Many not-for-profit organizations raise funds from individual and corporate sponsors to augment grant and fee revenue. Before undertaking a fundraising venture the Board of Directors should identify the objectives of the organization and how they relate to fundraising. Once the objectives have been clearly identified then the volunteers and staff can develop and implement a fundraising plan to meet them.
Establish fundraising objectives
The goal of a fundraising campaign is, obviously, to receive money and gifts-in-kind. However, raising money is not an end in itself. Your Board of Directors should first clearly identify the reason additional funds are needed by the organization. Matching the organization’s fundraising objectives with the interests of its members increases the likelihood of a successful campaign. Some common objectives are:
- Purchasing specific items: Fundraising for specific purchases is one of the most common objectives and the easiest to promote. Asking for donations for computer equipment or specific enhancements, such as a music program, is a much easier task than asking for money to eliminate a deficit as the objective is positive and tangible.
- Improving your financial position: If your organization is having difficulty obtaining sufficient funds to meet operating expenses on a day-to-day basis then your Board may determine that a fundraising campaign is necessary.
Unfortunately, fundraising to remain solvent usually does not work for organizations whose revenue is primarily generated by fees and memberships. For example, a childcare centre with capacity for 60 children and monthly expenses of $25,000 may need to raise up to $2,000 a month to make up for lost revenue if enrolment drops below the break-even point by only two children. Raising $2,000 a year, let alone every month, from fundraising is a challenge for most not-for-profit childcare centres. The centre would be better off first focusing its efforts on bringing enrolment back up to the break-even level.
Similarly, if fifty percent of government grant revenue is eliminated, your organization should first work towards redesigning its program to cope with the reductions and then determine whether it is appropriate to support the redesigned program with extra fundraising dollars.
- Sense of community: An often overlooked benefit of fundraising is an increased sense of community among members of the not-for-profit organization. For example, a childcare centre might put on a fundraising dinner and dance for the children’s parents. As well as raising money for the centre, the parents get a chance to meet and, hopefully, have a fun evening resulting in a more closely knit community.
Develop a fundraising plan
Once the fundraising objectives have been clearly articulated then setting a plan to achieve them need not be difficult. The plan should specify:
- How much money, net of fundraising expenses, is to be raised and when the money will be needed. It is important that the fundraising goal be net of expenses as the organization only benefits from net resources raised.
- Whether the fundraising campaign is to be an ongoing campaign or a one-shot effort.
- Exactly what resources of the organization are available to the fundraising team including money, staff and volunteer time.
- Who the target audience is for the campaign.
- Efficiency benchmarks. For example, requiring that a campaign generate at least a set amount , net of expenses, per volunteer hour (e.g. $40 per hour) and that administrative expenses be no more than a specified percent (e.g. 10%) of gross receipts raised.
Reporting results to the Board of Directors
The fundraising committee should make regular financial reports to the Board of Directors including:
- A statement of revenue and expenses for each campaign and a comparison with the original forecast. Again, the report should focus on revenue less related fundraising expenses and not gross receipts.
- Whether efficiency benchmarks (e.g. dollars per volunteer hour) are being met and if not what recommendations the fundraising committee has to improve returns.
For ease of reporting and tracking of expenditures all fundraising proceeds should be deposited in a bank account separate from that used for general operations. Note that this must be done by law for all gaming campaigns such as bingo, Nevada ticket sales, and raffles. We also strongly recommend separate accounts for campaigns where donors have been promised that their contributions will be used for specific purchases. Efficiency considerations
- The Board of Directors should set up a fundraising committee to select appropriate campaigns and make sure they are executed in as efficient a manner as possible. Maintaining some continuity of committee members from year to year will ensure successful and not-so-successful experiences are passed on as lessons learned from Board to Board. [See Volume I Issue 10, p.45 for comments on establishing Board committees]
One of the responsibilities of the fundraising committee should be to monitor fundraising trends in the not-for-profit industry. Campaigns such as bingo and direct marketing have become less effective as more and more organizations have begun taking advantage of them. Staying one step ahead of the fundraising pack is difficult but necessary. Monitoring efficiency benchmarks should give the Board an idea when a particular fundraising strategy is running out of steam and a change is required.
