Fund Development for Non-Profit Organizations

Elizabeth Scott

RD 874 Summer 2002

 

 

 

 

 

 

 


Fund Development for Non Profit Organizations

 

Introduction

            All non-profit organizations need money and thus at some point turn to someone, somewhere to get that money. Traditionally this is known as fund raising and is often the least favorite job of executive directors. Members of boards of directors of non-profits often report that they see fund raising as “definitely not my job”. They tend to see fund raising as passing around a bowl or hat to ask for donations, or asking their friends and neighbors to buy something they don’t need to raise funds for an organization.  This is one reason that non-profit people are now beginning to note the difference between “fund raising” and “fund development” and are applying it to their programming.   (Drucker 1990) Fund development is creating a constituency which supports the organization because it deserves it and it is developing a membership that participates through giving (both as volunteers and financially).  In fund development you appeal not just to the heart, but also to the head in an effort to build a continuing effort and solid base for the future.

Who Gives in America?

            Before beginning fund development it is important to know who gives and volunteers in America, how much they give and volunteer and what factors increase their giving and volunteering. In America 89% of households give and their average annual contribution is $1,620. (Toppe 2001) When it comes to volunteering, 44% of American adults volunteer. (69% on a regular basis) There is a strong connection between giving and volunteering. In the adult population 44% give only, 42% give and volunteer, 2% volunteer only and 10% do neither. The average contribution per year of those that give only is $1,009. However the average contribution of those that both give and volunteer is $2,295.  Another important factor in the amount people give is their being asked. Of those asked to give, they averaged $1,945. in donations where those who gave without being asked only gave an average of $1,109.  There are also strong correlations between involvement in non-profit organizations as a youth, attendance of religious programs, not being concerned about the economic future and voting.   All of these factors correlate to an increased amount a person contributes to non-profits on an annual basis.  In fact donors with all four characteristics averaged $3,678. in annual contributions to non-profits.   One more factor is that people who contribute through a monthly donation program tend to give more to that non-profit than they do to other similar non-profits. (McKinnon 2000) 

Why People Give

             Non-profits exist because communities have needs that must be met and problems that must be solved.  These problems and needs belong to every member of the community because if they aren’t solved they ultimately impact everyone. These needs result in programs and services to assist the community.  (Keegan 1990)

Maslow’s Hierarchy of needs can be used to illustrate both the needs of people and the needs of non-profit organizations. (Lumarda 2000)  While many non-profits wonder what donors “want” it may be more useful to use Maslow’s scale to look at what donors need. People who donate to non-profits need to know that their money is going to an organization that is effective, has good management, is an important part of the community, has special meaning to the donor and is something the donor can identify with.                                    Drucker tells us (1990) that people give to non-profits so that they can discharge the one mission they all have in common: to satisfy the need of the American people for self-realization, for living out our ideals and beliefs and our best opinion of ourselves. He goes on to say, “To make contributors out of donors means that the American people can see what they want to see – or should want to see – when each of us looks at himself or herself in the mirror in the morning; someone who as a citizen takes responsibility. Someone who as a neighbor cares.”  

            Non-profits also give people a sense of community and purpose and fulfill those needs that were once met by living in smaller communities and extended families. In fact, Drucker says that non-profits are the American community.  (Drucker 1990)  Members of the community give when they see that the organization (non-profit) has a clear mission that they feel is worthwhile and when they believe the organization is making cost-effective progress toward meeting that mission.

 

Donor Relations

           Making the most of fund development means having a clear mission and goals and  developing strong relationships with donors.  It requires understanding of their needs, desires and giving patterns and paying careful attention to follow-up.  A non-profit must have a plan for who to ask, how often to ask them and how much to ask for. And to be successful a good fund development plan includes the board of directors in the important role of donor relations, asking for donations and taking the lead by setting their own goals for donating to the non-profit they serve.

         By strengthening relations with donors a non-profit should be able to increase the amount of funds it raises each year while keeping the number of people who are fund raising and the amount of work the same. By building strong connections the non-profit will increase the average amount donated by each donor, retain donors and expand their base of support over time. One good first step is to do a donor survey (Farmelo 2001)

Questions that may be asked are:

1.      What information would you like about our work? And what areas are of most interest to you?

2.      What brings you to this organization to volunteer or donate?

3.      Tell us your preferences for giving. (Would the donor like to be asked once per year, twice, four times, in person, by phone or by mail?)

