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The Problem With Nonprofit Events

By Nell Edgington



nonprofit eventI was speaking to a group of nonprofit leaders recently about how to Move from Fundraising to Financing, and when I came to the part about events, the room went predictably quiet. Looks of shock shot around the room. Events are so ubiquitous in the nonprofit sector, how could I possibly say they have little financial value? It was heresy.

My argument in that room (and always, always) is that the nonprofit sector’s belief that events are a legitimate way to raise money is misguided.

For the most part, when you factor in the direct (food, venue, invites, entertainment) and indirect (staff, board and volunteer time) costs of an event, you either break even (best case) or lose money (worst case). The error many nonprofit leaders (board and staff alike) make is looking only at the gross revenue of an event (“We made $50,000!”) as opposed to the net revenue (“After factoring in expenses, we actually only made $20,000 on that event…”) and the cost to raise a dollar (“Whoa, it cost us $1.50 to raise $1.00 at that event!”).

Because it was a group of nonprofit leaders, they remained polite despite their disbelief (God love them!). But they did argue with me, and here is how I responded to each of their refutations:

“Board and staff time aren’t event expenses.”
The argument is that since staff salaries are a fixed expense and board (and other volunteer) time costs nothing, you shouldn’t include these items as event expenses. But you absolutely should. Every resource a nonprofit has (especially board and staff time) is limited. When you ask a board member to spend 20 hours volunteering to put on and attend an event, that is 20 hours of their time you can’t use in other (more profitable) ways. This is the idea of opportunity costs. As a nonprofit leader you want to make sure you are putting each resource to its highest and best use.

“Even if an event isn’t financially profitable, it raises awareness.”
I know I’m on a “raising awareness” rampage lately, but an expensive and time consuming activity like an event should never have such a vague goal guiding it. Awareness is not a real, tangible financial result. Awareness does not equal action, and it certainly doesn’t equal money. An event attendee’s vague sense of having had a good time quickly dissipates. Instead of trying to raise awareness, create a real strategy for getting in front of and encouraging action from your target funders.

“But our event builds our brand.”
Building your brand is about as meaningless as raising awareness. Forget the marketing jargon, the word “brand” is just a fancy word for what people think of your organization. I know this is blasphemy, but it simply doesn’t matter what people who are not in your target audience(s) think about your organization. In reality you only want to “build your brand” among those you are specifically targeting. So segment the market, figure out your target audiences, and then find cheaper, more specific ways to get them to act.

“We use events to connect with major donors”
Yes, now you are on to something. Let me be clear, I’m not saying that you should never host events. To the contrary, there absolutely are times when events make sense. When events are mission-focused, free to attend, and focused on cultivating and/or stewarding current or potential major donors (individuals, foundations, corporate leaders) they can make a lot of sense. But ONLY if you follow up with attendees on a one-on-one basis to further invest them in the organization and eventually ask them to contribute or renew their contributions. And ONLY if you don’t charge them to attend so that you can ask them for a bigger, and more meaningful gift down the road.

I stand by my claim: nonprofit events are not efficient fundraisers. Do the math on your events and see if they generate a positive cost to raise a dollar. If not, you should restructure or abandon them. But don’t continue doing something you hope is making money when it isn’t.

Photo Credit: Graham-Killers

 

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.

Thursday, September 10th, 2015 Innovators

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21 Comments to The Problem With Nonprofit Events

Gayle L. Gifford, ACFRE
September 14, 2015

Nell,
I always hate to be in the position of defending fundraising events, but I have to ask: what data do you have to back up your very definitive statement:
“nonprofit events are not efficient fundraisers”

I personally only have anecdotal data from my 30 years in fundraising. But I would never rule out special events categorically from the fundraisers toolbox.

I’ve worked with some incredibly talented events fundraisers who have strategically used this particular solicitation tool to not only raise (net) significant funds, but also have strategically used the special event to build significant public awareness (which can be leveraged to attract donors), to launch individual giving campaigns, to excite their constituency, and to engage volunteers.

Even if the event delivered just a 1.5:1 return, that might make it a better investment than acquisition direct mail where ROI’s could be 2:1 and still considered a worthy investment.

And, I’ve also seen special events as important vehicles to facilitate giving from 1) seasonal constituents for whom your party is the social event of the summer/fall/winter/spring season and are only going to donate this way 2) businesses where you can’t get in the charitable door but can get in the sponsorship or marketing door; and 3) donor groups new to philanthropy for whom the quid pro quo or fun time aspect of an event is an important gateway to future giving.

I agree completely that it is a mistake to just jump in. Unprofitable events are those that start without a fundraising strategy and execution plan (Pull out those gift pyramids from the start).

