food products for purpose of improving income for rural farmers in developing countries.
Examples of Joint Ventures • Nonprofit and business agree on contract that business will hire trainees for entry level positions while nonprofit continues with training. • Company wants customers to buy and send in boxtops from its product, agreeing to give proceeds to nonprofit, which in turn publicizes the opportunity. • Dental association endorses a brand of toothpaste and allows use of its logo on products in return for contribution from the company.
IRS rules about business income for nonprofits • Activity must be directly and substantively contribute to carrying out mission and purposes. If not, n.p. may lose its tax-exempt status. • “It’s making money for our organization” does not qualify. • May be structured as an unrelated business activity, making income from it taxable, but after-tax gains go to nonprofit without another tax (see regulations about Unrelated Business Income Tax) • Why is business income taxed? Gives nonprofit unfair advantage over similar for-profit company offering same service/product. • Paying U.B.I.T. does not jeopardize nonprofit’s 501c3 status.
Special Events • Most nonprofit folks find events the most comfortable method of fundraising. • Good way to generate lists of people to contact later for direct solicitations. • All types of special events require extensive input from board and staff, often with modest returns • Use for public awareness more than fundraising • Think creatively. Banquets, golf tournaments, marathons have been overdone and declining in appeal. • Invite local companies to co-sponsor events in exchange for publicity. • Plan to build on early events and grow to larger attendance and income later • Maintain data base on all givers
Special events • Pros: will raise visibility for your cause, and involve a certain kind of donor motivated by events. Good way to cultivate new prospects. Good way to socialize your board, volunteers, staff. Can be memorable event and lots of fun! • Cons: Require huge amounts of time, people, energy. Rate of return may disappoint, so this may not be the best approach if you’re only in it for the money. • A few exceptions: Project Safe, Cancer Foundation
Special events set-up • Carefully plan budget; analyze goals, profitability. • Find a “niche” – an unusual or unique event – know your “competition”. • Understand your donor base – will they come? Why? • Watch for conflicting events. • Involve experienced volunteers, event planners. • Have contingency plans for everything. • Understand the difficulties in renewing special event gifts. • Understand the tax consequences for donors. • Make sure you record contact information from participants
Event follow-up • Collect contact information from all attenders for future contacts. • Add names to mailing list. • Invite them to volunteer in organization’s activities and to subsequent events. • Send solicitation letters with follow up phone calls. • Remember: the greater the engagement, the more likely the giving.
Grant Sources • Government (federal and state) • look for RFPs (Requests for Proposals) • search government web sites • Foundations (http://fdncenter.org) • Charitable foundations • Family foundations • Corporate foundations • Community foundations • Operating foundations
Grants and Contracts • High competition, low yield for effort • Require specialized writing skills • Directed at special programs, not ongoing operations (leaves you hanging when $ runs out!) • Ask public officials about community block grants that might match your programs • Search foundation directories (http://fdncenter.org) for those interested in your programs and goals • Spend time with grant officer • Follow their guidelines for proposal
Stewardship of Gifts • Thank the donor in several ways. • Find appropriate ways to recognize and publicize the gift. Ask their preferences. • Use the money as the donor intended • Report to donor periodically • Continue to engage him/her with organization • Build long-term relationship of trust • Thank the donor again.
A Fundraiser’s checklist • Do I have a clear picture of the mission, priorities and needs of the organization? • Do I really understand and support the case, why someone should support this organization? • Do I contribute to the extent of my means? • Do I offer additions to the list of prospects? • Do I share in cultivating prospects? • Do I make introductions for others to make solicitations? • Do I accompany others on solicitations? • Do I write follow up and thank you letters? • Am I prepared to make solicitations myself? • Do I do what I say I will do?
Recommended Reading • S. Weinstein, The Complete Guide to Fundraising Management. Wiley, 2009. • K.S. Kelly, Effective Fund-Raising Management. Erlbaum, 1998. • J.M. Greenfield, Fundraising Fundamentals. Wiley, 1994. • F. Howe, The Board Member’s Guide to Fundraising. Boardsource, 2000. • Other materials on many web sites, such as www.managementhelp.org