chapter FOUR
What You Have to Understand to Begin Fundraising
This chapter lays out several key principles that apply to all fundraising: why fundraise, where money should come from, why people give to nonprofits, and who can raise funds.
Let's start with a question: What does an organization want from fundraising? Although you may think the answer is money, it's not; it's donors. Not donations, but donors; not gifts, but givers. We fundraise in order to build relationships with a broad cross section of people who will do some or all of the following for our organization: give money themselves, ask others to give, open doors to institutional giving, volunteer, say nice things about our organization, and so on. Of course you want people to make donations, but you also want them to feel so good about how they were treated and what you did with the money they gave that they want to give again and again.
Focusing on building a donor base rather than on simply raising money means that sometimes you will undertake a fundraising strategy that does not raise money in the first year beyond costs, such as direct mail, or that may not raise money for several years, such as legacy giving. It means that you will relate to your donors as individual human beings rather than as ATMs whom you engage when you want money but otherwise ignore. It means you will plan your fundraising for both the short term and the long term and look at the results of any fundraising strategy not only for the next month but also for the next few years.
An organization must diversify its funding sources to be interesting to the widest possible spectrum of potential supporters—that is, to receive money from a variety of individuals who give varying amounts. Diversification is a basic rule of economics, sales, investing, and any endeavor that relies on volume for success. Diversifying your fundraising means that your organization is not overly dependent on any one person, source, or strategy. There is no exact percentage for this, but you need to be able to lose any donor, any funder, or have any strategy go terribly wrong and still be able to function. Diversifying in fundraising also means an organization has to increase the number of people helping to raise money, and it has to diversify these people's skills. The need for diversity is not a new lesson. People with only one skill have a more difficult time finding employment than those with a variety of skills. Investors put their money in a variety of financial instruments. Thousands of organizations have had to cut back or even close because they relied too heavily on one or two foundations or one government contract as their main source of funding.
Yet many organizations continue to look for the ideal special event or extraordinary crowdfunding idea that will bring in their entire annual budget, or they search for one person, foundation, or corporation that will give most of the money they need, or they try to hire the perfect fundraiser who will bring in all their income without the help of anyone else in the organization. These organizations reason that if they could use one fundraising strategy that was absolutely certain, tried and true, or hire the one fundraising staff person who could do it all, their money worries would be over. Unfortunately, no fundraising strategy or person fits that description. In fact, only if it maintains a diversity of sources will an organization survive for the long term.
Here's what diversity looks like: Organizations aim to have no more than 30% of their funding come from any one source for more than one or two years. An organization could lose 30% of its funding and probably survive, although it would be difficult, but to lose more than 30% of one year's funding would be catastrophic unless you had a very large reserve fund for just such contingencies. This guideline about diversifying sources of income means that although you could have more than 30% of income coming from individuals (and many nonprofits do), you cannot have one donor providing 30% of this money. The IRS recognizes this principle with its “one‐third rule,” which states that an organization receiving one‐third or more of its total income from one person, foundation, or corporation for more than three years does not meet its test of what constitutes a public charity; if this condition persists for several years, an organization risks losing its 501(c)(3) status. Public charities are to be supported by a broad swath of the public and not to be hobbies of one or two people while operating with the tax advantages of public charities.
There is no set number of sources that constitutes healthy diversity. Much will depend on the size of your budget as well as on your location, your work, and your fundraising philosophy. Clearly, however, for organizations that seek to raise a significant amount of money from individuals, the more people who give you money, and the more ways you have of raising that money, the better off you are.
APPEAL TO PEOPLE WHO GIVE
To build that broad base of donors, it's useful to understand what motivates people to give. As we noted in Chapter One, about 65% of adults in the United States regularly donate to nonprofits, with most of those people supporting 5–15 organizations. Fundraising efforts should therefore aim for your organization to become one of the organizations that these givers choose. Do not spend a lot of effort trying to be the first organization that someone who is not a giver donates to, unless you have a program reaching out to young donors who may be new to giving.
In general, people who don't give away money are unlikely to change: it is not that they just haven't found the right NGO yet, it is that they are not givers. People who give money are going to give it away. They will give it to your organization or to another organization. Your organization's job is to become one of the nonprofits they support. To do that, first examine what makes a person a giver. Start by thinking about why you give, assuming that you are part of the majority of people around the world who give away money.
