Nonprofit fundraising is a complicated topic and a crucial function. Nonprofits are in a special position from companies in that they cannot price their services and products to, well, make a profit. Operating budgets have to be conceived from other sources than program revenues.
This is a manual focused on fundraising for nonprofits. It will discuss the following major topics:
1. Crafting a nonprofit fundraising strategy
2. Optimizing your organization
3. Kickstarting your donor development
Before we begin, here is a brief background on financing.
How are nonprofits funded?
The following classes make up the bulk of funds for nonprofits:
Fees for Goods/Services from Private Sources – this is driven largely by hospitals and higher-education nonprofits who charge fees for services, tuition, etc..
Fees for Goods/Services from Government Resources – includes things like Medicare and Medicaid reimbursements
Government Grants – money awarded to organizations with varying stipulations attached
Private Contributions – charitable donations and grants from private individuals, corporations, etc..
Investment Income – endowments compose a significant portion of income, especially among foundations
Where do donations come from?
Personal contributions make up the greatest portion of non-program-related revenue streams for nonprofits. These donations totaled $373.25 billion in 2015.
While this represents enormous potential, it brings even more enormous challenges for nonprofits looking to focus marketing and fundraising strategies on particular stations. The need for personal touch with the majority of individual donors makes it hard to scale funding strategies focused on individual donors.
Any successful initiative requires a plan. To optimize your business’s potential, it’s important to understand where you are now and define specific paths to where you need to be in the future. A useful strategic plan for your fundraising function will provide a sense of direction for your company and outline measurable goals to evaluate progress.
1. Establish a vision
The first thing you want to do is create an ideal version of your organization. Leslie Allen from Front Range Source printed a good guide on the topic where she suggests you ask yourself the following questions:
A little administrative work should also be carried out today… specifically setting a budget for how much you would like to spend on this nonprofit fundraising strategy and an implementation timeline that you would like to achieve your goals by.
2. Understand your current state
Describe your organization as it is now. This will form the foundation for which your plan will be implemented against.
You should take inventory of all the various funding sources you currently use and have used in the past. Try to rank and prioritize the efficacy and quantity of funds raised from each one. Take notice of what’s worked in the past and what has not.
Take an external perspective if possible. If you can manage to audit your company, take action. Otherwise, be as impartial as possible in deciding how successful your company performs in this area, and compare it to other organizations. Use either current employees or colleagues from outside the organization to find a picture of how other nonprofits perform.
Understand your strengths and weaknesses! If you’re too overly funded by a particular source-let’s say a specific government grant that comes in every year and funds 90% of your budget-you need to tackle this. Like every business overly concentrated on one customer, you run the danger of being shut down, should the authorities grant stop.
Make your organization invulnerable to things you can’t control.
3. Envision your future state
Use the answers produced on your vision creation to help manage your future state. Where the vision phase is all about creating conceptual ideals for what your organization should look like, this stage should be about measuring them.
Decide exactly what you would like to concentrate on. If you decided that a focused nonprofit fundraising strategy was the way to go, make sure to document why it’s the best path and what the benefits of this choice is.
The result of this phase should be a set of goals that you would like your organization to achieve.
4. Perform a gap analysis
By quantifying your upcoming state and documenting where you stand today, your next step is to carry out a gap analysis. It’s critical to know where all the major gaps are in your organization.
If you have 90% of your revenue coming from one government grant and your upcoming state involves diversifying your revenue streams, then obviously here’s a significant difference in your strategy.
Always know your organization’s vulnerabilities. Prioritize what you believe are the most critical gaps and areas that could create the most impactful change if they’re closed.
5. Connect the dots
The last step requires determining precisely what activities will need to be done in order to achieve your desired state.
Divide the aims into key initiatives. You should ideally produce a list of projects which can be implemented on, each with different positions for cost, effort, time, and impact.
Create a matrix which assesses each project against these four dimensions and rank the projects based on your priorities. If your strategy needs to be completed quickly with less regard to price, then rank projects requiring less time higher. If you want the biggest impact of your initiatives, then rank these ones higher, with the understanding it might take longer and cost more than other projects.
