Fundraising is, for the most part, a fundamentally misunderstood activity. There are a lot of misconceptions, among nonprofit leaders, board members — even donors — about effective ways to bring money in the door.
Here are are a few of the worst delusions about fundraising that persist in the sector:
- Events Are Fundraisers
Very few nonprofit events generate a net income after you factor in the direct (food, venue, invitations, entertainment) and indirect (board and staff time) costs that go into them. They simply are not profit-generating activities. If you are looking to your events to bring in a profit, calculate the cost to raise a dollar to see if they actually are. Some nonprofit leaders argue that events generate value beyond profit, vague terms like “awareness” or “goodwill.” That may be, but unless you follow-up with individual event attendees to turn that increased “awareness” or “goodwill” into money, there is little financial value to events. Turn your energies instead to low-cost, mission-focused cultivation and stewardship events for your major donors and major donor prospects, then you might have something.
- Crowdfunding Creates Revenue
Nope, it doesn’t. Revenue is the on-going money you need to keep your doors open and your operations running. A crowdfunding campaign, by definition, is a one-time deal. It is organized around a specific need or timeframe. Therefore the money it generates is not easily or regularly repeated. Crowdfunding could make sense for a nonprofit hoping to raise startup, growth or capacity capital (all one-time infusions of money). But that Kickstarter campaign is not going to keep the lights on, so look elsewhere (like a financing plan) for sustainable revenue.
- Major Donors Can Be Recruited En Masse
Major donors are secured through a long-term, systematic, one-on-one process. There is no quick way to bring large donors on board. My issue with mass major donor fundraising programs (like the Benevon model) is that when you ask people as a group to pull out their checkbooks, you are leaving money on the table. The check someone feels compelled to write after watching a 20-minute presentation with their friends pales in comparison to the one they will write after you’ve built a one-on-one relationship with them over time. Put together a strategic major donor campaign, along with the infrastructure and systems to execute on it, and you will create a long-term major donor base (and its corresponding revenue stream) for years to come.
- Skimping on Fundraising Staff and Systems Saves Money
While you may save a few thousand dollars in salary by hiring a novice fundraiser (instead of an experienced one), you will cost the organization hundreds of thousands of dollars in missed revenue. The same is true with cheap fundraising systems like an ineffective donor database, an unresponsive website, a cumbersome email marketing system, or a poor (or non-existent) marketing strategy. Figure out what it will really cost to build the fundraising team and systems you need and then raise the capacity capital to get there.
- Endowments Solve Money Woes
Let’s face it, an endowment makes sense for very few nonprofits. Even if you were able to convince donors to let their money just sit in a bank account (which is a big “if”), that money won’t really impact your bottomline. Even if you raise an endowment of $1 million, it will only generate $50,000 (assuming a 5% return) of operating revenue each year. Instead raise a much smaller amount of capacity capital which you could use to strengthen your fundraising infrastructure (more staff, better technology). Those improvements could increase your annual revenue by many times more than $50,000.
It’s time to face the facts. There are smart ways to raise money and there are delusional ways to (not) do it. Embrace the power of money and use it as a tool to create a more effective, sustainable organization.
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