Fundraising for YourNonprofit Organization

Thomas P. Holland, Ph.D., Professor

Institute for Nonprofit Organizations

University of Georgia

Athens, Ga.

Presentation will cover

• Sources of income for nonprofits

• Approaches to fundraising

• Individual solicitations

• Board responsibilities

• Asking for gifts

• Other approaches

– Special events

– Sales and fees

– Planned giving

– Grants

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 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 and fees• 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)

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.

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

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.

Many nonprofit bring in 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 easiest 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 lack 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: Requires huge amounts of time, people, energy. Rate of return may disappoint. Not the best option if you’re only in it for the $$.

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.

Most Productive Method:

IN-PERSON SOLICITATION• 70% of contributed funds for most nonprofits come from

individuals• 90% of gifts come from 10% of donors• Identify people with means through research• Then find people who know them and who will introduce

you to them• Invite them to get acquainted with your organization, attend

events, volunteer• Listen to their interests and increase their involvement

accordingly• Invite them to help sponsor activities• Thank them

Over 80% of All Adults Give.Reasons why they do:

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.

Sources of Individually Contributed Income

• Annual giving (unrestricted)• Telephone and mail campaigns (unrestricted)• Special Events (unrestricted)• Capital funds (restricted)• Bequests, wills, trusts, endowments• In-kind contributions

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.

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

Key Principles of Direct Fundraising

• The board takes leadership, 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.

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.

The Ladder of Effective Communication

• Two-way communication is most effective.

In order of effectiveness:

1. Face to face conversation

2. Small group discussions

3. Telephone conversations

4. Handwritten letter, inviting response

5. Large group discussion

The Ladder of Effective Communication

• One-way methods are far less effective.

In descending order of effectiveness:

6. Videotape

7. Mass-produced letter

8. Newsletter

9. Brochure

10. News item

11. Advertisements

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

The Board and Senior Staff Develop Friends into Sponsors

• Board identifies priorities for new funding.• It demonstrates commitment by 100% giving.• Members and staff share enthusiasm with friends.• Invite them to get acquainted with organization.• Host special events to showcase projects.• Ask friend for support for aspect of interest or

introduce to Executive or Chairperson for the ask.• Follow up with appropriate thanks.• Staff supports board in these efforts, rather than

doing it for them.

PREREQUISITE

• If your board is not taking leadership in fundraising, the FIRST task is to solve that problem.

• Willingness to learn and try are the beginning steps. Skill comes with practice.

• Everything else depends on this foundation.• Everybody must be involved in some way.• No excuses allowed.

Common Excuses:

• I’ll do anything but raise money.• Nobody ever said raising money was part of being on

this board. (problem with nominating committee)• We deal with substantive issues, not with raising

money. (what is more vital to organization’s survival?)• I’m too busy. (commitment?)• I don’t want to ask my friends for money.• I can’t stand being turned down.• I’m just not good at that sort of thing.• I’ll get around to that later (procrastination)

Such Denials of Responsibility Must be Faced and Dealt With

• The board is ultimately responsible for the well being of the organization in every area.

• Other competitors are moving ahead with raising money, taking your potential donors.

• Board members have various talents, all of which are needed.

• Fundraising can be learned, practiced, and refined.

• It can be fun and satisfying.

Board Applications

• The board is responsible for the future well-being of the organization

• It sets strategic goals for the future– identify needed enhancements of organization and

programs– become knowledgeable and experienced about

fundraising– budget for staff to help board and CEO with

marketing, communications, fundraising, advocacy, partnerships, volunteer recruitment and retention

Board Applications (cont’d)

• Set up savings account or endowment fund• Put 5-10% of every year’s budget there and

any cash beyond 2 months’ expenses• Put 50%+ of board campaign nets there• Allow organization to spend no more than half

of annual interest earned by fund• Begin right now as time is your best ally• Move to more extensive fundraising and

investment approaches in the future

Set Clear Expectations for Board• Write board 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 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• 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 steering committee• Set up record system and recognition system• Identify roles and responsibilities for each• 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?

Annual Giving• Organized effort to secure gifts on an annual

basis, either by mail, telephone, personal solicitation, events, or all four.

• The primary fundraising method used to broaden support, upgrade giving levels, and provide operating support for ongoing programs.

• The backbone of most fundraising programs.• Complements other forms of giving: planned,

capital, endowment.• A cyclical, multi-stage process that may involve

several solicitation strategies.

Purpose of annual giving

• Acquire new donors

• Renew donor support annually

• Cultivate donors to increase giving levels

• Build donor loyalty

• Identify and involve leaders

• Identify major, capital gift prospects

Rules of thumb in annual giving1. Understand what will motivate your donors or

prospective donors before you plan your solicitation strategies.

