Fundraising for Your Nonprofit Organization

1. Fundraising for YourNonprofit Organization Thomas P. Holland, Ph.D., Professor Institute for Nonprofit Organizations University of Georgia Athens, Ga.

2. 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

3. 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%

4. 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.

5. 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

6. 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)

7. 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.

8. 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.

9. 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.

10. 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

11. 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.

12. 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.

13. 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

14. 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

15. 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.

16. 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.

17. 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.

18. 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.

19. 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

20. 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 $$.

21. 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.

22. 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

23. 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.

24. 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

25. 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.

26. 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

27. 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.

28. 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.

29. 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

30. 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

31. 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

32. 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.

33. 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.

34. 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)

35. 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.

36. 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

37. 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

38. 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

39. 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

40. 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

41. 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

42. 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?

43. 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.

44. 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

45. Rules of thumb in annual giving • Understand what will motivate your donors or prospective donors before you plan your solicitation strategies. • Carefully match prospects to projects and to solicitation strategies. • Renew the same way you solicited the original gift. • Provide varied giving opportunities during the annual fund cycle. • Provide varied and multiple forms of appreciation during the annual fund cycle. • Track your results carefully to understand your donors’ giving patterns.

46. 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.

47. 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

48. 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.

49. 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

50. 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