4.      Do you use the internet? (This may help with future fund raising and gives a reason to share your www address).

5.      May we call you? (It is important to know if phone calls are acceptable, but it also helps to note that you sometimes make phone calls to thank people and to ask if that is acceptable)

6.      Will you help us mobilize funds?    (Asking for names of other people who may be willing to donate)

7.    Are you interested in using your will power? (Don’t forget planned giving as a potential source of funding)

8.      Would you like a copy of our annual report?

9.      Comments and suggestions (Giving general feedback helps the non-profit to learn a lot more details and also gives the donor an opportunity to feel involved in the organization and listened to.)

         So that the non-profit staff can be sure to clearly identify who is responding, a mailing label with their name and address should go at the top of each form. (Farmelo 2001) Also including a return envelope makes replying as easy as possible. A typical response to such a survey might be about 10% but with a well developed mailing list it can be much higher and in some cases reaches over 20%.   When donor surveys come back it is very important to follow up with a written response with attention to the details of the answers provided. For instance, if the donor wants to hear from an organization only once per year, when a letter is written as a follow-up, it should note that in the letter and state that it will be the only appeal that year.  All information should be carefully cataloged and put into a data base for future reference. Each time an appeal is made for funds it is important to look at the information individuals donors have provided and tailor the request to it.

            The next important aspect of soliciting donations is to know not only who to ask, but how much to ask for. A good indication of how much a person may donate is past donations to other non-profits or to the same non-profit.  It is very important to ask for the right amount. (Klein 2000)  First time donors to a non-profit usually make smaller donations, but if the donor has donated before they will often increase their donation if they are asked to.   On the other hand if a donor is only asked for a small amount they sometimes give that amount when they would and could have given more.  Developing a chart of how many gifts are needed at what amount can help non-profits know how much to ask, as can keeping careful track of individual donations to not only the non-profit in question but to other similar non-profits.  

            Research also shows that donors give more when they commit to a monthly giving plan. (McKinnon 2000) A non-profit that is first in line for a person’s monthly donation will benefit considerably. According to McKinnon, most philanthropically minded individuals will give gifts to four to ten non-profits per year, but only one or two of those will they chose to join in a monthly giving plan. Often they do not do a monthly giving plan to their favorite organization, but simply to whichever non-profit asks them first. And when they do have to cut back, donors will cut back first to those that they give to on an occasional basis and will cut back last on those non-profits that they are giving to monthly, because they have “made a commitment.”  

            Some non-profits shy away from monthly giving programs because they believe they are too much work or result in donations that are too small.  However they can be very cost effective and the yearly total of many small monthly donations often are much larger than annual donations.  

          The board of directors for a non-profit should be not only volunteering but also donating to the organization and helping with fund development.  Many members of boards do not donate dollars to the non-profit for the simple reason that they have never been asked.  Researchers and professional fund developers consistently say that all members of a board should be asked annually to pledge to the non-profit.  This should not be so large an amount that it “hurts” but rather a large enough amount that it feels really good. (Keegan 1990)      It is important for the executive director to remember and indeed believe that everyone can give some amount.  And the executive director should set the pace by making their own donations on a regular basis and letting the board members know how much they are donating.  Many board members of non-profits do not feel comfortable with fund development and the executive director needs to clearly explain expectations to new members when they join the board and also provide training on how to do fund development on a regular basis.  The board of a non-profit is in a unique position to know the potential donors in the community and to develop strong bonds with them. Because of this they are a vital resource to the non-profit and must learn to value their own abilities, knowledge and commitments so that they can be an advocate for the non-profit and be a strong asset for fund development.  

Creating a Culture of Fund Development   

          Fund development must be a part of programming and be integrated into all parts of an organization’s work.  (Roth 2001) However, programming staff are often uncomfortable with fund development and believe it should be left to those with the technical skills and training (such as a professional fund developer).  They tend to separate themselves from the fund raising and concentrate on programming.   On the other hand, fund development staff (who have a higher turnover than programming staff) report feeling left out of the very organization that they are expected to work for, which makes it difficult to develop a good understanding of and commitment to the non-profit.  What is needed is a full integration of fund development and programming so that a non- profit develops a culture of fund development.  Roth (2001) suggests ten tips for success:

