A strong infrastructure — internal departments and the overhead spending to back them — are the life’s blood of the business world. A strong infrastructure is just good business, and nonprofits cannot escape this fact. Yet, nonprofits tend to underfund their overhead needs. One need look no further than to nonprofit fundraising departments and programs to see this reality.
A study of more than 220,000 nonprofit organizations found that more than a third of these organizations reported no fundraising costs at all. One in eight reported no management and general expenses, and between 75-85 percent of these organizations incorrectly reported the costs associated with grant pursuits. The main concern of these organizations was the costs involved in building a strong fundraising department or program
So, what can nonprofits really expect to accomplish in fundraising, and how much does a robust fundraising strategy cost? Many nonprofits just think they can fundraise on no budget, or they think they can get fundraisers to work for a very low cost, for free, or (GASP) for a percentage based only on the success of the fundraising efforts.
This is bad planning. Would a business survive without a sales department? No, it would not. We must remember that nonprofits are businesses, and their fundraising departments are their sales departments. Following are some frequently asked questions about the importance of fundraising departments in the nonprofit world:
Q: I need to raise money, but I don’t have a budget for fundraising. What can I accomplish?
A: This one might be hard because while you can fundraise for little money, most of the time these efforts result in “friends and family” donations rather than moving towards a sustainable fundraising program. You can go with little to no money, but the reality is you won’t play in the big leagues.
Q: Can I hire a consultant that gets paid only if the grant is received or on commission?
A: According to the Association of Fundraising Professionals, this is a no-no. AFP believes that individuals serving a nonprofit for compensation must accept the principle that the nonprofit’s purpose and mission, not self-gain, are paramount. The logic is that percentage-based compensation puts self-gain in the driver’s seat, damages donor trust, and creates an incentive for self-dealing to prevail over donors’ best interests. Ultimately, AFP holds that percentage based compensation can encourage abuses, harms the integrity of the voluntary sector, and undermines the very philanthropic values on which the voluntary sector is based. Bottomline: Do not pay fundraising consultants on commission or on a win-by-win basis.
Q: What should I budget for a robust fundraising strategy?
A: While a 15 percent fundraising expense ratio is often cited as the “expected average,” so much more goes into the budgetary formula for a fundraising strategy. These factors include the size of the nonprofit, how old it is, the popularity of its cause, the scope of the nonprofit, and the list goes on. It is not a simple 2+2=Millions equation. Success comes with the development of an analytical model that fits the individual nonprofit’s needs with consideration, transparency, respect, and an engaged board of directors. The result is an investment in growth and a mission accomplished.
Q: How do I manage the expectations of the board, staff, or executive director?
A: This is a Steps:
1. Understand how much you need to raise and what specifically you need the money for.
2. Develop “buckets” that delineate different areas of funding opportunities for donors.
3. identify prospects.
4. Determine how you will cultivate, ask, steward, and develop a budget for all the things you will need to execute, including events, travel, meals, recognition, communication, CRM, staff, consultants, etc.
Remember, it is okay to have a small budget for fundraising, but having no budget will slowly starve the organization. Just like you plan for program growth, you have to plan for your support staff — fundraising and communications team — to grow and thrive as well. Still have more questions, contact Sharity today, and we will answer them.