- Try to match the duration of a fundraising campaign with the period over which your organization needs the money. Specifically, if your organization needs additional money every month then select a fundraiser that will generate funds each month. If your organization can philosophically accept using gambling proceeds then consider applying for a bingo or Nevada license that will generate funds on a continuous basis. If gambling proceeds are ideologically unacceptable you must look elsewhere. If, on the other hand, you want to raise funds for a single purchase a one-shot fundraising campaign may be more appropriate.
- Not-for-profit organizations frequently undertake a fundraiser and assume that staff will fit it in along with their regular duties. This may or may not be possible and in many instances staff do the fundraising on their own time.
Budgeting staff time and determining when the work will be done brings the Board’s staffing decisions to a conscious level. If overtime is necessary it should be acknowledged. To ensure the Board is aware of the extent of staff involvement, set a budget for staff hours and ask for regular reports of whether hours spent are greater or less than expected.
- Volunteer time is a resource which is often just as valuable as paid staff time when it comes to fundraising. The fundraising committee should estimate how much volunteer time is required as part of selecting a fundraising campaign. The anticipated dollars raised for each volunteer hour should be compared to the benchmark established by the Board of Directors. If the return is lower than required it may be time to find a more efficient (i.e. profitable) campaign.
Categories of fundraising campaigns
Selecting the appropriate fundraising campaign can be a difficult task. Fundraising campaigns usually fall into one of four categories. Each has its own strengths, weaknesses and legal requirements.
- Donor appeals: Donation drives for money (flyers, door-to-door campaigns, direct marketing) work best when the organization has a well known cause with a large public from which to solicit funds. Donor appeals often require a large initial investment in volunteer time (door-to-door canvassing) and/or money ( the printing and mailing costs of direct mail). The ability of your organization to issue charitable donation receipts is generally necessary for running a successful campaign.
- Sale of merchandise: Sale of merchandise works best when you have a dedicated membership. Sales of food products, clothing, gift wrap and coupon books are popular items. Reduce the risk of incurring significant up-front costs that may not be recovered. For example, ordering more t-shirts than can be sold for a t-shirt sale campaign could result in your organization actually losing money. Selecting a fundraising campaign where merchandise is purchased after orders are taken will reduce this risk. The down side is that impulse purchases are less likely to be made and every sale can require a follow-up visit to deliver the merchandise.
Given recent bad press involving the sale of coupon books you would be well advised to do your homework on the reliability of the distributors of the books. Ask distributors for several references from well known organizations selling the books and be sure to follow them up.
- Gaming: Using bingo, Nevada, raffle, Monte Carlo and other gambling schemes for fundraising can provide a steady stream of revenue if your organization itself is lucky and if revenue from gambling is philosophically acceptable. These campaigns often require a significant investment in volunteer time if they are to be run legally. They also have strict government reporting requirements. In our experience returns per volunteer and staff hour from these sources have declined significantly over the past few years as more and more organizations, especially government organizations, have jumped on the gaming bandwagon.
- Social and professional development events: Events such as fun fairs, dinner dances and professional conferences can be good for community building and can generate significant money. They also require much volunteer and staff time both to stage the events and to obtain donations from businesses and individuals. Generally these events can be held annually at best and are therefore most useful for one-time fundraising needs. Many organizations without a steady stream of fee revenue, such as school parent councils, use events such as spring or fall fun fairs to raise the majority of their fundraising dollars.
There is generally no need to obtain licenses for these events unless you plan to sell liquor or conduct a raffle as part of the festivities.
In conclusion, fundraising is not for the faint of heart. It requires energy, effort and commitment. Start by setting objectives then develop a plan and match the campaign with your cash needs. Remember, fundraising does not replace sound financial management for meeting day-to-day expenses.