How Much Does Fundraising Cost?

20 Jun How Much Does Fundraising Cost?

Imagine a day when someone walks in the door of your land trust and offers to pay for everything you need to accomplish your mission. Not an invitation to be extravagant, and not crazy stuff, but if money weren’t a barrier, what would it cost to run your land trust?

What would you include in your calculations?

• Your ED salary would be included as well as your program staff. But the fundraising staff would no longer be necessary.
• You’d probably hang on to your communications staff, too. The newsletter, eNews, social media, and news releases would still be necessary.
• Likewise your volunteer stewardship: recruitment, training, and recognition.
• You’d also keep office space, vehicles, maintenance, travel, legal, insurance, and so on.
• You’d keep stewardship tools such as trucks, prescribed fire equipment, weed management tools, signage, restoration equipment, and so on.
• You wouldn’t need donor software, fundraising and donor appreciation event logistics, most of the office’s paper and postage, logo merchandise, and a lot of consulting.

Whatever that number is, it seems to me that you should know it, and it should be presented clearly in your organizational budgets. “It costs $455,000 to run our core business and the administrative services that support it.”

At that point, the organization turns to its fundraising program and says “create a system such that you become that someone walking in the door and paying for everything.”

The job of fundraising, then, is to build a program of interrelated strategies (membership, campaigns, events, planned giving, and so on) that delivers a net result large enough to meet the organizational need. The mission is perpetual, so the fundraising strategies must be designed to be perpetually sustainable as well.

I would argue that you need a completely separate budget for fundraising. A budget that assumes certain outcomes from the fundraising strategies, and manages certain expenses necessary to carry them off. This budget would clearly include all the expenses you eliminated earlier: fundraising staff salaries, donor software, fundraising and donor appreciation event logistics, most of the office’s paper and postage, logo merchandise, and fundraising consulting.

And the Net Revenue from this second budget would be the same as the number needed from the program budget ($455,000 from the example above).

The two budgets can then be rolled up into one organizational budget if necessary, but everyone internally will know what the revenue strategies are and how much they cost.

Organizations that do this will have different budgeting discussions than those who don’t. They learn that:

• It is possible to outgrow a fundraising strategy. The key question is related to scalability. If we need to raise twice as much money, will I be able to do twice as much of that?
• Some fundraising strategies take longer than a year to put in place. Membership is a good example, and capital campaigns.
• Some fundraising strategies take an enormous amount of time and don’t produce a large net return on that investment. So, the discussion becomes as much about opportunity cost as about net revenue.
• Some fundraising strategies are “one and done” strategies – strategies that take advantage of a fad or current event but lose their potential through replication. (Think Ice-Bucket Challenge)
• It takes more than 4% to raise money. In fact, it can take more than 10%. So, telling donors that 96% of their money goes to programs can hurt your ability to raise money.

Starting out with fundraising expenses and program expenses included all together can mask the actual costs associated with raising money and can even compromise the fundraiser’s ability to raise money.

At the other extreme, in a perfect world, each fundraising strategy would also have a separate budget with a clear understanding of the net revenue return on investment associated with each strategy. In fact, these strategies would also be evaluated over time as well, instead of always looking at 12 month budgets.

The best time to have these discussions, of course, is during organizational Strategic Planning. Quantify how much it will cost to accomplish the goals set forth in the Plan, framed as ongoing operations capacity and overall capital needs – both. Then task your fundraisers with coming up with a plan to get you there.

Cheers,

-da

Photo by Adam Sherez courtesy of Stocksnap.io.

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