The Hidden Costs of Fundraising Events

The Hidden Costs of Fundraising Events

 

By David Allen, Development for Conservation

 

Over the years, I have worked with more than a few land trusts that are significantly dependent on revenue from a large, annual fundraising event – including one conservancy that was getting more than half of its annual unrestricted revenue from a single event.

Most of the time, when I ask why that event, I get variations on the same answer: “We’ve always done it.”

Right.

And if you’ve always done it, it must be right. Right?

Well, maybe not. Most organizations calculate the Return on Investment (ROI) of events by subtracting the cost of the event from the gross revenues. (Some even stop at calculating the gross!)

And stopping there.

I believe that there are at least three hidden costs that need to be considered in the calculus of event-based fundraising. Maybe you can add more based on your experience.

 

The Opportunity Cost

 

It takes a lot of time to pull off a fundraising event. And the bigger event, the more time it takes. How should we evaluate this time? Further, it’s not just staff time. It’s Board member time, volunteer time, and sometimes even consulting time. Hours and hours.

And for the most part, it’s neither tracked nor even estimated. Many organizations start planning for their fundraising events six, nine, and even twelve months in advance. They have monthly ad-hoc committee meetings – 6 people X 2 hours X 8 meetings = 96 hours just in meetings!

Hours and hours and hours.

The ROI is often expressed as “cost per dollar raised,” and this “cost” is always money. Thirty cents to make a dollar or fifty cents per dollar raised. I suggest we find a way to add time into this calculation. And there’s no need to monetize it.

It cost $15,000 and 200 hours to raise $30,000 from our event.

Here’s why: What could you have been doing with your time to achieve a greater return on your (time) investment?

Meeting people one-on-one? Organizing a tour of one of your protected properties? Creating more effective donor communication pieces? Recruiting new donors?

If you spend 200 hours organizing an event that nets $15,000, that’s $75/hour. Some might say “not bad.” But if you spent that same 200 hours engaging five major gift prospects in specific land conservation projects that matched what you knew about their interests, could you raise that same $15,000?

More?

And at the end of the year, would you be in an equivalent place with regard to fundraising capacity?

What about everyone else involved? Could your Board members have raised more than the tickets or tables they sold if they hosted a house party for prospects interested in a new land project?

The difference between what the event raised and what might have been raised otherwise is the opportunity cost.

 

The Cost of Overstating Gross Revenue

 

One organization raised $50,000 from their event – Great! It was even $3,000 more than the previous year – Wonderful!

But looking at it more closely, $25,000 was from Board members and another $10,000 was from a single donor with a long history of supporting the programs.

In other words, $35,000 of their $50,000 was money they arguably would have raised anyway.

When they recalculate the financial ROI grossing only $15,000 against their expenses, the event didn’t look so great and wonderful.

Because it wasn’t really money they raised from the event as much as it was money that had been redirected from other revenue streams.

In the same way that we need to be careful when raising money for projects not to simply turn unrestricted money into restricted money, we need to be careful to evaluate events based on money that would not have been raised otherwise.

That’s a cost.

 

The Cost of Confusing Transactional Fundraising with Philanthropy

 

For many donors who give to and come to events, this is their only connection with the organization. This is really easy to see with golf tournaments and run/walk/bike events, but it’s true for galas as well. Galas tend to attract donors who like the party.

Fundraising events are transactional by nature. The gifts involved are mentally considered against the perceived value of the experience, regardless of the needs of the organization or even the donors’ relative ability to give. Donors even consider fundraising events in the community against each other – it’s a competitive marketplace. This sets an effective ceiling on donor gifts that is completely unrelated to organizational needs, specific project opportunities, or donor capacity.

Further, if those same people can’t come/run/bike next year, or you don’t or can’t host the event next year, they won’t give again.

In other words, you’ve spent time and money engaging people in the moment while failing to draw them closer. To deepen their relationship with the mission or the projects.

Long-term pain for short-term gain.

Worse in some ways is that it begins to feel like longer-term fundraising. Board members get really into it (and pour hours and hours into finding sponsors and selling tables). After all, it’s more fun than donor development and they get to feel good being “hosts.”

And organizational dependence on fundraising events begins to attract people who like events to the Board.

Donors are attracted to events, too. They get to play golf, or bike for miles, or dance at a gala, or play poker, or solve a mystery. Over time, the organizational investment becomes greater and greater, but the donor relationships stay at a very shallow level.

And fundraising events tend to attract donors who like events.

But if the event goes away, so do the donors. After all, they can always find another tournament, race, gala, poker game, or mystery house. It’s not even the only one they will go to this year. This phenomenon tends to show up first in attrition rates – the relative inability to hang onto to donors from year to year.

But the real hidden cost is the relationship cost. It’s fundraising because it raises money, but it’s not philanthropy. Event donors are probably more related to customers than to donors because they are essentially “buying” an experience, even if that experience is purchased at a premium. They give value and receive value in return. Their “gift” is therefore not necessarily even related to support of the mission. It doesn’t necessarily increase over time. And it doesn’t result in donors leaving the land trust in their will.

 

There are certainly fundraising events out there that defy the odds. The connection to mission is direct and tangible, and the events serve an important role in bringing in new donors and engaging them in lasting ways.

And there are fundraising events that also serve a larger purpose than just raising money – visibility, community engagement, securing long-term corporate support, and so on.

It’s just not the norm.

If yours is one of these organizations that has become increasingly dependent on event-based fundraising, at least consider taking one or more of these steps to decrease your organizational vulnerability:

  • Avoid conflating events with donor engagement. Treat events as fun things to do and leave it there. Donor engagement (donor stewardship) still needs to be done afterward.
  • Start tracking time as well as expenses for the event.
  • Outsource the event logistics. Have the event planner work with a host committee that might or might not include Board members. Event planning is not the highest and best use of Board member time.
  • Take your financial participation of Board members out of the event calculation. Board members can still have tables and otherwise be recognized at the event, but remove their financial consideration from the event calculus.
  • Avoid focusing Board member time and attention on the event itself at the expense of follow-up with specific (assigned) donors instead. If they can and will do both, great. If not, the latter is the more important for the long term.

 

Here’s the bottom line: Events aren’t bad. There just are what they are. Your land trust will find no higher ROI than donor development and events will have only marginal value there.

If you are using your events to help develop deeper relationships with donors, that is best.

If your events are getting in the way of developing deeper relationships with donors, it’s not helping. It’s not sustainable. And your organization is increasingly vulnerable as a result.

 

Cheers, and Have a great week.

-da

 

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Photo by Amit Nayak courtesy Unsplash

 

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2 Comments
  • Renee Carey
    Posted at 09:26h, 24 September Reply

    Thank you David!! Once again your blog post is an easy share with Board members. As an “outside expert” you have credibility and a wonderful summary of things that are often overlooked when talking about events. Several years ago we stopped holding an event when I showed them that for the 3rd year in a row, while they said they’d do more, the number of staff hours went up. That final year “cost” us money to hold the event once the costs of staff time were added in.

  • KIMBERLY A GLEFFE
    Posted at 11:32h, 24 September Reply

    So timely, as we are in the midst of planning our 25th anniversary gala! For the reasons stated, we only do an event every 5 years as a milestone celebration, and hope to at least garner the attention of a few new people to our mission and organization! Very true that events usually end up costing more than they raise. We usually refer to them as Friendraisers 🙂
    Thanks, David!

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