Nonprofit fundraising is a complex topic and a crucial function. Nonprofits are in a unique position from companies in that they can’t price their products and services to, well, make a profit. Operating budgets must be conceived from different 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 plan
2. Optimizing your organization
3. Kickstarting your donor development
4. Developing your marketing campaign
Before we begin, here’s a brief background on financing.
How are nonprofits financed?
These 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 tuition, services, etc..
Fees for Goods/Services from Government Resources – includes things like Medicare and Medicaid reimbursements
Government Grants – cash 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 greatest portion of non-program-related revenue streams for nonprofits.
While this represents massive potential, it attracts even more enormous challenges for nonprofits looking to focus marketing and fundraising strategies on particular stations. The need for private touch with most individual donors makes it difficult to scale financing strategies focused on individual donors.
Any successful initiative takes a plan. To optimize your organization’s potential, it is important to comprehend where you are today and define certain 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 evaluate progress.
The first thing you need to do is create an ideal version of your company. Leslie Allen from Front Range Source published a Great guide on the subject where she suggests you ask yourself the following questions:
A little administrative work also needs to be carried out now… specifically setting a budget for how much you wish to spend on this nonprofit fundraising strategy and an implementation timeline that you would like to attain your goals by.
2. Understand your current state
Describe your business as it is now. This will form the basis for which your strategy will be implemented against.
You should take inventory of all 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 notice of what’s worked in the past and what has not.
Just take an external perspective if possible. If you can manage to audit your company, do it. Otherwise, be as unbiased as possible in deciding how successful your organization performs in this region, and compare it to other organizations. Use either current employees or colleagues from outside the organization to get a picture of the other nonprofits perform.
If you are too overly funded by a specific source-let’s say a particular government grant that comes in each year and funds 90 percent of your budget-you have to tackle this. Like every business overly concentrated on one customer, you run the risk of being shut down, should the government grant stop.
Do not limit yourself to single or few funding sources whenever possible. Make your organization invulnerable to things you can not control.
3. Envision your future state
Use the answers produced on your eyesight creation to help manage your future condition. Where the vision phase is about producing conceptual ideals for what your organization needs to look like, this stage should be about quantifying them.
Decide exactly what you would like to concentrate on. If you decided that a focused nonprofit fundraising strategy was the way to go, be certain to document why it is the best path and what the advantages of this choice will be.
The result of this stage 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 now, your next step is to perform a gap analysis. It is critical to understand where all the major gaps are in your own organization.
In case you have 90% of your revenue coming from 1 government grant and your future state involves diversifying your revenue streams, then obviously here is a significant gap in your strategy.
Always know your company’s vulnerabilities. Prioritize what you believe are the most critical gaps and areas that could create the most impactful change if they’re closed.
The last step requires determining precisely what activities will need to be done in order to achieve your desired state.
Break up the aims into key initiatives. You should ideally come up with a list of projects which can be executed on, each with different positions for cost, effort, time, and impact.
Create a matrix that assesses each project against these four dimensions and rank the projects according to your priorities. If your strategy needs to be completed quickly with less regard to price, then rank jobs requiring less time higher. If you want the biggest impact of your initiatives, then rank these ones higher, with the understanding it may 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 constraints. Any change to a single constraint requires a change in the others. Or quality suffers.
Be sure to get all the right 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 has to be done.
Optimize your organization for change
A common mistake among nonprofits is the lack of a single person who manages the entire “money function” of the organization. It isn’t enough to have an individual who manages only government contracts, or just individual donors – you absolutely have to have someone who manages all money flows to the organization.
Development director office
To make certain you employ or promote from within the right candidate for the job, you must be able to offer enough of a salary to lure a person to remain and grow the organization. Check aggressive rates of not only nonprofit development directors, but also nonprofit CFOs, for-profit CFOs, etc..
It could be painful trying to come up with 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% of the time focused on money. And in a few years’ time, they need to be paying their own salaries with the work they have done to increase your organization’s capacity.
Construct a business environment that permits 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 in your organization. By choosing the right person, you can ensure that they know precisely how many staff they need and what roles they need to hire to do specific tasks (marketing plans, technology updates, cold calling, etc.).
Additionally, you have to budget for costs like software, computer updates, marketing collateral, association dues, professional development, and so forth.
You want to create an environment that enables development success. This way, you help retain top talent that can executive on longer-term strategies having the maximum potential for organizational expansion.
Bottom line – you would like to hire the right person who will help grow your organization. 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 individuals. Especially for associations with slim staff and budgets, this can be an effective tool. Tap into your alumni pool and other partners/alliances you might have formed before.
Your board of trustees ultimately sets the direction and vision 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 based 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 difficulties.
Regardless of the size of your nonprofit, it’s critical to be 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. By way of example, a very simple thank-you goes a long way. A fundraising study conducted by Cygnus found that when donors obtained a thank-you telephone from board members within days of making a present:
93% said they would definitely or probably give again
84% said they would make a larger gift
74% said they would continue giving indefinitely
Find ways to engage donors. Their clout alone brings great respect to the men and women who donate to the organization. This should be used to your advantage.
