Monday, December 10, 2007

Want to Spend Less on Your Non Profit's Fundraising? Here's How...

As I always, I want you to do a few things. The up shot? This particular post will probably help your organization keep some money in the bank, that it would otherwise spend.

What do I want you to do?

1. Track some specific information.
2. Analyze that information.
3. Review findings. Make changes based on findings.

I describe each step, below.

You can use the following method to reduce your organization's fundraising costs for each fundraising method that your organization currently does or is planning to implement.

If you are making a certain amount of money, annually, from a given fundraising method you are probably pleased to just be able to add the revenue to your organization's financials' "Income" line, year to year. I understand. We all feel that way when we raise money for our causes. I've even been known to yell, "Hallelujah!" With the current economy, though, we're all feeling the squeeze. Like you, the organization that I work for needs more cash flow right about now.

Let me show you how you can spend less on each of your fundraising methods, thereby keeping more of the organization's money in the bank.

To demonstrate, let's say, hypothetically, that your non profit writes and mails an annual appeal each year to your donors. Let's take a look at your 2007 annual appeal mailing (and this could be done for any of your fundraising methods, so if you raise money mostly by grant writing or instead use donation envelopes in a quarterly newsletter, etc. - whatever - this recommendation applies).

Let's say that you just mailed your annual appeal letter to 300 folks who've donated to your non profit, before. You've included a donation remittance envelope with each letter. Here are the real expenses for this particular project:

Letterhead paper - $1,500
Letterhead window envelopes - $1,500
Donation remittance envelopes - $500
Postage - non profit bulk rate sending mailing out - $105
Postage - non profit bulk rate to receive donation remittance envelopes - $20
Mailing labels - $15
Printing mailing labels and letters - professional printers or wear and tear on your printer - $30
Executive Director's time - proof reading annual appeal letter, analyzing results - $50
Fundraising Manager's time - writing annual appeal letter, organizing project, analyzing results - $100
Fundraising Associate's time - printing mailing labels, updating donor database w/returned letters, receiving and processing donations - $100
Bookkeeper - accounting for donations and delivering checks to the bank - $60
Volunteers' time folding, stuffing, sealing envelopes, and bundling mailing -$0
Mileage reimbursement - delivering mailing to post office, delivering checks to the bank - $7.00
Total Expense: $3,997

Now, for each of these expenses there are ways to bring your costs down. For instance, be sure that your non profit has a federal non profit bulk mailing rate for large mailings. Go to the post office to apply for one, if you haven't. Do not spend the regular postage rate on your larger mass mailings. Also, compare local printers, office supplies, and letterhead costs. Consider whether one of your regular donors is a print shop owner? If so, ask them if they'll donate printing, letterhead, etc. (these are in kind donations). Buy paper, etc. in bulk to get a reduced price for your purchase volume, or form a co-op with other local non profits and buy your supplies together, getting an even bigger large volume purchase discount to share amongst your organizations. Lastly, use volunteers as much as is possible.

For this post, though, I'm going a step further to show you how to keep more money in the bank. I'm asking you to do the three steps that I listed, above. This analysis can be done many different ways. Do what works best for your organization. Here are my suggestions:

1. Track some specific information:
Before you mail them, and after the envelopes have been labeled, break the annual appeal letters down into three distinct groups based on the recipients' giving history: large amount donors, medium amount donors, smaller amount donors. For your internal use get three different colored pens, give each group a color, and mark each remittance envelope according to how the donor has given in the past. For instance, let's say that Mr. Frank Paul has given $100 to each of your requests and that's a larger donation amount for the typical amounts your organization receives. Then, place a small line on his remittance envelope in the color that you've assigned to your larger amount donors. Do this for each of the three groups. Your letter recipients won't know what a little color dash on the remittance envelope means, but it will allow your group to gather some information. When you receive donations, keep track of how many of each color responds to the annual appeal letter, and keep track of how much each envelope, for each color, donated. You will learn how many people are giving at the same amount level year to year, how many donations you received from each of the giving level groups, and how many of your donors responded to the annual appeal letter, overall.

2. Analyze the information:
In American professional fundraising, it is estimated that it takes 3-5 years (depending on the fundraising method) to make money on a given fundraising method. In other words, you need to expect to lose money on a new fundraising methods for at least three years after you establish it, before you will begin to make money on it (cover your expenses plus raise more money). This varies, of course, because older organizations with established donor bases could expect immediate net earnings on a new event or method. Keeping this in mind, look over the amounts received, donor history vs. how much they gave to this letter, and overall response to your mailing. If this is a brand new fundraiser you should expect only a 3-5% total response (and that's OK if your organization can afford it (or budgeted for it) because a new fundraiser is an investment in future funds). Otherwise, ask your self some questions: did the donors who've given at higher amounts to the annual appeal in the past, give at that same high level again this year? Did you receive many responses from the volunteers and smaller amount donors? Overall, did you receive at least a 10% response (i.e. for 300 letters mailed, you'd receive 30 letters)?

3. Review findings and make changes:
Let's say that from your mailing above you received 100 donations. For 300 sent, that's a great response. One finding, then, is that your donors respond well to annual appeal letters, as a fundraising method, and seem to like them. If, though, your organization only received 5 donations, total, from the mailing; you need to find out why and make changes. Call up a few donors that you know, personally, who did not donate and if they're comfortable doing so, ask them 'was the letter well written?', 'were they just too inundated by donation requests from several non profits at the same time of year?', 'would they rather give to your organization through another way such as a special event or a quarterly newsletter's envelope?' Ask them what they didn't like about the letter. Listen to them! Make changes. Perhaps you need someone who's a better writer to write next year's annual appeal? Maybe they wish they'd receive your letter in late October instead of December, when most people get many donation requests, etc. Listen and make changes. If you notice that donors who gave in larger increments last year are given a little less (i.e. Frank Paul only gave $75 this year instead of his usual $100) you can surmise that your donors are feeling the economic downturn and forecast for your organization's next fiscal operating budget accordingly. Lastly, let's say you see, from the results, that 95% of the smaller donors and volunteers did not give at all. Next year - either do not include them in the annual appeal request or only include those small donors who gave.

It's not that you want to remove those who did not give, from your donor list. What you want to do is take note, for each donor, when, how, where, and why they have given to your group, before; and then you want to reach out to them that way annually. Don't waste money on trying to get donations from them in ways that they've demonstrated to your organization that they do not care for. Do not spend money where you are just wasting it. To know where that is, you need to gather some information.

Be sure to compare apples to apples. Compare donor giving trends to the same events, year to year. Also, follow through. If you've taken the time to begin this analysis process, see it through all the way to learning from your finding and implementing changes. There are many questions about your donors' preferences or giving trends that you can research if you set your organization up to be able to gather that specific information. First, determine what the question is that you want to know (i.e. How many of our major donors are also giving to the non profit down the road whose mission is similar to ours'?). Second, ask yourself what information or resources you'd need to answer this question (i.e. Get the other organization's donations roster from perhaps their newsletter, website, or annual report which are all available to the public, usually). Lastly, analyze your information, review your findings, and make necessary changes (For example, perhaps 80% of your major donors are giving to the other non profit and you've found from the roster that they're giving the other group more money. That's fine, but make a move. Contact a few of them and ask them what their connection is to your organization (Do not mention the other organization. They haven't done a thing wrong. Make the conversation about them and your organization. Through your questions, remind them why they give to your group at all), and ask them for a higher amount donation for this or next year because you've found that they give at higher levels).

Cut the unnecessary spending and keep a little extra dough in the bank. It will add up.

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