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How to Budget for Nonprofit Fundraising

As you probably already know, raising money costs money. No nonprofit organization receives every grant or gift that it seeks. So before you put your fundraising plan into action, you need to make sure that your organization can afford its potential fundraising costs and that the possible returns outweigh those costs.

Fundraising costs should be a modest part of an organization’s budget. The costs will be higher when the organization is starting up or launching a major new fundraising effort. Costs likely will decline after a few years.

Generally speaking, recruiting a new donor costs more than securing a second gift from a past supporter, and raising money through special events, mass mailings, and telemarketing are expensive fundraising methods. However, all of the above may be worthwhile if they bring visibility, new donors, or unrestricted support to your organization.

Here’s a quick look at the costs — in terms of both time and money — of the fundraising activities your organization may consider using:

  • Grants and contracts: Most of the costs of securing grants and contracts are labor costs for planning and writing the grant proposal. Sometimes you need to travel to meet in person with the agency awarding the money, so don’t forget to budget that, too.

    Pay attention to each grant maker’s requirements for reporting the results of a project and make sure you can afford to complete the report. Some grants require the collection and analysis of extensive data. Some require audited financial statements.

  • Corporate sponsors: Businesses and corporations may require visible recognition for their contributions to nonprofit organizations. Such support is often called a sponsorship, and the nonprofit and corporation agree upfront to the type of acknowledgment that they expect — whether it’s a corporate logo printed on t-shirts or a 6-foot banner announcing a company’s support. Costs of printing t-shirts, banners, and other promotions generally are incurred by the nonprofit organizations.

  • Individual contributions: Costs related to securing individual contributions include salaried staff members’ time spent compiling lists of possible donors and the tools used for making successful donation requests. Common tools include solicitation letters and e-mails, brochures, and printed reply envelopes. Adding capacity to your website so it can accept online contributions may be another good investment.

    Often when you think of solicitation letters, you probably think of direct mail — hundreds of thousands of letters sent to purchased lists of potential donors. Although direct mail can be a very successful form of fundraising for some causes — medical emergencies, animal rescue, and civil rights, just to name a few — it’s also very expensive.

    A new, emerging nonprofit can make good use of letter-writing by targeting a small mailing to people who already know its work well, asking its board members and volunteers to make personal appeals to people they know, or by using e-mail rather than snail mail.

    Some organizations hire companies to handle telephone solicitation campaigns. Be cautious if you take this step: Some of these companies charge a high percentage of the money raised in exchange for providing this service. Others are reputable and valued by the nonprofits they serve.

  • Special events: Special events can be a great way to introduce new people to your organization, but producing such events can be one of the more expensive ways to raise funds. Spending 50 percent or 60 percent of the income from an event to pay for costs is common. After all, printing, advertising, food, and entertainment all cost money.

    Also, special events are labor intensive, so make sure you have an experienced volunteer group or detail-oriented staff to work on special events if you go this route.

  • Planned giving: If your nonprofit isn’t familiar with tax laws regarding wills and estates, it may need to employ or hire on contract a planned giving expert (or attract one as a board member). Bringing this person on board can be expensive in the short term, but doing so can yield important long-term support for your agency.

    Planned giving works best for organizations that have been around for a long time and that show good prospects for continuing. Universities, museums, and churches come to mind. Small, new groups have a difficult time attracting bequests.

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