I 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.
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