The biggest fundraising mistake I believe nonprofits make is… the failure to provide sufficient funding for their own fundraising operations.
As in any endeavor, the first rule should be SURVIVAL and that’s not going to happen if you don’t have sufficient funds to fund your own fundraising operations. If you’re going to help others, you must first learn how to help yourself. Here’s how. More
Make sure you have sufficient assets to achieve your fundraising goals. These assets should include both human and physical capital such as: employees, office space, computers, software, equipment, furniture, event materials, mailing pieces, hardware and software and should also include travel and entertainment, recruiting, trade show expenses, consulting services and R&D.
I get that nonprofits want to be, or at least appear to be, as efficient as possible. They don’t feel comfortable spending money on their own operations because they naively believe that the overwhelming majority of the money should go to programs. All noble and good but… also terribly wrong thinking.
Let me give you an example. Suppose your organization raises $1,000,000 and of that amount just 15% goes to overhead. That would provide $850,000 for programs and would be considered acceptable to most outside observers who are evaluating your department’s efficiency. But what if I told you that for $50,000 you could invest in newer technology that could more accurately help you define and test additional aspects of your campaign so you could make better decisions that would result in raising an additional $250,000 with basically the same effort. Now you would raise $1,250,000 at a total cost of $200,000 for a net of $1,050,000.
Your fundraising overhead would now be 16% ($1,250,000 / $200,000), which is slightly less efficient but the total amount raised is 25% greater ($1,250,000 – $1,000,000 / $1,000,000) and the net available for programs increased by $200,000, a 23.5% increase ($1,050,000 – $850,000 / $850,000).
So which metric would you use? The one that shows you are operating more efficiently or the one that shows you are maximizing your fundraising efforts? Lacking perfect knowledge, the answer may not be clear but then again… experience and good testing should lead you to the better conclusion.
Stop feeling guilty about expenditures and start feeling elated about results
Nonprofits, as with any organization, must constantly be aware of new techniques, technologies, systems and procedures that could improve their effectiveness. They should willingly be open to new ideas and where possible test their implementation. In short, nonprofits should provide a percentage of their budgets to investigate and invest in new opportunities that could improve their operations and not feel guilty about making investments that are likely to achieve superior results.
The end result is clear. To help more people, you have to raise more money. To raise more money, you have to increase the efficacy of your fundraising. To increase the efficacy of your fundraising, you need to invest in improving your fundraising methods.