Always understand the project management triangle of price . time. Any strategic decision will be based on these three limitations. Any change to a single constraint requires a change in others. Or quality suffers.
Be sure to get all the proper stakeholders involved in this priority setting process to be certain your strategic alignment matches your organization’s vision and your board’s idea of what has to be done.
Optimize your organization for change
A common mistake among nonprofits is the absence of a single person who oversees the entire “money function” of the organization. It is not enough to have an individual that manages only government contracts, or just individual donors – you absolutely must have someone who manages all cash flows into the organization.
Development manager office
To ensure you hire or promote from within the perfect candidate for your job, you need to have the ability to supply enough of a salary to lure someone to stay and grow the business.
It may be painful trying to think of the money to pay somebody to do this job-which is typically lower than executive director or other high-ranking positions in your organization-but it’s worth it.
You’re paying for men and women who spend 100 percent of their time focused on cash. And in a few years’ time, they should be paying their own wages with the work they’ve done to boost your organization’s capacity.
Build a business environment that enables development.
Beyond just financing the salary of your rock-star fundraiser, it’s important to provide this person authority over creating a team and office within your organization. By choosing the right person, you can ensure that they know precisely how many staff they need and what functions they will need to hire to perform specific tasks (marketing plans, technology updates, cold calling, etc.).
Additionally, you have to budget for costs like software, computer upgrades, marketing collateral, association dues, professional development, and so forth.
You want to create an environment that permits development success. This way, you help retain top talent that can executive on longer-term strategies that have the maximum potential for organizational growth.
Bottom line – you would like to hire the right person who will help grow your organization. They need the ability to propose and set a budget and to executive on their strategies.
Bonus tip – leverage volunteers.
Use unpaid support to support your efforts in reaching out to people. Especially for associations with slim budgets and staff, this can be an effective tool. Tap into your alumni pool and other partners/alliances you may have formed before.
Volunteers can be especially useful when promoting events, selling tickets, or soliciting sponsorships.
Engage with your board
Your board of trustees ultimately sets the vision and direction for your organization. As a result, we will need to spend some significant time making sure everyone is aligned with what we are trying to accomplish with fundraising.
The role of the board typically changes depending on the size of the organization-smaller organizations have board members who typically take a more operational and hands on strategy, while larger organizations may have board members more focused on governance issues.
Regardless of the size of your nonprofit, it’s critical to be sure everyone understands the importance of philanthropy and can agree on a high-level strategy for accomplishing the mission.
Beyond agreeing on strategies, this can be an extremely valuable task in helping to grow and retain donors. For example, a simple thank-you goes a long way. A fundraising study performed by Cygnus discovered that when donors got a thank-you telephone from board members within days of making a gift:
Their clout alone brings great respect to the men and women who donate to the organization.
As important as engaging board members with donors, is keeping donors participated in the plan. Present strategy suggestions and work in their feedback.
Keep everyone involved in the budget setting process so that they know a plan goes beyond simple concepts and pipe dreams. The board needs to understand that fundraising is staff driven and presenting a simple projection of expected costs and revenue with a strategy can go a long way in helping drive change.
Above all – realize when you have good board members and do everything you can to keep them. Keep them motivated. Their contacts and knowledge go a long way toward helping push your strategy, so understand what you have while you have it and do not risk losing great board members to greener pastures.
Measuring and communication impact
After staff and board considerations, the next major item to get ready for is impact dimension. You will need to have the ability to communicate your story with numbers and words.
Nonprofit fundraising is significantly more than asking for donations. It includes everything before and following this step… from searching for supporters to expressing gratitude and measuring impact. Measuring impact helps you do two things:
Evaluate fundraising campaign effectiveness
Prove your program’s effectiveness and help tell a story that will attract future funding
Your programs currently exist to further your organization’s mission. And for apps that do it well, there should be data that prove it. Make sure to have the systems in place to capture the results of your programs’ efforts. (Note: systems don’t have to be complicated… they can simply be processes used to record results of actions.)
Use your mission to determine a set of outcomes you wish to attain. Then work backwards to ascertain the activities you can perform to get there.
