Transcript Fundraising for Nonprofit Organizations

Fundraising for Your
Nonprofit Organization,
Part I
Thomas P. Holland, Ph.D., Professor
Institute for Nonprofit Organizations
University of Georgia
Presentation will cover
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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
• Public (government)
50%
30%
– grants & contracts for restricted purposes
• Private Contributions
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20%
individuals give about
foundations give about
corporations give about
bequests, wills, trusts, endowments
70% of that
10%
10%
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
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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
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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
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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 effectiveness
Henry Rosso, Achieving Excellence in Fundraising, Jossey-Bass
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Person to person solicitation
Personal letter with phone follow up
Personal phone call with follow-up letter Most
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)
Least
Media advertising
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 wellbeing 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
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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
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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
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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)
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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