  1. Send staff and the board to fundraising trainings (one time training is not enough, you need to build a strong base of people with multiple skills)
  2. Don’t segregate fundraising from program activities (people can fill a variety of roles in an organization and may be more effective as a result)
  3. Set aside time once or twice per year at board or staff meetings to discuss some aspect of money and our society’s attitude toward it.  (it is important to get people comfortable talking about money)         
  4. Make sure you have representation of staff, board, volunteers and members for each fund raising activity.  (this applies not only to special events but also to other events such as direct mail campaigns and small-scale-phone-a-thons.) 
  5. Develop specific ways for people to get involved.  (if you bring someone in for training you need to have something for people to get involved with right away)
  6. Create an annual pledge form on which board members indicate what they are willing to do that year in the area of fundraising (and giving).
  7. Leadership from the executive director and the chair of the board are critical.
  8. Use an organizing model to get people involved.
  9. Celebrate your fund raising success. (make sure people are recognized and rewarded for their contributions)
  10. Make a commitment to create a culture of fund raising in your non-profit knowing that it may take some time. (it may take years, don’t give up)

Capital Campaigns for Non-Profits

        A capital campaign by definition is time limited and should have a specific beginning and end. Small campaigns may raise less than $500,000. but larger campaigns may not be much more work than smaller ones. To begin a campaign you need a cause (often a building), a campaign case statement, and budget, an adequate database, gift acceptance policies and a motivated board.  (Klein2001)    

         The next step is to create a gift giving chart which details the number of prospects needed to produce the number of gifts needed (at various levels) to reach the campaign goal.  In most campaigns 40 to 60% of the goal is provided by six to eight donors. Most groups identify these major gifts before they proceed and this is referred to the “quiet” period of the campaign.  After some large pledges are in place (at least 30% of the total needed) then the campaign is announced with much publicity.  Campaign contributions are generally a minimum of $1,000. and while some donors may want to contribute smaller amounts, these smaller gifts may negatively impact the annual giving plan for the non-profit and they are not generally solicited. Following the launch of the campaign where the major donors are announced, the goal is to complete the campaign within the announced time frame.       

 

 

Resources for Non-Profits

             When a non-profit executive director or board wants to learn more about fund development or perhaps begin a capital campaign they often need to look outside the organization for assistance to learn how to be more effective.  There are numerous sources of information and training such as: the Foundation Center in New York, The Fund Raising School at the University of Indiana, The Drucker Foundation and the Grassroots Fundraising Journal.  These are all excellent sources of information, but access is limited unless the non-profit has enough resources to pay membership fees or subscriptions.   As a result some areas have developed associations of non-profits or local networking groups which serve to support non-profits. By pooling resources, smaller non-profits may be able to access more information, training and support for their staff and volunteers.

Conclusion

               Fund development is essential to the survival on non-profits and thus to the American community. It begins with a clear mission and goals and a committed executive director and board.   Non-profits need to develop a culture of fund development that is a part of their programming efforts. All contributors must be seen as part of the solution and an integral part of the mission. It is a community effort which must give meaning and purpose to its volunteers, staff and board while at the same time providing services to those in need.  

 

 

 

 

References

 

 

Drucker, Peter F. (1990) Managing the Non-Profit Organization, HarperBusiness

 

Farmelo, Martha (2001) “Getting to Know Your Donors: the Donor Survey”

Grassroots Fundraising Journal Vol. 20 No. 1 Chardon Press

 

Herman, Robert D. & Associates (1994) The Jossey-Bass Handbook of Nonprofit Leadership and Management, Jossey-Bass Publishers, San Francisco

 

Keegan, P. Burke (1990) Fundraising for Non-Profits, HarperPerennial

 

Klein, Kim (2001) “Getting Over the Fear of Asking” Grassroots Fundraising Journal Vol. 20 No. 2 Chardon Press

 

            Klein, Kim (2001) “The Phases of a Capital Campaign” Grassroots Fundraising

             Journal Vol. 20, No. 4, Chardon Press

Lumarda, Joe (2001)  Philanthropy, Self-fulfillment and the Leadership of Community Foundations”, Leader to Leader  No 22  The Peter F. Drucker Foundation for Nonprofit Management

McKinnon, Harvey (2000) “Developing a Monthly Donor Program” Grassroots

            Fundraising Journal Vol. 19, No. 5 Chardon Press

 

Roth, Stephanie (2001) “Creating a Culture of Fundraising in your Organization”

Grassroots Fundraising Journal  Vol. 20, No. 9 Chardon Press

 

Toppe PhD, Chris (2001) “Giving and Volunteering in the United States” Independent Sector, Nov 4, 2001