Nonprofit fundraising is a complicated topic and a critical function. Nonprofits are in a unique position from businesses 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 guide focused on fundraising for nonprofits. It will discuss the following important topics:
1. Crafting a nonprofit fundraising strategy
2. Optimizing your organization
3. Kickstarting your donor development
Before we begin, here’s a brief background on funding.
How are nonprofits funded?
The following categories 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 part of income, particularly among foundations
Where do donations come from?
Personal contributions make up the largest 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 channels. The need for private touch with the majority of individual donors makes it hard to scale financing strategies focused on individual donors.
Craft the perfect nonprofit fundraising plan
Any successful initiative requires a plan. To optimize your organization’s potential, it is important to understand where you are now and define specific paths to where you will need to be in the future. A useful strategic plan for your fundraising function will provide a feeling of direction for your company and outline measurable goals to assess progress.
1. Establish a vision
The first thing you need to do is produce an perfect version of your company. Leslie Allen from Front Range Source published a good guide on the topic where she suggests you ask yourself the following questions:
A little administrative work also needs to be done today… especially setting a budget for how much you would like to spend on this nonprofit fundraising strategy and an implementation timeline that you wish to achieve your goals by.
Describe your business as it is now. This will form the foundation for which your plan will be implemented against.
You should take inventory of all of the different funding sources you currently use and have used in the past. Try to rank and prioritize the effectiveness and quantity of funds raised from every one. Take note of what’s worked before and what has not.
Just take an outside perspective if possible. If you can manage to audit your company, take action. Otherwise, be as unbiased as possible in deciding how effective your company performs in this region, and compare it to other organizations. Use either current employees or colleagues from outside the organization to find a picture of the other nonprofits perform.
Know your strengths and weaknesses! If you are too overly funded by a specific source-let’s say a specific government grant that comes in each year and funds 90% of your budget-you need to tackle this. Like any business overly concentrated on one customer, you run the risk of being shut down, should the authorities grant stop.
Do not limit yourself to single or few funding sources whenever possible. Make your organization invulnerable to things you can’t control.
3. Envision your future condition
Use the answers produced in your vision creation to help craft your future state. Where the vision phase is about creating conceptual ideals for what your company needs to look like, this stage should be about measuring them.
Decide exactly what you want to concentrate on. If you decided that a concentrated nonprofit fundraising plan was the way to go, be certain to document why it is the best course and what the benefits of this choice is.
The result of this phase should be a set of goals which you would like your organization to achieve.
4. Perform a gap analysis
By quantifying your future condition 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.
In case you have 90% of your earnings coming from 1 government grant and your future state involves diversifying your revenue streams, then obviously here’s a significant gap in your strategy.
Always know your company’s vulnerabilities. Prioritize what you think are the most critical gaps and areas that could produce the most impactful change if they’re closed.
The last step requires determining precisely what actions need to be done to achieve your desired state.
Divide the goals into key initiatives. You should ideally produce a list of projects that can be executed on, each with various positions for cost, effort, time, and impact.
Create a matrix which assesses each project against these four dimensions and position the projects according to your priorities. If your strategy needs to be completed quickly with less respect 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 vs. scope vs. time. Any strategic decision will be based on these three limitations. Any change to one constraint requires a change in others. Or quality suffers.
Make certain to get all the proper stakeholders involved in this priority setting process to make sure your strategic alignment matches your organization’s vision and your board’s idea of what needs to be done.
Optimize your company for change
A frequent mistake among nonprofits is the lack of a single person who oversees the whole “money function” of the organization. It isn’t enough to have an individual who oversees only government contracts, or only 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 right candidate for your job, you need to be able to supply enough of a salary to lure a person to stay and grow the organization. Check competitive rates of not only nonprofit development supervisors, but also nonprofit CFOs, for-profit CFOs, etc..
It could be painful trying to think of the money to pay someone to do this job-which is typically lower than executive director or other high-ranking positions on your organization-but it’s well worth it.
You’re paying for people who spend 100 percent of their time focused on money. And in a few years’ time, they should be paying their own salaries with the work they have done to boost your organization’s capacity.
Build a business environment that permits development.
Beyond just financing the salary of your rock-star fundraiser, it’s important to give this person authority over developing a team and office in your organization. By choosing the right person, you can make sure that they know precisely how many staff they need and what functions they will need to hire to perform certain tasks (marketing plans, technology updates, cold calling, etc.).
Additionally, you must budget for costs like software, computer upgrades, marketing collateral, association dues, professional development, etc.
