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