All fundraising takes staff time. All of it…

IMHO

Nell Edgington
September 14, 2015

Gayle,

Thank you so much for your very thoughtful response to my post.

I agree with you that all fundraising takes staff time, absolutely. My argument is simply that we need to put the very limited and valuable resource of staff time (as well as the very limited and valuable resource of board time) to its highest and best use. And for the most part, nonprofit events that aim to raise as much money as possible are not the highest and best use of staff and board time. My data on this comes from running the numbers not only on events when I was the staff fundraiser, but also on events I’ve come in contact with in my consulting. But don’t get me wrong, I don’t believe that this is an iron-clad rule. Certainly there are exceptions where a nonprofit event is done so efficiently that it can generate a positive return on investment. But much more often than not there are better, more efficient ways for nonprofits to make money.

To your point about an event’s cost to raise a dollar being better than direct mail, I actually think direct mail is an even less efficient way to raise money. Direct mail is an example of “push” as opposed to “pull” marketing, which I talk about a lot, and is increasingly, especially in such a crowded marketplace, a terrible way to raise money.

I understand your arguments for 3 ways in which events can be “important vehicles to facilitate giving,” but I would argue that all 3 of these come from the (I hope) dying mentality that “charity” lives beside the real work of the world. Quid pro quo giving and social event giving exist in a world where “charity” lives beside, instead of fully integrated into, the economy. I believe that we are moving to a place where the work of social change (historically the work of “charity”) is fully integrated into the rest of the economy and you no longer have to pay the price of admission by writing a check or sitting on a board. Rather, the work of social change is just as important as the work of making widgets or the work of building roads and everyone understands that in order for all of it to work well, we need to finance it effectively.

At the end of the day, I’m simply asking nonprofit leaders to run the numbers and put their limited resources toward the most efficient ways to bring money in the door.

Gayle L. Gifford, ACFRE
September 14, 2015

Nell,
I totally agree that running the numbers and putting limited resources toward the most efficient — which I would describe as the longest lasting, lifetime value way to raise money — is the starting point and that too many organizations fail to raise funding because they fail to do the math.

But I am not one to say that those numbers fall to one side or another for all organizations. E.g. We know that face to face fundraising is them most effective and if followed-up with a strong donor-centered stewardship program also likely to be the longest lasting. But over my 30 years in fund development, I have learned that each organization has to find the funding model that works best for it. What works or is possible or even just efficient for a national or international organization at huge donor scale is likely to be entirely different from a small, local nonprofit.

I too long for/ and am working for the day when social justice is integrated into our economy as well as our philanthropic life… though that’s going to take some pretty massive restructuring of an economy based on unlimited resource extraction and consumption. But I still hold out that hope.

Best, Gayle

Nell Edgington
September 14, 2015

Gayle,

I completely agree with you that there is no one size fits all in the world of nonprofit funding. Each nonprofit organization must create an effective and sustainable financial model based on their mission and core competencies. But I also believe that too many nonprofits see the shiny object of fundraising events and think that is the way to go, when more often than not it is exactly the wrong way to go.

I agree with you that fully integrating social change into our economy is not going to be quick or easy, but the truth is that it is already happening. There is a real convergence of the nonprofit, for-profit and government sectors and the result is that social change is now rather ubiquitous. At the same time, technology and the ways in which we communicate are changing rapidly as well. Add to that a Millennial generation that bakes social change into everything they do, and I think you start to see the beginnings of the “pretty massive restructuring” you and I are talking about.

Nonprofits need to do the analysis and abandon activities that just aren’t effective. And then they need to look to some of these structural changes we are witnessing to find more efficient ways to create a sustainable financial model for their social change work.

[…] “ The nonprofit sector's belief that events are a legitimate way to raise money is misguided.”  […]