To find out more check out Whole Whale’s manual on measuring nonprofit effects.
Once you’ve set up your impact measurement procedures, figure out ways to communicate your results on your website. This may come in the shape of dashboards, case studies, personal stories, etc.. Be sure to consistently update your articles to not just keep things fresh, but convey your continued success.
If a donor visits your website and sees overwhelming evidence of the good things you’re doing, he’ll be more likely to buy into your own cause and believe that his donations are being well spent.
How much do you spend on fundraising?
CharityWatch assesses the effectiveness of nonprofits across a wide range of statistics. One particular interesting number is the “Cost to Raise $100.” Just how it sounds, this reflects how much it costs a charity to bring in $100 of public contributions.
On this basis, a nonprofit is considered exceptionally efficient if its price to raise $100 is $25 or less.
Practically speaking, determine how much you want to raise with your nonprofit fundraising plan or even a specific campaign. Begin with a 4:1 ratio to get to the $25 mark and move from there. If you wanted to raise $5,000,000, you’d begin your budget at $1,250,000. Adjust from there.
Kickstart your donor development
The section that probably brought most of you here… actual donor development.
You have your organization set up for success. You have a clear vision of what you wish to accomplish.
Prospecting and donor study
Many experts like to share a fundraising pyramid. A strong general fund of donors supports a smaller core of mid-level gifts in addition to which is a few major donors to your organization.
You want to maximize every level of the volcano and continuously work on moving individuals upward.
The first step is to create a list of prospects.
Direct mail or email
Brainstorming of prospects (using board members and staff alike)
Prospect research (databases filled with free or purchasable contact lists)
Donors give for their own reasons, none. When assessing your current prospect pool and looking for more, assess these characteristics of each prospect:
Longevity – How long has this person been giving? If they possibly move up the pyramid if they have been here some time? Start looking for the latter as good opportunities to move up the pyramid.
Engagement – Search for people who are reading your newsletters, responding to your requirements, reaching out about your organization… these are the types you need to move up the pyramid.
When you start a prospect collecting mission, it could not hurt to start by scrubbing your current database (whether its paper documents or an Excel workbook or an whole donor management system). It is great to get a clear idea of everybody you’ve previously had relationships to understand your likelihood of using these people as a foundation for your new strategy or as referrals to new candidates.
As soon as you’ve got a baseline of prospects, decide if you should leverage more advanced technology for your nonprofit fundraising efforts.
The benefits of a formal CRM system are enormous for all kinds of organizations. With the proper system in place, your company has the ability to record all communications with donors and prospects, track their personal characteristics, create simple email campaigns, find volunteers, etc.
Especially useful are these systems’ abilities to report on progress during campaigns and examine the demographics of prospects and donors. You can run reports that help determine which people in which locations to target for each particular kind of outreach. This helps when trying to nail down a specific donor outreach campaign.
TechSoup has a breakdown of 8 best CRM systems for nonprofits as well. Perform a similar analysis for this when assessing applications for your organization.
Ensure donors keep giving
You have two major goals with donor development:
Ensure current donors keep contributing.
Attempt to move donors up to mid-level and major gift level status.
Some useful tips for maintaining and enhancing donor relationships range from simple thank-you notes to community recognition to providing access to special information or services.
Invite people individually to events or conference calls you might have. Point out donors who have contributed in a monthly newsletter. Everyone enjoys a little recognition, particularly if they’re intent on furthering their own missions of giving.
More tactically, you may use donor surveys and other donor-directed communications to attempt and get a feel for the way they perceive your company to be doing. Gear your marketing collateral to them based on specific programs and results that you’re achieving.
As you’re publishing data and other marketing collateral for broader consumption, try to focus certain pieces to donors only to let them see in the progress you are really making within an organization. You can use a more friendly and casual tone when communicating with current donors, to help aid in the relationship building process.
Hold special events only for donors. Have a social where donors can meet one another and discuss their own missions and visions for what they want to attain. Everybody enjoys being connected with more people who can help their cause… so use this avenue intelligently to help boost relationships among your community.
Work the pyramid
Asking for more money is never easy, especially if you fear losing a connection with someone who has given faithfully to your organization for many years.