2. Carefully match prospects to projects and to solicitation strategies.

3. Renew the same way you solicited the original gift.4. Provide varied giving opportunities during the

annual fund cycle.5. Provide varied and multiple forms of appreciation

during the annual fund cycle.6. Track your results carefully to understand your

donors’ giving patterns.

The ASK is Essential• You are offering them opportunities to do good.• Not everyone has to do every aspect of the

campaign, but someone must be ready and willing to do the ask. Guarantee: It won’t hurt if you try.

• Time it to come after you already are well acquainted with the person and s/he with you and your organization.

• Match ask to their interests and their resources.• Ask and then shut up. (Don’t fill the space with

nervous chatter.)• Respond to questions and offer alternatives.• Thank them several ways, regardless of results,

building relationship for the future.

The Asking Scenario• Open with pleasantries• Get to the subject• Get to the asking• Suggest a specific figure (then be quiet)• Be ready for various negative responses

– don’t push or argue (you can’t win ‘em all)

– leave the request on the table

– be prepared with alternatives if asked

• Leave on a positive note• Follow up with a note of appreciation

Prerequisites to the ASK

• You have the right prospect.• You have cultivated a good relationship with the

person, and s/he is familiar with your organization.• You know the person’s interests well.• You have an appointment to discuss the specific

opportunity and make the ask.• You know the amount to ask for and the right task

needing their expertise.• You are prepared with ways to recognize the gift

and to make use of their help.

Personal Solicitation

• Preparation: – obtain accurate information about donor/prospect

interests, past giving history, capacity. – Determine best person to contact the prospective

donor (let volunteers pick their donor prospects)– Offer adequate support, training to solicitor

• Presentation:– Match solicitor to prospect– Arrange to visit a prospect in person when possible– Ask for a specific amount– Follow through on any follow-up prospect requests

Personal Solicitation (cont.)

• The Close– Be quiet. Do not fill the space with chatter.

Let other person speak first.– Be positive, not apologetic if prospect

declines– Be prepared to negotiate terms of gift– Make careful notes about next steps and

follow through with donor– Thank them

The Basics of Major Gifts• Build on annual gifts but seek larger amounts• Small number of givers will provide most funds• The most cost-effective approach to fundraising• May be used for

– New or expanded programs– Capital for buildings or equipment (often called

Capital Campaigns)– Endowments– Sponsorship of special need or activity

• Usually come from person’s assets (savings) rather than their current income

• Go to organization’s assets rather than its current operations

• Require extensive personal cultivation

Steps

• 1. Specify major opportunities for sponsors, drawing from strategic plan and linking with prospect’s interest

• 2. Plan the gift pyramid• 3. Identify likely givers

– Records of prior giving– Prior engagement with organization– Interests and motivations– Capacity to give– Network of associates

More steps

• 4. Start with board members and others already engaged with organization

• 5. Each person must make own gift first, before asking anyone else

• 6. Timing: Consider special events in prospects’ lives (birth, marriage, change in

business)• 7. Prepare personalized presentation,

drawing on case statement and linking opportunity with prospect’s interests

Steps (continued)

• 8. Presentation plan– Personalized case statement– Financial records of organization– Opportunity for which gift is sought– Benefit to giver– Specific request and options

• 9. Peer makes appointment to present in person, in private

Don’t Be Afraid to Ask for a Large Gift

• Benefactor• Patron• Sponsor• Donor• Contributor• Friend

• Senior Associate• Associate• Sponsoring Member• Sustaining Member• Contributing Member• Member

Giving Levels: Two Examples

Stewardship of Gifts

• Thank the donor.• 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.

Planned Giving

• Come from the donor’s capital holdings • Bequests, insurance, gifts or property or

income, trusts, endowments• They may be deferred gifts (pledge in a

will of life insurance) or current (interest from a trust)

• Donors may gain by tax benefits• Usually require specialized staff skills

Sources of Grants

• Government (federal and state)– look for RFPs (Requests for Proposals)– search government web sites

• Foundations (http://fdncenter.org)– Charitable foundations– Family foundations– Corporate 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

A Board Members’ Fundraising 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?

Build Board Capacity and Skill• Talk with people on other boards that have success with

fundraising.• Visit the Foundation Center Library (Hurt Building, Main

floor, 5 Points, Atlanta) for more other materials and resources (http://fdncenter.org)

• Use prepared learning resources– Ga. Center for Nonprofits offers short workshops

(www.gcn.org)– BoardSource has several good booklets and

educational resources such as “Fearless Fundraising: The Video Workshop” (www.boardsource.org)

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