Mimi Heberlein
September 17, 2015

Hmmm. Perhaps this man has never heard of the words, “in-kind donation”. There are a lot of businesses that would be more than happy to donate product, services and event space 100% free to help out charitable causes because they care. They trick is, like everything else in life… You Have To Ask Them. Every business has an advertising budget and they also are aware of tax deductible donations that can go hand in hand. The cost to purchase an ad in a newspaper, on television or radio can cost thousands of dollars and the individual impact is 10 to 60 seconds without potential customers ever tasting the food you sell or experiencing your services. Donating a food course to a charitable event is a direct interaction with potential clients when they try your products and you get to talk with them as you serve it to them. It’s the best advertising ever for businesses like food, wine/beer/beverage people and event spaces that let charitable function goers see their facility first hand and in action. Again- best advertising ever. This guy had never met the folks at Greater Lansing Food Bank who have now brought millions of dollars into the very worthy cause through the Empty Plate event. Charitable events like donors put their money where their mouth is and everone tastes the sweet success of fundraising together.
I’ve been in event planning and the hospitality/tourism industry since 1978. The REAL problem with fundraising events is COMMITTEES. Being on a fundraising committee for a “cool” charity is a pass-time for most people, and not a mission like it should be. I call this Year Book Syndrome. They have NO interest in actually doing any work, making calls, knocking on doors or rolling up their sleeves to help. They just want to sit around a table and pretend they know what they’re talking about so they can go back to their work and write “committee member” on their LinkedIn page. THAT has to stop. Committee members should never be the Queen of England- a figurehead, there out of courtesy. They should be required to take on tasks and complete them or they are OFF the board or committee the next year. Most of the moneyed people who take up space on committees have a lot of friends and colleagues who could easily be tapped into for corporate donations, products, services and auction items. These people have condos and some have private planes whose use could be donated in conjunction with a condo for an amazing weekend auction prize. Pony up or get off the committee. saying you have power and influence means nothing if you can’t actually wield it. I have too often been a working committee member and watched others who only showed up for the food tasting to decide on the luncheon menu. if you want to just have your name on a list and your picture in a program then THAT should cost $10,000 minimum- be a donor, not a committee/board member. Look at the fundraising efforts that are successful and follow their lead.

Nell Edgington
September 17, 2015

Mimi,

Thanks for your comments. I agree that fundraising committees can be an enormous waste of time and that board time could often be used in much more profitable ways.

To your point about in-kind donations, I think there is danger there at times as well. Unless an in-kind donation offsets a budgeted expense it is not of benefit to a nonprofit. And securing in-kind donations can often take just as much time, or more, than securing cash gifts, so the return can be even less.

TomD
September 17, 2015

I have been an event planner for several nonprofits. I think it’s important to note that every event is different, and furthermore that events play different roles at different types of organizations.

A small social service charity that throws a modest event and “nets” $10,000 (regardless of all the indirect costs, which we could talk about forever) from 100 attendees could, in fact, make a case that this event “raised awareness” for relatively little investment.

A large arts organization that throws an extravagant opening night gala that costs $1 million but grosses $2 million while getting major media coverage etc? That event was not a waste of time.

A small arts organization that throws an extravagant opening night gala that costs $50K and grosses $100K while giving everyone on the staff an ulcer? This is not a good idea.

I have been in all three camps and I know this is a complicated question.

TomD
September 17, 2015

I should add that I’m a little puzzled by your dismissal of the importance of building and maintaining your brand. A large arts organization, the kind that serves hundreds of thousands of community members and always has inventory to move, the kind that has a budget of $25 million or more, the kind that may in fact be the only organization in an entire major city to offer arts education to public school students, the kind that sells merchandise or sound recordings or whatever – this organization is very very concerned about its brand.

I often read advice intended for nonprofit leaders and am shocked by how misguided it seems, until I realize – oh, this author is really only talking about small organizations. Or about health care organizations. Or about Symphonies. Or whatever. This is my fault for misinterpreting things, but it’s important to remember that not every piece of advice is equally relevant to the entire nonprofit community.

I feel we need to move away from talking about “the nonprofit community” as though it were a monolith with uniform needs and challenges.

Nell Edgington
September 17, 2015

Tom, thanks so much for your comments.

First, to your 3 examples of different kinds of events. Again, I would argue that “raising awareness” and “major media coverage” have a meaningless bottomline. I would argue (and have before) that there is little financial value there.

To your point about moving away from talking about the nonprofit community as though it has uniform needs and challenges, I agree. The nonprofit sector is at least as diverse as the for-profit sector. There are a whole host of various business models, domains, and areas of expertise. We certainly should not think that one size fits all in most things.

However, I do think that there are certain things that pervade the sector. One of which is the “charity mindset” that handcuffs a nonprofit, making their work harder and less efficient. I happen to believe that fundraising events, for the most part, are one of these. Certainly there are exceptions to every rule, but personally I would like to see fewer fundraising events in the sector. I think we would all be better for it.

[…] I just read Nell Edgington’s excellent piece. […]

Jennifer Oseng
September 29, 2015

I am a seasoned 27-year development professional, and I believe the special event should be part of the development efforts, although I believe an organization should have only one or two events annually, at the most. From my vantage point, there are many donors who will ONLY give to you through special events. I am a huge proponent of spending my time and energy on major gift calls, but if I have a board member who puts 4 couples at her table and each one of them donate $5K during the “fund a need/raise a paddle” portion of the program, that’s a win-win for me. In most cases, those one-on-one donor meetings with the couple would be difficult if not impossible to set up; however, the introduction at the event, along with our mission-centered program, is the perfect venue for that gift. While I am now cultivating those couples for additional and increased major gifts, the introduction and initial gifts were perfectly orchestrated at the event. In addition, there are many corporations, like law firms, accounting firms, etc. that will buy a table at an event, or a golf tournament, because they can write it off as marketing, but they won’t give you a straight out donation towards programming. You should listen to Dan Palotta’s ted talk about the way we think about charity as being dead wrong. Fundraising costs are not the issue. The issue is the size of the pie and how much money we are raising!