However, you have to overcome this fear and ask for more money.
Why would someone consider giving you more cash?
First, they need to believe in your mission. It must support something they find dear to them. So, communicate your mission accurately and descriptively.
Second, they need to believe in your group and you will use their money wisely. No, they do not expect a return on their investment, but with the thousands of nonprofits out there competing for their dollars, they have plenty of options to select from when giving to a charity.
Most of all, donors increase their presents when requested to. If you don’t ask, they will likely continue giving the standard amount-which is fine-but we’re trying to build a fundraising strategy for expansion.
Key takeaway – You need to aim as high as possible when placing prospects on your donor pyramid. The larger you make the mid-level and high-level sections, the better off your company will be. You can depend on these larger donations on a more regular basis, which may be used a springboard for future expansion.
Create an impeccable marketing campaign
There are lots of different tools you can leverage and approaches you can take to boost your nonprofit fundraising plan.
Major types of communication
The basic types of marketing channels are usually known. You are able to communicate direct via email, telephone call or personal visit. You may communicate to a wider scale with public speaking, newsletters, website content, advertising etc.. The main thing to know is what you’re trying to accomplish with every sort of communication.
You’re not going to get a significant donation from sending out a newsletter-you might, but this sort of communication is usually geared to higher-volume, lower-dollar amounts.
You are typically going to need to use more mass communication techniques for filling your pipeline and those earlier-stage kinds of activities. More direct personal touch must close most deals, particularly when more cash is on the line.
When to use each strategy
A good approach uses a mix of all of the techniques discussed above. There will be times that you want to target people and times you will want to target groups.
This method can be used whether you’re reaching out to an individual or your entire prospect list. Be sure to use email over email if you’re planning to get a later-in-the-process “revenue” discussion with a prospect as physical mail has a more personal touch.
Use this technique when you want to connect directly with individuals. Be sure to use personal touch to make the receiver feel that this notice has more value than the other things that end up in the trash. Also include a call to action-conversion rates skyrocket simply by including an option to act in your message.
Use this technique when you want to reach out to more than just your immediate community. This may be through printed papers and periodicals, on the radio or through television or other forms of media.
Make sure you know the anticipated return on investment before planning any fundraising dollars to this method, but realize it can pay off especially if you would like to educate the masses get your brand and workout there.
A much more affordable form of promoting your brand, using social networking platforms and other online communities allows you to connect with the greatest number of possible donors for the lowest overall price.
The internet was made to reach people quickly and cheaply. Use it to your advantage.
Host an event that brings together different individuals in your community and use the platform to raise funds. Everyone likes to be connected to like-minded people. By creating somewhat regular events that accomplish that, you can provide spikes in your donation ingestion at certain times of the year.
An yearly appeal may work here. Market the chance as a yearly or monthly gathering, and give people a reason to attend. The key here is to make sure that you don’t overdo it. Don’t host too many occasions or the notion of a unique promotion loses its luster. Why would a donor attend your annual appeal if you really had weekly appeals? No luster.
When you host an event or generate a new piece of useful content, create a media release to announce it to your community. Like advertising, this has the opportunity of reaching a large number of people.
Just bear in mind you will get more press coverage in an area if you’re able to show that your information directly impacts the community.
Additional Techniques for nonprofit fundraising achievement
Up to 6 percent of all product launches rely on some form of cobranding. Get your name attached to other people who encourage similar causes. You should not see other organizations as only competitors… but rather as possible matches to your strategy.
Work with partners to construct a whole that’s greater than the sum of these parts. Unlock hidden potential by partnering with the right affiliates to help expand your reach beyond your immediate community.
What about crowdfunding?
In a society that is continuing to be interested in social impact, this is a potentially huge area to raise capital.
Think of Kickstarter. All they need to do is connect to an investor’s sense of purpose.
Be aware there are fees attached! Take some time to compare various platforms and factor in the cost to raise money with any effort put on a platform.
Also be aware of nonprofit fundraising laws! With the internet it is much easier to raise money from people in multiple states, even if you operate in just one. Many states require nonprofits to register in order to conduct fundraising within their jurisdiction-this may apply to more states than intended if you plan to raise funds online.
