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Top 10 Things to Understand About How Fundraising Really Works Today

Wouldn’t it be wonderful if everybody in your organization agreed on what it takes for successful fundraising?

Ha? Where?

There are a lot of myths out there about how fundraising really works.

Your Leaders Need to Be on the Same Page About Fundraising

That is, if you want to be successful in fund development.

Everybody in your organization – all the staff, board members, leaders of all types – they all need to understand and agree on certain fundamentals about fundraising.

You need to have a “culture of philanthropy” that everybody agrees upon and buys into.  Right?

What are the “Pre-Conditions” for Fundraising Success?

Here are 10 basic fundamentals on how fundraising really works – and how it doesn’t work – today.

Ten Basic Fundamentals for Fundraising Success

1.  Success in fund development is a long term project.

4 steps

It takes time and consistency to achieve the payback you want.

It takes an investment of time.

Over time, the dollar returns build up and generate more and more revenues.

This is because your visibility and pool of donors gradually grow – if you’re doing smart fundraising.

This means that: you can’t expect a fundraiser to come in out of the blue and immediately work miracles.

You’ve got to give them something to build upon, and to work with.

2.    There is a significant ROI in fundraising that many people do not understand.

Fundraising costs are not a black hole into which you pour money.

Fundraising actually pays for itself. (Yes, it’s true!)

Not only that,  fund development yields a multiple dollar return.

This means that: generally, investing one dollar in fundraising will probably yield 3-4 dollars back.

I’ve seen plenty of CEO’s try to squeeze the fundraising budget dry and then are unhappy when their contributions go down. They don’t see the cause and effect. They don’t understand that if they cut their direct mail budget and send out poor quality appeals, then the number of gifts will go down – and not because of the recession. 

Cost Per Dollar Raised for Different Fundraising Strategies

3.    Different fundraising strategies have different paybacks.

Cost of fundraising is much higher for a fundraising event is much lower than the cost of face to face visits.

For example, looking at the chart above: an event usually costs fifty cents on the dollar. (see my popular post, “why you should ditch your next fundraising event.”)

This means that: when you invest in major gifts staff or in capital campaign consulting, then you will probably get about a 10-1 return on your investment.

Different strategies have different paybacks.

Which way to go? Different strategies have different paybacks.

4.    Fundraising is a highly technical specialized business.

The professional body of knowledge of best fundraising practices is well established and researched.

We know what works in fundraising and we now have the research data to back it up.

This means that: it’s important to believe the fundraising staffer regarding what strategies work best.

This also means that your leadership should NOT make fundraising strategy decisions based on their own personal preferences and private opinions of what they like.

5.  Success in fund development requires help and support from everyone in the organization.

Too often board members and the rest of the staff look at fundraising as something that is apart from their own work.

The fund development functions are not integrated with the rest of the organization and its culture. Does everybody embrace the annual event and pitch in to help? Or do they complain and say “that’s not my job.”

Friendraising Creates Energy and Enthusiasm for the Cause

It takes all hands on deck to create successful fundraising.

This means that: if the whole organization doesn’t embrace and support fund development, your results will really suffer.

This also means that: if you expect a fundraiser to work self-sufficiently in a silo alone, you will not experience a lot of success.

Definitely refer to the Compasspoint report “Underdeveloped” for a more complete discussion here!

6.    Success in fund development requires consistency.

If you are not consistent in your communications, your thank you’s, your contacts with donors and potential donors, then you won’t be developing the kinds of relationships that will generate money.

This means that: if the position of development director is vacant for any length of time, you are losing serious ground by not being in front of your donors.

When the next director comes in, there will be nothing to work with because all your donors no longer feel connected.

7.    “Post-recession” donors have changed in their expectations from nonprofits they support.

Our profession studies donor behavior constantly.

And we are finding that donors want different things from the nonprofits they support.

They do not trust us as well as they used to.

They want to designate their gifts. They want clear information on where their money is going.

Help your donor feel happy that she gave to you.

Today’s donor most likely is an older female. For every $100 men gave, women in the same economic circumstances gave $256!

This means that: donors don’t want to give to the black hole of “unrestricted.” You’ll raise far more money if you let them restrict their gifts.

8.  Retaining your current donors is more important financially than finding new donors.

Did you know that on average, 65% of your donors do not renew their gifts?

If you are like other organizations, your fundraising is a leaky bucket.

You are losing donors as fast as you are bringing in new ones.

