Nonprofits have been asking this question for years, probably since the first nonprofit existed. Even if they aren’t ‘hard’ costs, your nonprofit likely has a cost of fundraising. It could be a staff member (either full or part time), event costs, an online platform, and presence, postal charges or participation in local programs. Most times these costs are rolled into “overhead,” and as long as that amount can pass the reasonableness testing, it shouldn’t raise any red flags.
What about ‘hard’ or actual out-of-pocket costs, specifically when it comes to hiring a solicitor or telemarketer to help raise funds? There are generally two options – fee for services or percentage of funds raised. When funds are limited the percentage option may seem like a great solution to fill the coffers. The process can look good on paper, no upfront costs and you pay a percentage of what they raise. The problems start when that percentage is too much; and what is too much? Daniel Borochoff of Charity Watch recently told Fox News “we think it shouldn’t cost more than $35 to raise a hundred dollars. ii”
With that guideline in mind, why are some nonprofits spending so much more, even paying more than is raised? In fact, while almost 80% of charities failed to meet the 35% bar, almost 25% of charities keep less than 20% of what was raised on their behalf. Even more concerning more than 20% LOST MONEY with contract fundraising in 2015, 2014 and 2013!
Sometimes it can be a bad contract that includes ‘hidden fees and extras.' Costs can also reflect the limited recognition of the nonprofit. When you have little or no ‘name recognition’ or exposure, it is going to be a bit more difficult to fundraise from the general public. These people are likely calling from a purchased list and may never even have heard of your cause!
However, if hiring fundraisers are the only option that your nonprofit feels it has, here are a few guidelines to keep in mind:
The first thing, of course, is the contract should explicitly state the details of the payment calculation and a limit or cap – this is definitely one time you want to have an attorney involved!
Thoroughly investigate the company or individual you are going to hire, check references and request proof of previous successes that you can verify independently.
Consider a fee and bonus program; you can connect the bonus to overall success vs. a percentage of the funds raised.
Before you commit to hiring any fundraiser, evaluate your other options, such as martialing your volunteers to make calls – provide a script and some training, you may find their passion for your organization far outweighs the ‘skills’ of a professional. Ask those same volunteers, your staff and board for references of people that they can ‘introduce’ to your cause, creating contacts for you or your team to pursue. In most nonprofits the Executive Director allocates a large part of their time to fundraising, providing a list of contacts can make those efforts much more fruitful.
Don’t forget to make technology a part of your fundraising strategy. Crowdfunding platforms which capitalize on social media contacts can be very successful when properly planned and executed. Digital Donations own crowdGIV™ program has no upfront costs; fees are specific and far below the 35% stated previously. When you add in the unique Partner Rewards program your nonprofit can be just as successful if not more so, with much less cost!
If you are ready to start a CrowdGIV or Partner Rewards program give us a call at 888-705-2220 or email us.
Digital Donations™ develops fundraising and marketing solutions that connect corporate America with charitable organizations.
i General guidelines are 25 – 30% of overall funds raised per Charity Navigator.
ii FoxNews.com December 29, 2016