Why People Give
People give to nonprofit organizations for many reasons, but numerous studies show that the most common reason is because they were asked to donate. People are more likely to remember how they were asked than the name of the organization to which they gave. Of course, responding to being asked is usually accompanied by other motives, varying from a straight transaction (receiving a tote bag, discounted tickets) to tradition (our family or friends always give to X organization), to deeply held belief.
At a more altruistic level, there are more reasons for giving. People give because they care about the issue and because they agree with the organization's analysis of a problem and vision for a solution. Often people give because they or someone they know were once in the position of the people the agency serves (alcoholics, abused women or children, unemployed, homeless) or because they are thankful that neither they nor anyone they know is in that position.
Sometimes people give because they feel guilty about how much they have or what they have or haven't done in their own lives, or in order to feel more assured of forgiveness.
People give because the nonprofit expresses their own ideals and enables them to reinforce their self‐image as a principled and generous person—for example, “I am a feminist, environmentalist, pacifist, equal rights advocate, good parent, concerned citizen,” or whatever values are important to them. Through their giving, they can say in truth: “I am a caring person,” “I have deep feelings for others,” “I am helping others.”
When people are asked personally by a friend or someone they admire to give to a particular organization, in addition to feeling good about giving to the organization, they show themselves as kind and open‐hearted to someone whose opinion they value.
Although these motivations for giving are what impel most people to give, most nonprofit organizations focus on two other reasons they think will motivate people to give but that are not very persuasive: “We need the money” and “Your gift is tax deductible.” Neither of these reasons distinguishes your organization from any others. All nonprofit organizations claim to need money, and most of them do. The fact that the gift is tax deductible is a nice touch, but gifts to more than one million other nonprofits are tax deductible, too, and because most Americans do not itemize their donations on their tax forms, they actually receive no tax benefits for their giving. Neither need nor tax advantage makes your organization special or particularly worthy of a gift. As the great fundraiser Kay Sprinkel Grace says, “People don't give because we have needs; they give because we meet needs.”
People who donate to nonprofits in essence “pay” them to do work that can only be accomplished by group efforts. There is very little one person can do about racism, for example, or pollution, or world hunger. There are few services, such as child care, after‐school enrichment, or health care, that a single person can offer. Only as part of an organization can an individual make a difference in these or any other pressing social problems. Certainly, one person cannot be a theater or a museum or an alternative school—but many people can be entertained or educated by these organizations. Donors need the organization as much as the organization needs the donors. Donors give money in exchange for nonprofits to accomplish the work the donors themselves cannot perform.
Asking People to Give Is Easy to Learn
A most important lesson for all organizations, particularly smaller ones, is that fundraising is easy to learn. You do not need a degree or certification to be a good fundraiser. To be a successful fundraiser, you need only three things: common sense, commitment to a cause, and a basic affection for people.
No one says at the age of 12, “When I grow up, I want to be in fundraising.” Instead, a person is drawn to an idea or cause and to an organization working on that issue. The organization needs money in order to pursue the cause, so the person decides to help with fundraising even though it is not their first choice of how to be involved and even though they initially may have found the idea of raising money slightly distasteful or a little frightening. With time and experience, many people find that fundraising is not as difficult as they had imagined, and many others even begin to like it. They realize that people feel good about themselves when they give money to a cause they believe in and that to ask people for money actually gives them opportunities to express important traditions or beliefs.
People asked to raise money often project the distaste they may feel about asking for money and assume that those being asked feel the same about giving money. In fact, there is a significant difference between the two. Rarely do people feel good when they ask for money until they get used to it, but people almost always feel good about giving money. In asking situations, potential donors are more than likely flattered, pleased to be included, and thinking about what amount they could give.
The feelings of discomfort in asking for money are normal; in Chapter Eight we talk about them and how to deal with them. For now, be clear that asking and giving are two very different experiences, even when they occur in the same conversation. When people are recruited to ask for money, they must reflect on what they like about giving, not on what they hate about asking.
When an organization has a diverse number of ways to raise money, it can use the talents and abilities of all the people in the group to help with fundraising. As volunteers and board members learn more about fundraising and experience success doing it, they will be willing to learn new strategies and will begin to like asking for money. Further, an organization that has only one or two people raising its funding is not much better off than an organization that has only one or two sources of money. Many small organizations have suffered more from having too few people doing the fundraising than from having too few sources of funds. In the chapters that follow, we discuss how to identify appropriate fundraising strategies and how to build a team of volunteer fundraisers.