You wish to create an environment that enables development success. This way, you help retain top talent that can executive on longer-term strategies that have the highest potential for organizational growth.
Bottom line – you would like to hire the right person who will help grow your organization. They must have the keys to the kingdom when it comes to seeing how all cash flows in and out. They need the ability to propose and decide on a budget and to executive on their strategies.
Use unpaid support to support your efforts in reaching out to people. Especially for organizations with slim budgets and staff, this can be an effective instrument. Tap into your alumni pool and other partners/alliances you may have formed in the past.
Volunteers can be particularly 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. Because of this, we will need to spend some substantial time making sure everyone is aligned with what we are trying to accomplish with fundraising.
The use of the board typically changes depending on the size of the organization-smaller organizations have board members that typically take a more operational and hands-on approach, while larger organizations might have board members more focused on governance issues.
Regardless of the size of your nonprofit, it is critical to make sure everyone understands the value of philanthropy and can agree on a high level strategy for accomplishing the mission.
Have an open conversation about what role board members can play in nonprofit fundraising. Beyond agreeing on strategies, this may be an extremely beneficial task in helping to raise and retain donors. For example, a simple thank-you goes a long way. A fundraising study conducted by Cygnus discovered that when donors got a thank-you telephone from board members in days of making a present:
Use board members for this purpose. Their clout alone brings great respect to the men and women who donate to the organization.
Just as important as engaging board members with donors, is keeping donors engaged in the strategy. Present strategy proposals and work in their feedback.
The board should know that fundraising is staff driven and introducing a simple projection of anticipated expenses and earnings with a plan can go a long way in helping drive change.
Most importantly – realize when you have good board members and do whatever you can to retain them. Listen to what they say. Their connections and knowledge go a long way toward helping drive your plan, so understand what you have while you’ve got it and don’t risk losing great board members to greener pastures.
Measuring and communicating impact
After staff and board considerations, the next major item to prepare for is impact dimension. You will need to be able to communicate your story with numbers and words.
Nonprofit fundraising is much more than asking for contributions. It features everything before and following this step… from searching for fans to expressing gratitude and measuring impact.
Evaluate fundraising campaign effectiveness
Demonstrate your program’s effectiveness and help tell a story that will attract future funding
Your programs already exist to further your organization’s mission. Be sure to have the systems in place to capture the outcomes of your programs’ efforts. (Note: systems don’t need to be complex… they can simply be procedures used to document results of activities.)
Use your mission to determine a set of results you wish to attain. Then work backwards to determine the activities you can perform to get there.
To find out more check out Whole Whale’s manual on measuring nonprofit effects.
As soon as you’ve set up your impact measurement procedures, figure out ways to communicate your results on your own site. Make certain to consistently update your content 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 are doing, he’ll be more likely to buy into your cause and believe that his donations are being well spent.
How much do you spend on fundraising?
CharityWatch analyzes 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 donations.
On this foundation, a nonprofit is considered exceptionally efficient if its cost to raise $100 is $25 or less.
Practically speaking, ascertain how much you would like to raise with your nonprofit fundraising plan or even a specific campaign. Start with a 4:1 ratio for the $25 mark and move from there. If you wanted to raise $5,000,000, you would begin your budget at $1,250,000. Adjust from there.
Kickstart your donor growth
The section that probably brought most of you here… actual donor development.
You’ve got your company set up for success. You have a clear vision of what you wish to accomplish.
Prospecting and donor research
Many experts like to talk about a fundraising pyramid. A solid general fund of small donors supports a smaller core of mid-level gifts on top of which is a few significant donors for your organization.
You need to maximize each level of the volcano and continuously work on transferring people upward.
The first step is to create a list of prospects.
Direct mail or email
Brainstorming of prospects (using board members and employees alike)
Prospect research (databases full of free or purchasable contact lists)
Donors give to their own reasons, not yours. When assessing your current prospect pool and searching for more, evaluate the following characteristics of each prospect:
Longevity – How long has this individual been giving? Should they possibly move up the pyramid if they’ve been here some time? Start looking for the latter as great opportunities to move up the pyramid.
Engagement – Search for individuals who are reading your newsletters, responding to your calls, reaching out about your organization… these are the types that you need to move up the pyramid.
Leverage Customer Relationship Management (CRM) systems
When you begin a prospect collecting mission, it could not hurt to start with scrubbing your existing database (whether its paper files or an Excel workbook or an entire donor management system). It’s good to get a good idea of everyone you’ve previously had relationships to understand your likelihood of using these people as a foundation for the new strategy or as referrals to new candidates.
