Fundraising is expensive and time consuming. Some estimates state that 20 – 40% of every dollar raised was spent on raising the money. Making fundraising less expensive would provide significantly more money without changing the amount of money raised.
Making the process more efficient is a good place to start. One simple suggestion is to be more selective when cultivating donors. Spending time cultivating the generosity of a donor who has reached their limit is unlikely to yield much of a return on investment. During the cultivation, try to learn how the donor is measuring the effectiveness of their gift. When a donor feels their gift is being more effective, their generosity increases.
Many small donors have the capacity to give more. The first thing your cultivation must do is determine a donor’s capacity to give. If they have the capacity to give $100 a year and they are currently giving $25, it will take careful analysis to determine if the cultivation is worth the effort. In the first year it will be unprofitable. How many years will it take to create a reasonable return on your effort? What is the potential of each donor’s capacity increasing significantly? A college student who gives $25 is a good candidate for cultivation because in a few years they will have a healthy paycheck if they have modest student loans to payback.
Many times nonprofits focus on finding new donors. Most new donors come from fundraising events though most events yield very few new donors. Events attract many small donors who are there because of the entainment, the items for auction, or because a friend asked them to attend. They will make a token gift but they are unlikely to become passionate, engaged, generous donors. It is more expensive to find a new donor than it is to cultivate the generosity of a current donor who has the capacity to grow.
Many nonprofits are tempted to add an event when they need more money. Most communities have too many nonprofit events already. Adding another one is unlikely to produce many new donors or much income. While there seems to be an abundance of individuals who are willing to run an event on behalf of a nonprofit, just having the event is a distraction for the fundraising staff and reduces their effectiveness and availability to cultivate current donors. In addition, unless the fundraising event (new or old) is mission centric, it hurts the nonprofit’s reputation because it is about money and finding donors.
The best way to find new donors is through referrals from existing engaged donors. Those new donors have been prescreened by your donor and have a high probability of becoming loyal, generous, and engaged donors. When a donor reaches their capacity to give, you know they are a passionate and engaged donor. As it says above, continuing to cultivate their generosity is unlikely to be productive. However, cultivating their willingness to help recruit others might be advantageous.
Talk with your donors. They probably have several ideas for making your cultivation and other donor-related activities more effective and efficient.
A key point to remember is that you are looking for ways to make fundraising more efficient. Be careful where you choose to cut costs. For example, cutting lunches with donors from the budget is unlikely to make the donors more generous or reduce the time it takes to cultivate the donor. Taking two donors, who are friends or you think will become friends, to lunch will save time and may increase their generosity because they receive validation and emotional support from the other. Inviting a board member to join the three of you and pay for lunch is even better. The board member’s willingness to pay for lunch and their presence tells the donors how much they are valued by your nonprofit and its leaders. That by itself encourages generosity.
Next Step:
Be creative when looking for ways to make your fundraising more efficient and effective
Be careful where you cut costs
Tailor your cultivation to fit each donor’s needs (use donor feedback to guide your tailoring)
Imagine the economy turns down and demand for your services increase at the same time or some local event had a similar effect on your community. The crisis will probably prevent most donors from increasing their giving. It might even cause some to reduce their support. Therefore, making fundraising more efficient and effective is the only way your nonprofit can provide the resources to meet the surge in demand.
If you have to reduce the cost of fundraising by 10% while increasing income by 5% what will you do? You would find a way if you had to. Find the way now so that you can make better use of your donors’ gifts.
Take It Further:
Be proactive and increase the efficiency and effectiveness of your fundraising before your donors demand it or they begin reducing their giving because they are disappointed with your use of their gifts
Look for ways to broaden your services, while remaining mission centric, so that your mission becomes more attractive to more potential donors (use what you do to attract donors instead of relying on your staff to find donors)
Set a goal of reducing your cost of raising funds to below 10% within five years