As important as engaging board members with donors, is keeping donors engaged in the plan. Present strategy suggestions and work in their feedback. This ensures equilibrium and sense of purpose with board members.
The board should know that fundraising is staff driven and presenting a simple projection of anticipated costs and earnings with a strategy 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. Keep them motivated. Listen to what they say. Their connections and knowledge go a long way toward helping drive your strategy, 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 board and staff considerations, the next big 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 much more than asking for contributions. It includes everything before and following this step… from trying to find supporters to expressing gratitude and measuring impact. Measuring effect 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 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 have to be complicated… they can simply be procedures used to document results of actions.)
Use your mission to ascertain a set of results you wish to achieve. 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 impact.
Once you’ve set up your impact measurement processes, figure out ways to communicate your results on your own site. This may come in the shape of dashboards, case studies, personal stories, etc.. Make certain to consistently update your content to not just keep things fresh, but convey your continued success.
If a donor visits your site and sees overwhelming evidence of the great things you’re doing, he will be more likely to buy into your cause and believe that his contributions are being well spent.
How much do you spend on fundraising?
CharityWatch analyzes the effectiveness of nonprofits across a broad assortment 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 earn $100 of public donations.
On this foundation, a nonprofit is considered highly efficient if its cost to raise $100 is $25 or less.
Practically speaking, determine how much you want to raise with your nonprofit fundraising strategy 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’d begin your budget at $1,250,000.
Kickstart your donor development
The section that probably brought most of you here… real donor development.
You’ve got your organization set up for success. You have a clear vision of what you want to accomplish. Your board is behind you and you have the right staff to tackle the job.
Prospecting and donor study
Many experts like to share a fundraising pyramid. A solid general fund of donors supports a smaller core of mid-level gifts on top of which is a few major donors to your organization.
You need to maximize each level of the volcano and continuously work on moving people 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 full of free or purchasable contact lists)
Donors give to their own reasons, none. When assessing your current prospect pool and looking for more, evaluate the following characteristics of each prospect:
Longevity – How long has this person been giving? Should 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 – Look for people who are reading your newsletters, responding to your calls, reaching out about your organization… these are the types that you want to move up the pyramid.
When you start a prospect gathering mission, it couldn’t hurt to start with scrubbing your current database (whether its paper documents or an Excel workbook or an whole 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 base for the new strategy or as referrals to new candidates.
Once 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 easy 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 individuals in which places to target for each particular kind of outreach. This helps when trying to nail down a particular donor outreach campaign.
TechSoup has a breakdown of 8 best CRM systems for nonprofits also. Perform a similar analysis to this when assessing applications for your organization.
Ensure donors keep giving
Make sure current donors keep contributing.
Attempt to move donors up to mid-level and major gift level standing.
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.
Personal touch goes a long way in cultivating relationships with donors. Point out donors who have given in a monthly newsletter. Everyone enjoys a little recognition, particularly if they’re intent on furthering their own assignments of committing.
More tactically, you may use donor surveys and other donor-directed communications to attempt and get a sense of how they perceive your company to be doing. Gear your marketing collateral to them based on particular programs and results that you are achieving.
As you’re publishing data and other marketing collateral for broader consumption, try to focus certain pieces to donors only to allow them to see in the progress you are really making as an organization. You can use a more friendly and informal 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 need to achieve. Everybody enjoys being connected with more people who can help their cause… so use this route intelligently to help boost relationships among your community.
Work the pyramid
Asking for more money is not easy, especially if you fear losing a connection with a person who has given faithfully to your company for several years.
Why would someone consider giving you more money?
First, they need to believe in your mission. It must support something they find precious to them. Thus, communicate your mission accurately and descriptively.
Second, they need to believe in your team and that 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 bucks, they have plenty of options to choose 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 conventional amount-which is fine-but we’re trying to construct a fundraising strategy for expansion.
Key takeaway – You should aim as high as possible when putting prospects on your donor pyramid. The bigger you make the mid-level and high-level sections, the better off your company will be. You can count on these bigger donations on a more regular basis, which can be used a springboard for future expansion.
Create an impeccable marketing effort
There are many different tools you can leverage and approaches you can take to enhance your nonprofit fundraising strategy.
Major types of communication
The basic types of marketing channels are usually known. You can communicate direct through email, phone call or personal visit. You can communicate to a broader scale with public speaking, newsletters, website content, advertising etc.. The main thing to know is what you’re trying to accomplish with each sort of communication.
You are not going to get a major donation from sending out a newsletter-you might, yet this sort of communication is usually geared to higher-volume, lower-dollar amounts.
You’re typically going to want to use more mass communication methods for filling your pipeline and these earlier-stage kinds of activities. More direct personal touch is required to close most deals, particularly when more cash is online.
When to use each approach
A fantastic approach utilizes a mix of all of the techniques discussed above. There’ll be times that you wish to target individuals and times you’ll want to target groups.
This method can be used whether you are reaching out to an individual or your entire prospect list. Make certain to use mail over email if you’re planning to have a later-in-the-process “sales” discussion with a prospect as physical mail has a more personal touch.