As soon as you have a baseline of prospects, then decide if you need to leverage more advanced technology for your nonprofit fundraising efforts.
The advantages of a formal CRM system are enormous for all kinds of organizations. With the proper system in place, your company has the capacity to record all communications with donors and prospects, track their personal traits, create simple email campaigns, find volunteers, and so on.
Especially useful are these systems’ abilities to report on progress during campaigns and examine the demographics of donors and prospects. You can run reports that help determine which people in which places 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 to this when assessing applications for your own organization.
Ensure donors keep giving
Ensure current donors keep giving.
Attempt to move donors up to mid-level and major gift level status.
Some useful methods for maintaining and improving donor relationships range from straightforward thank-you notes to community recognition to providing access to special information or services.
Personal touch goes a long way in cultivating relationships with donors. Point out donors who have contributed in a monthly newsletter. Everyone enjoys a little recognition, particularly if they are intent on furthering their own missions of committing.
More tactically, you can use donor surveys and other donor-directed communications to try and get a sense of the way they perceive your company to be doing. Gear your marketing collateral to them based on particular programs and outcomes that you’re achieving.
While you’re publishing info and other marketing collateral for wider consumption, try to focus certain pieces to donors only to let them see in the progress you are really making within an organization. It is possible to use a more friendly and informal tone when communicating with current donors, to help aid in the relationship building process.
Hold special events just for donors. Have a societal where donors can meet one another and discuss their own missions and visions for what they want to achieve.
Work the pyramid
Asking for more money is not easy, especially if you fear losing a connection with someone that has given faithfully to your organization for many years.
Why would someone consider giving you more money?
First, they need to believe in your mission. It must support something they find dear to them. Thus, communicate your mission accurately and descriptively.
Second, they need to believe in your team and you will use their money wisely. No, they don’t 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 asked to. If you don’t ask, they will likely continue giving the conventional amount-which is fine-but we are trying to construct a fundraising strategy for growth.
Key takeaway – You need to aim as large as possible when putting prospects on your donor pyramid. The bigger you make the mid-level and high-level sections, the better off your organization will be. You can count on these bigger donations on a more regular basis, which can be used a springboard for future growth.
Develop an impeccable marketing effort
There are many different tools you can leverage and approaches you can take to enhance your nonprofit fundraising strategy.
Major Kinds of communication
The basic types of marketing channels are generally known. You are able to communicate direct via email, phone call or personal visit. You may communicate to a wider scale with people speaking, newsletters, website content, advertising etc.. The main thing to understand is what you are trying to achieve with each type of communication.
You’re not going to have a significant contribution from sending out a newsletter-you might, but this type of communication is usually geared to higher-volume, lower-dollar quantities.
You’re typically going to need to use more mass communication techniques for filling your pipeline and these earlier-stage types of activities. More direct personal touch must close most deals, especially when more money is on the line.
When to use each approach
A good approach utilizes a mix of all of the techniques discussed above. There’ll be times that you wish to target individuals and times you will want to target groups.
This method can be used whether you are 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 “sales” discussion with a prospect as physical mail has a more personal touch.
Use this technique if you need to connect directly with individuals. Be sure to use personal touch to make the recipient 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 by simply including an choice to act in your message.
Use this technique if you need to reach out to more than just your immediate community. This may be through printed newspapers and periodicals, on the radio or through television or other forms of media.
Make sure that you know the anticipated return on investment before planning any fundraising dollars to this technique, but realize it can pay off especially if you want to educate the masses or get your brand and mission out there.
A much cheaper form of marketing your brand, the use of social networking platforms and other online communities allows you to connect with the largest number of possible donors for the lowest overall cost.
Besides simply promoting your content or brand, you may include calls to action like “donate now” on a nonprofit Facebook page. The internet was created to reach people quickly and cheaply. Use it to your benefit.
Everyone likes to be connected to like-minded people. By creating somewhat regular events that accomplish that, you can provide spikes in your contribution ingestion at certain times of the year.
An yearly appeal may work here. Market the opportunity as an annual or monthly gathering, and give people a reason to attend. The important thing here is to be sure that you don’t overdo it. Do not host too many events or the idea of a special promotion loses its luster. Why would a donor attend your annual appeal in the event you really had weekly appeals? No luster.
When you host an event or generate a new piece of helpful content, create a press release to announce it to your community. Like advertising, this has the chance of reaching a large number of people.
Just keep in mind that you’ll get more press coverage in a place if you’re able to show that your news directly impacts the community.
