Peter Zehren | Nonprofit Management and Leadership
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Fundraising has a cost. While most businesses are slated to wait at least two years to turn a profit, most nonprofits look to fundraising programs, campaigns and initiatives to turn a profit from the get-go. They don’t consider fundraising an investment.
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At the International Conference for the Association of Fundraising Professionals (AFP) in San Antonio, Penelope Burk presented her latest research stressing the real costs and needs of fundraising—what she calls in her book Donor Centered Leadership. Simply said, nonprofits must invest in fundraising.
Burk stressed most nonprofits do not see the long term gain from spending on staff, infrastructure and sophisticated fundraising methods. With the exception of universities and colleges, she believes a “preoccupation with costs…inhibits fundraising success.”
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The Environment
Nonprofits are supposed to work smart. Right? They are not supposed to spend more than they bring in. Yet that is what investment takes. You have to spend money to make money.
I launched an individual giving program at a social service agency. Starting with Leadership and Major Gifts, I knew there would be a two-three year turn around. Unfortunately, the expectation was to see profit the first year. Like most nonprofits, the expectation was to bring in more than what was spent. The initiative was dropped and potential donors lost.
The Cost of Professionals
Ironically most nonprofits live in a “profit only” environment where it is nearly impossible to succeed. Which is why many professional fundraisers either move on or are asked to leave. Burk’s research shows the cost of replacing a top fundraising professional is 1.2-million dollars. How efficient is that investment tactic?
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Staggering as that figure is, it’s difficult to see because many costs are hidden in unrealized funds. Factor in the time required to bring a new person “up to speed” not to mention rebuilding relationships. That’s where real damage occurs. Donors and board members who had a strong relationship with a fundraiser who moves on will wait to act.
Program Run Shops
A colleague and I were talking at the conference about how most nonprofits figure the costs of the programs they want, then set fundraising goals to meet those costs—totally ignoring any data on the propensity of donors to give.
Nonprofits who look at data that can substantiate what to spend are far better off. While the program idea may come first, it’s important to have donors back that idea before moving forward. Donors love to invest in new ideas, especially when they believe they’ll succeed.
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Conclusion
The reality is nonprofits will raise more if they spend more on fundraising. They must invest now for future profits. Fundraising has a cost; and that cost must include more than just a financial bottom line. Benefits over time must be factored in to truly see the whole picture.
That is not to say that fundraising should not draw a profit. It must. However, with new initiatives, campaigns and donor acquisition that profit may happen over time not within any fiscal year. And the real cost of not strengthening and building relationships in the long run must also be considered.
How does your organization approach investing in fundraising?
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