This means that: the real high dollar opportunity is to work on retaining your current donors. You’ll have higher fundraising returns if you do.

9. Communications to our donors are far more important than they used to be.

Good communications help prepare the donors for another gift.

Because of that, we are now “donor-centered” in our communications instead of “organization-centered.”

“Content management” is now a big issue. What do we share when the 8-page newsletter is giving way to a one paragraph update?

This means that: your communications to donors have everything to do with whether they give again. If you cut your marketing budget, you’ll probably see lower fundraising results.

Why are we losing our current donors so quickly?

How much is she really worth? How much would you lose if she left?

10. Your fundraising person is worth more to you than you may think.

Here’s why: the top reason fundraising staff leave is for another job to make more money.

And, when a staffer leaves, the fundraising program takes a serious hit.

Out the door go your warm, fuzzy relationships with important donors. Out the door goes the know-how on your auction, your mailing program, and other strategies.

Your contributions will decline.

This means that: you might want to consider what will cost you more: A salary raise to keep your fundraiser? Or the hit that your fundraising program will take?

 BOTTOM LINE

OK, I know I’ve tackled some sacred cows today. And maybe pushed a few buttons.

But hey, my goal is to be constructively provocative and generate helpful discussion.

Leave me a comment and let me know what you think!

 

 

 

 

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  • Joseph Griffin

    Gail, From my perspective you scored ten out of ten. I only wish you had alluded to the “uniform gift hypothesis,” i.e., the all too common common notion that that best way to raise $100,000 is to get one thousand people to donate $1,000. Thanks for this stimulating summary.

  • Joseph Griffin

    Oops. I meant one thousand people donating $100.

  • gailperry

    Hi Joseph, thanks a million. I sure hope this post helps my fundraiser colleagues communicate with their boards and bosses! Great point about the “uniform gift” notion – it’s total bunk!

  • http://twitter.com/FundraiserBeth Beth Ann Locke

    There are so many issues to discuss in this “Underdeveloped” report. Thanks for tackling a few of the issues in your straight forward and thoughtful way!

  • gailperry

    Thanks Beth Ann- I hope this generates some interesting discussion among board members!

  • http://twitter.com/JessGreenSD Jessica Green

    I totally agree with all of these, 8 and 10 especially! And they relate to each other, keeping your fundraising staff consistent makes it easier to cultivate your current donors. That’s not so easy if they’re being contacted by new people every year.

  • gailperry

    Hi Jessica, just wish we could get the board members to understand this!

  • LisaW

    You had me until point # 10. Retention is not based exclusively on financial compensation, and perpetuating that myth isn’t helpful to our non-profit sector, which typically can’t afford to give out pay raises. There is a lot that organizations can do to improve retention of fundraising staff – participative management, cross-functional job opportunities, educational stipends and time away, flex time, additional vacation…. the list goes on for a long way before pay raises appears.

  • http://twitter.com/MarlaGee Marla Grant

    Gail, invaluable collection of really important concepts. I may be stepping into a new role with a growing organization so this is timely and appropriate for the major players to see. Fortunately the principal who founded the organization gets this – no small wonder since he’s a financial professional.

  • gailperry

    Marla, so glad you are tackling these issues and ideas. Get everybody on board with this way of thinking and your path ahead will be much smoother!

  • gailperry

    Well i am just quoting Penelope Burk’s studies that the #1 reason fundraisers leave their jobs is to make more money. I agree there are lots of other factors that impact retention!

  • julie

    Great tips. I guess #8 would be the same for businesses too. Better to make the ones who are already customers happy than to spend your time and money getting new ones. So women are twice as generous as men. Hhmm….

  • gailperry

    Julie, that one about women IS really interesting, isn’t it. It makes the men in my audiences scratch their heads too! :)

  • Claire Axelrad

    Fabulous post Gail. I say “AMEN”! All of these are important. If I had to choose, I’d hone in on the changes that the digital revolution hath wrought. Donors encounter us differently, so we must respond in kind. They are often 2/3s down the path towards engagement with us (or away from it) before we know they exist. We no longer control the communication flow. So we absolutely must figure out how to become a part of that flow and, hopefully, how to gently guide our donors so that they flow in our direction. For this to happen, absolutely everyone in the organization has to be part of the conversation. The donor only sees ONE organization. They don’t care about our siloed departments.

  • Carolyn Hipkins

    There was a lot of commonsense in this post. Good job.

  • gailperry

    HI Carolyn – thanks and I sure wish every single nonprofit board member would read this! Gail