Use this technique if you want to connect directly with people. Be sure to use personal touch to make the receiver feel that this notice has more value than the other items that end up in the garbage. Also include a call to action-conversion rates skyrocket by simply including an option to act in your message.
Use this technique if you want 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 expected return on investment prior to planning any fundraising dollars to this method, but understand it can pay off especially if you would like 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 permits you to connect with the largest number of potential donors for the lowest total 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 made to reach people quickly and cheaply. Use it to your benefit.
By creating somewhat regular events that accomplish this, you are able to provide spikes in your donation intake at certain times of the year.
An yearly appeal may work here. Market the chance as an annual or monthly gathering, and give people a reason to attend. The important thing here is to make sure that you don’t overdo it. Don’t host too many events or the notion of a unique promotion loses its luster. Why would a donor attend your yearly appeal in the event you actually had weekly appeals? No luster.
When you host an event or generate a new piece of helpful 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 keep in mind that you’ll get more press coverage in an area if you can demonstrate that your news directly affects the community.
Additional Techniques for nonprofit fundraising success
Up to 6 percent of all product launches rely on some type of cobranding. Get your name attached to other people who encourage similar causes. You shouldn’t see other organizations as merely competitors… but rather as potential matches to your strategy.
Work with partners to build a whole that’s greater than the sum of the 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’s continuing to be interested in social influence, this is a potentially huge area to raise capital.
Everyone can promote any cause and collect money from anyone around the world. All they need to do is link to an investor’s sense of purpose.
Be aware there are fees attached! When using a public platform, understand the costs associated. Take some time to compare various platforms and factor in the cost to raise cash with any attempt placed on a platform.
Also be conscious of nonprofit fundraising laws! With the internet it’s far easier to raise money from people in multiple states, even in the event that you operate in just one. Many states require nonprofits to register in order to conduct fundraising within their jurisdiction-this may apply to more nations than planned if you’re planning to raise funds online.
That having been said, there are definitely opportunities to use crowdfunding to your advantage.
Craft the Ideal story
There are many ways to get a person to become interested in your organization. Most include connecting with their personal sense of purpose. You want them to feel the pain you are trying to solve.
You might think you don’t have all the proper details for a truly compelling story, but you are wrong!
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 that story.
Rags to riches – Use your actual clients or support recipients as a catalyst. Explain the bad circumstances that led to them using your organization, and 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 totally carbon neutral society. Where do we stand on that long trip? What are you doing about it? Tell that story. Make people feel compelled to do something for those suffering.
Leverage grants and other funding opportunities
While donors may constitute a good core of your fundraising strategy, there are often overlooked free dollars out there that you may qualify for without realizing. It’s important to see where these areas of opportunity are and to always incorporate grants and other free money in your fundraising plans.
Master grant study
There are growing numbers of online sources that can be used for free (or at affordable costs) to help in your prospect hunt. Download the free premium edition of the guide to see a list of the greatest sources and some of their details and how best to use each one.
Write a killer proposal
Finding the right grant for your organization is only half the battle.
How do you now secure the financing?
If you have never written a grant proposal earlier, check out GrantSpace’s free introductory grant-writing class.
GrantSpace also contains a repository of sample documents. This ranges from proposals to letters of inquiry to cover letters to budgets.
Do your homework! If you find 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 is 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 sites and see the types of programs they offer. Does your organization appear to fit this mold? Write your proposal keeping in mind what sorts of programs worked in the past for this funder.
Start planning. If you agree that your organization is a fantastic fit for the grant, meet with your team and begin 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 complete proposal. This is potentially a massive time saver, if actually you are not a realistic recipient for this grant.
They are generally very friendly people and a simple conversation can go a long way. Either you briefly discuss your idea and it is not a match, and you’ve saved yourself time and effort putting together a full proposal.
Or you’re a great fit, you hit it off with the funder, and you have started a fantastic 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 funding.
When you finally start your proposal, you should have all the info you need to be confident you will win the award. It should be 5-15 pages long and cover things such as a summary of your program, background and needs, goals, evaluation procedure, budget, timeline, and any partnerships you are planning to leverage.
Remember to answer every part of every question!
RFPs can be very lengthy and tedious, but any excuse to dismiss an applicant is usually enough to throw the proposal in the garbage. Do not risk this. Don’t worry about fluffy language… get straight to the point. Don’t hesitate to leverage content from previous proposals, as often the exact questions are asked in RFPs.
Otherwise, you move on. There are loads of other grant opportunities out there… see the previous section…
The grant-writing process
If you have been following all the actions outlined in this guide, the actual grant-writing process will be the least stressful part. You’ve already got the foundation for sustained excellence engrained in your own organization. Now just wrap the bow around your mission and make the grant dollars you know you deserve!
In an ever-changing technological and financial landscape, it is sometimes tough to dedicate the time and effort to staying on top of what works and what doesn’t in this space.
Utilize 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 incorporate them into upgraded material for others to use.
Nonprofit fundraising doesn’t have to be difficult, and hopefully this manual provides a fantastic basis for crafting your strategy and executing on it for many years to come!