That having been said, there are definitely opportunities to use crowdfunding to your benefit.
Craft the Ideal story
There are a number of ways to get a person to become interested in your company. Most include connecting with their personal sense of purpose. You want them to feel the pain you’re trying to fix.
You might think you do not have all the right details for a truly compelling story, but you are incorrect!
Beth Kanter outlines four classic storylines that operate well when soliciting donors:
Overcoming the monster – Talk about some form of adversity your organization is tackling. Are 99% of kids on your region on subsidized school lunch programs? Okay… tell this story.
Rags to riches – Use your real clients or support recipients as a catalyst. Explain the poor circumstances that contributed to them using your organization, as well as the 180 degree turnaround you helped them achieve. Don’t be afraid to receive detailed in describing the low stage.
Quest – Everyone loves a fantastic quest story. We are on a quest to a completely carbon neutral society. Where do we stand on that long journey? What are you doing about it? Make people feel compelled to do something for all those suffering.
While donors may constitute a fantastic core of your fundraising strategy, there are often overlooked free dollars out there which you might qualify for without realizing. It’s important to understand where these areas of opportunity are and to always include grants and other free money in your fundraising plans.
Master grant research
There are increasing numbers of online sources which may be used for free (or at affordable prices) to help in your prospect search. Download the free premium edition of this guide to find a list of the top sources and a number of their details and how best to use each one.
Finding the correct grant for your organization is only half the battle.
How can you now secure the funding?
If you’ve never written a grant proposal before, check out GrantSpace’s free introductory grant-writing class.
GrantSpace also contains a repository of sample files.
Do your homework! If you discover a grant and it has a request for proposals (RFP), then it should have all the guidelines for you to consider. Know any deadlines, if there is a letter of intent due before the application, the ceiling level for financing, etc..
Then visit the funder’s website and see what other types of organizations are typically funded. Go to their websites and see the kinds of programs they provide. Does your organization appear to fit this mold? Write your proposal keeping in mind what types of programs worked in the past for this funder.
Start planning. If you agree that your organization is a good match for the grant, meet with your team and start outlining what has to be done. This is your one- or two-page pitch to the funder to show why you’re a fantastic fit for them. If the funder likes you, they will ask you to submit a full proposal. This is potentially a massive time saver, if in fact you’re not a realistic recipient for this grant.
They’re generally very friendly people and a simple conversation can go a long way. Either you briefly talk about your idea and it is not a fit, and you’ve saved yourself time and effort putting together a complete proposal.
Or you’re a great match, you hit it off with the funder, and you have started a great relationship together, essentially completing the first stage of the application procedure.
This could lead to many years of future funding. Don’t overlook this useful step! Try to build a relationship with the funder before you’ve formally applied for funding.
When you finally begin your proposal, you should have all the info you have to be confident that you will win the award. It should be 5-15 pages long and cover things such as a summary of your schedule, background and needs, goals, evaluation process, budget, timeline, and any partnerships you’re planning to leverage.
Don’t forget to answer every part of every question!
RFPs can be very long and tedious, but any excuse to dismiss an applicant is usually sufficient to throw the proposal in the trash. Do not risk this. Don’t worry about fluffy language… get right to the point. Feel free to leverage content from prior proposals, as often the exact questions are asked in RFPs.
Submit your proposal and be confident you will win. If not, you proceed. There are plenty of other grant opportunities out there… see the previous section…
The grant-writing process
If you’ve been following all the actions outlined in this guide, the true grant-writing process is going to be the least stressful part. You have already got the basis for sustained excellence engrained in your organization. Now just wrap the bow around your assignment and make the grant dollars that you know you deserve!
Within an ever-changing technological and fiscal landscape, it is sometimes tough to dedicate the time and effort to staying on top of what works and what doesn’t in this area.
Use the tools outlined in this guide to help your organization optimize its fundraising potential. Share your successes and lessons learned with us as we would love to integrate them into updated material for others to use.
Nonprofit fundraising does not have to be difficult, and this manual provides a good foundation for crafting your plan and executing it for many years to come!