07 Jun Fundraising for “Enough” (What would “enough” even look like?)
7 June 2022
By David Allen, Development for Conservation
(Most of this post was originally published in June of 2017.)
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 your organization need to look like (staff, volunteers, office space, travel) if you had the capacity to never turn down a mission opportunity?
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, much 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 could theoretically turn to its fundraising program and say “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 think 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, much 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?
- And transference. Are we simply getting people to give to this strategy over here instead of to that strategy over there? And if so, is that a good thing?
- 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 hurts your ability to raise money. It’s not about how cheap you can be. It’s about how much you need to raise (net) and whether you’re getting closer to being able to do that.
Starting out with fundraising expenses and program expenses co-mingled can mask the actual costs associated with raising money and can even compromise the fundraiser’s ability to raise money. I’ve written before about Executive Directors who categorically ask every budget manager to cut 10-percent. Without cutting staff, that means cutting a much larger percentage of the operating expenses – in some cases up to 30%. This puts the fundraiser in a bind – how do you cut 30% without also cutting the net result from your fundraising results?
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 that 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 immediately AFTER organizational Strategic Planning. Take a pause to quantify how much it will cost to accomplish all the goals set forth in the Plan, framed as ongoing operations capacity and overall capital needs – both.
Assume that success is possible. (Because it is.)
Then ask your fundraisers to design a (strategic development) plan to get you there.
Ask your fundraisers to rise to the need instead of serving as brakes.
Cheers, and Have a great week!
PS: Your comments on these posts are welcomed and warmly requested. If you have not posted a comment before, or if you are using a new email address, please know that there may be a delay in seeing your posted comment. That’s my SPAM defense at work. I approve all comments as soon as I am able during the day.
Photo by KIMDAEJEUNG courtesy of Pixabay.
Lee SchillerPosted at 11:38h, 09 June
I don’t understand “So, telling donors that 96% of their money goes to programs hurts your ability to raise money.” I believe that land trusts (& all 501(c)3s) should be accountable & transparent, which includes publishing a donor friendly annual report that includes financials.
David AllenPosted at 13:30h, 09 June
I’m certainly not talking about accountability and transparency. But putting that aside, there are three problems with trumpeting how low your overhead is to donors. The first is that is focuses attention (for both of you) on how little you are spending instead of how much you are getting done. It focuses attention on the cost instead of the NET. In fact, I would say that most of the organizations I have worked with never even bothered looking at the net. The second is that it incentivizes deceit. In an effort to keep fundraising costs looking as low as possible, you don’t include the stationary for your appeal letters as a fundraising expense because you had it already included as an office supply cost. Or the cost of the event wine, because it was donated. (If they had donated the money and you used it to by the same wine, the percentage cost would be higher.)
But worst – and this was the point I was making in the post – the time period typically considered for such calculations is 12 months. What about strategies that take longer to mature? Or for which the expenses are frontloaded? My favorite example is direct mail. I’ve documented costs as low as $85 and as high as $250 to recruit a single member, on average, using direct mail. Even if that person gives you $100 as a first gift, the cost of raising money looks terrible after the first year. I’ve also documented that the median land trust experience is that same member being worth $800, on average, after 5 years. If the donor stewardship and renewal costs are even $20/year (and that would be high), your investment in direct mail is a no-brainer.
Bottom line – when someone asks how much we spend on fundraising, I give them the same answer we put in the 990 each year. When someone asks how much supports programs, I answer “all of it.” The thing is, though, when we focus OUR attention on how much we are getting done, donors don’t ask how much it costs.
I really appreciate the questions, Lee. Keep them coming.