Additional methods for nonprofit fundraising achievement
Of note are cobranding and affinity marketing. Up to 6% 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 merely competitors… but rather as possible complements to your strategy.
Work with partners to build 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. Anyone can promote any cause and collect money from anyone around the world. All they have to do is link to an investor’s sense of purpose.
Be aware there are fees attached! Take the time to compare various platforms and factor in the cost to raise cash with any effort put on a platform.
Also be aware of nonprofit fundraising legislation! With the internet it’s far easier to raise money from people in multiple states, even in the event that you operate in only one. Many states require nonprofits to register in order to conduct fundraising within their jurisdiction-this may apply to more states than planned if you plan to raise funds online.
That having been said, there are definitely opportunities to use crowdfunding to your advantage.
Craft the Ideal story
There are a number of ways to get a individual to be interested in your organization. Most include connecting with their personal sense of purpose. You need them to feel the pain you’re trying to fix.
You might think you do not have all the right details for a really compelling story, but you are incorrect!
Beth Kanter outlines four classic storylines that operate well when soliciting donors:
Overcoming the monster – Talk about some kind of adversity your organization is handling. Are 99% of kids in your region on subsidized school lunch programs? Okay… tell this story.
Rags to riches – Use your real customers or service recipients as a catalyst. Explain the poor circumstances that led 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 good quest story. We are on a quest to a completely carbon neutral society. Where do we stand on this long journey? What are you doing about it? Make people feel pressured to do something for all those suffering.
While donors may make up a fantastic core of your fundraising plan, there are often overlooked free dollars out there which you might qualify for without realizing. It’s important to see where these areas of opportunity are and to always include grants and other free money in your fundraising plans.
Master grant study
There are increasing numbers of online sources that can be used for free (or at reasonable prices) to help on your prospect hunt. Download the free premium edition of this guide to find a list of the greatest sources and some of their details and how best to use each one.
Finding the right grant for your organization is just half the battle.
How can you now secure the funding?
If you have never written a grant proposal earlier, check out GrantSpace’s free introductory grant-writing class. It may be done online or in person and should help provide a baseline for writing a good proposal.
GrantSpace also includes a repository of sample files.
If you discover a grant and it has a request for proposals (RFP), then it should have all the guidelines for you to consider. Understand any deadlines, if there’s a letter of intent due before the application, the ceiling level for funding, etc..
Then go to the funder’s website and see what other kinds of organizations are usually funded. Visit their websites and see the types of programs they provide. Does your organization seem to fit this mold? Write your proposal keeping in mind what types of programs worked previously for this funder.
Start planning. If you agree that your organization is a fantastic fit for the grant, meet with your staff and start outlining what needs to be done. If a letter of intent (LOI) is required, use it to your advantage. This is your one- or two-page pitch into the funder to show why you’re a great 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 actually you’re not a realistic receiver for this grant.
Reach out to the funder’s program officer. They are generally very friendly people and a very simple conversation can go a long way. Either you briefly discuss your idea and it is not a match, and you have saved yourself time and effort putting together a complete proposal.
Or you’re a excellent match, you hit it off with the funder, and you’ve started a great relationship together, basically completing the first stage of the application process.
This could lead to a lot of years of future funding. Don’t overlook this helpful step! Try to build a relationship with the funder before you’ve formally applied for financing.
When you finally begin your proposal, you should have all the info you have to be confident you will win the award. It should be 5-15 pages long and cover matters like a summary of your program, 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 quite long and tedious, but any excuse to dismiss an applicant is usually enough to throw the proposal in the trash. Do not risk this. Don’t be worried about fluffy language… get straight to the point. Feel free to leverage content from previous proposals, as often the same questions are asked in RFPs.
Submit your proposal and be confident you will win. Otherwise, you proceed. There are plenty of other grant opportunities out there… see the previous section…
The grant-writing procedure
If you’ve been following all the steps outlined in this guide, the actual grant-writing process is going to be the least stressful part. You’ve already got the foundation for sustained excellence engrained in your own organization. Now only wrap the bow around your assignment and make the grant dollars you know you deserve!
In an ever-changing technological and fiscal landscape, it’s sometimes tough to dedicate time and effort to staying on top of what works and what does not in this space.
Use the tools outlined in this guide to help your organization maximize its fundraising potential. Share your successes and lessons learned with us as we would like to incorporate them into updated material for others to use.
Nonprofit fundraising does not have to be difficult, and this guide provides a good foundation for crafting your plan and executing it for many years to come!