Nell Edgington
September 29, 2015

Jennifer, thanks for your comments, and I am very familiar with Dan Pallotta’s work. And I completely agree with you that we need to grow the size of the pie, or the money flowing to the nonprofit sector overall. But I would argue that the way to grow the pie is not through events. Rather it’s by changing how we think about and articulate the social change work that we do. We have to get to a place where the work that nonprofit organizations do is not something to be talked about once or twice a year at an event, but rather something that is baked into our lives.

It sounds like you have found a way to make events successful for your organization. However, I would encourage you, just as I do every nonprofit leader, to do the math to make sure that the net revenue and cost to raise a dollar of those events are effective. I would hate to see you, or any nonprofit leader, working so hard to pull off an event that are actually not as profitable as you might have thought.

Lauren
January 6, 2016

Hi Nell,

I’m a little late to this post, so I’m not sure if it’ll get to you. I am very new in the fundraising world and the professional work force in general (I just graduated college in 2014). I took some training classes with AFP last year and it seemed as though almost all the teachers who were all fundraising professionals felt the same as you about events. People in the organization I work for think events are the way to go, even though they’ve had major failures in past years. I just want to go into this job and my career doing the right thing and knowing the right information.
What do you suggest as the best way to fundraise for an organization if events aren’t the best way?
Thanks!

Lauren

Nell Edgington
January 6, 2016

Hi Lauren, welcome to the nonprofit world! It sounds like you will be a great addition to the sector. I believe that nonprofits should Finance, instead of Fundraise for, their work. This is a completely different approach, and it involves taking a much more holistic approach to using money as a tool to achieving social change. I would encourage you to start here: http://www.socialvelocity.net/financing-not-fundraising-a-social-velocity-blog-series/

Let me know if you have additional questions. Good luck!

Len Dalquest
February 17, 2016

I am a 501c3 Board Member. I use the Salvation Army as an example for our annual fund raiser dinner. They maintain a large volunteer group with minimum staff effort. The Sr. Staff and Board Members are there. A prominent guest speaker is paid for. All in all it attracts old and new donors for the reason that it is “Buy a Table” only a VIP turnout..

Our major donors are scattered inCounties of Rural Oklahoma, most of them “weekendeers” on a very large lake. I think you would agree, contacting them is difficult.

We added very classy silent and live auctions with a very specific “Fund A Need” at the end with bidders competing to be the highest bidder or at least matching. A prime rib dinner and cash bar makes it a social occasion. Large donors are invited by special invitation to a cocktail meet and greet the guest speaker before the main event. We do not pay for this speaker, but honor him/her for their service (Governors,Senators, University Presidents and other such dignitaries have all been so chosen). We do not count staff, nor volunteer efforts and have a waiting list to join us. We have consistently netter over $100,000 after food and minimum out-of-pocket costs costs Pro auctioneer, sound system, banners, etc are “In Kind”.

Trust me, we have a very aggressive follow-up program. Many of our big donors tell me they are happy to make a large annual donation and the banquet and social outing is a great reminder and excuse to deliver the check personally.

I agree with your concept and enjoy your postings. I just wish you could emphasize that there can be exceptions depending many factors.

Marcacci Communications
June 17, 2016

[…] While the debate continues on the efficacy of special events in raising revenue, many argue that they aren’t your best bet for a high return on investment. Depending on the source, the general ROI fluctuates though most seem to agree that it isn’t […]

Kelly Leichtnam
October 14, 2016

When calculating the efficiency of a fundraiser cost to raise $1 do I add in kind donations against the effeciancy. For Example. I put on a fundraiser that costs 25k and generates 90k in total revenue. However I also additionally received 25k in in-kind donations. Do I count the in kind donations to the total cost to put on the event (50K) or leave in kind donations out of the cost to put on the event?

Nell Edgington
October 17, 2016

Kelly, if the in-kind donations off set the costs to put on the event, then include them just as you would revenue. But if the in-kind donations are items that you would not have purchased otherwise, do not include them at all.

[…] “When you factor in the direct costs of an event (food, venue, invites, entertainment) and indirect costs of an event (staff, board, volunteer time), you either break even (best case) or lose money (worst case). The error that many nonprofit leaders make is looking only at the gross revenue of an event as opposed to the net revenue,” — The Social Velocity […]

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