Why is Fundraising Important?
Fundraising involves more than raising funds to support your organization’s agenda and pay your staff. It also helps nonprofits take a step back to plan their strategy. This often includes evaluating your organization’s successes or shortcomings, identifying any vulnerabilities, prioritizing projects, aligning teams with key goals, creating partnerships, reaching new or broader audiences, addressing community needs, and creating initiatives to promote sustainability. Together, these activities make fundraising critical to your nonprofit’s overall strategic plan.
Common Fundraising Sources
Be sure to consider a wide variety of sources when planning how your nonprofit will raise funds, including:
- Your Board of Directors: In the past, few nonprofit board members participated in fundraising activities. Yet, many nonprofits now consider it an important part of this role. Whether a board member directly contributes funds or helps in other ways, such as through grant writing or event planning, fundraising is one of their key responsibilities and a great way to demonstrate their commitment to the cause.
- Individuals: This category includes private donors who make cash contributions through your website, the mail, social media platforms, or at your office. Individuals also may make contributions for specific nonprofit activities. For example, if your nonprofit offers several programs, an individual donor may donate money to a particular program and not necessarily to the overall organization.
- Corporate Donors: Corporations make great donors because they can write off charitable contributions on their tax returns. Research corporations in your community and seek out those with a history of supporting your cause. Some corporations may even have their own foundations while others make contributions through corporate giving programs.
- Major Donors: The definition of a major donation can vary by organization. For some, a contribution of $500 or more may qualify someone as a major donor while others might set the bar at $100,000. Major donors also come from all walks of life — from local businesspeople to industry tycoons. Targeting major donors often proves highly effective, especially if you can find people with a personal connection to your organization and/or its cause.
- Grants: Typically offered by foundations, corporations, or government agencies, grants provide funds that nonprofits need not repay. However, grants often come with certain requirements. For example, grants normally require a nonprofit to use the money to directly support its mission rather than spending those dollars for any other purpose. To receive a grant, nonprofits must prepare an application or proposal — an often long and complicated process that requires meticulous attention to detail.
- Foundations: While foundations also have tax-exempt status, they typically don’t offer programs to support their mission like a public charity nonprofit would. Instead, foundations support other charitable organizations that provide programs and services — and some even offer grants. As such, a foundation that supports the same cause as your nonprofit can provide a good potential source of funding.
As you engage with potential donors and start to receive contributions, be sure to create a detailed donor database to help you keep track of them. This database should enable you to maintain accurate information on each donor, including contact information, contribution amount(s), contribution date(s), and any other information useful for your future fundraising efforts.
A variety of commercial software programs can help you with this so check out a few to determine which will best meet your needs.
Key Fundraising Strategies
Once you identify your target sources of funding, you then need to consider which fundraising strategies to pursue. Many nonprofit organizations pursue multiple strategies to help ensure they raise the funds necessary to achieve their goals.
Here are 10 key fundraising strategies to consider:
- Grant Writing: Applying for grant money is a popular strategy because grants usually offer larger sums than a nonprofit may receive from multiple individual donations. This strategy does, however, require you to have a skilled grant writer on your team or a staff member willing to learn grant writing techniques. The strongest grant proposals go beyond the facts and take a storytelling approach, making a gifted writer essential for success.
- Events: Many nonprofits host events to raise money for their organization as well as for specific programs they offer. Some nonprofits even host one large annual event, such as a gala. This strategy often works well because it keeps communities engaged with an organization and aware of its activities throughout the year. Events also provide opportunities for your staff to build relationships with donors and supporters while also showing appreciation for them.
- Annual Appeals: An annual appeal involves distributing a written letter to a nonprofit’s email and postal mailing lists, requesting unrestricted donations. This strategy enables nonprofits to use the resulting donations as they see fit instead of only for a specific program or purpose. For example, a nonprofit could add annual appeal donations to its general fund to cover operating costs as well as programs.
The most effective annual appeal letters avoid statistics and instead share compelling, often emotional stories about someone who recently benefited from the organization’s programs or services. Many nonprofits conduct their annual appeals in the fall — a time when donors may feel more generous as the holidays approach.
- Memberships: Depending on your organization, you may want to consider offering membership options. Memberships work well for nonprofits looking for people who don’t currently serve as board members or staff to take on roles beyond simply providing cash donations. For example, you could set a required number of volunteer hours for members or a certain type of political support, expertise, or influence they must provide. As an added bonus, this strategy can help nonprofit members feel more engaged with an organization’s cause — and more involved in its programs — than donors.
Memberships can take the form of an annual membership fee or multiple membership levels with different benefits for each level. Offering an annual fee membership can not only provide a dependable revenue stream for your organization but also inform your monthly and annual financial planning because you know how much your organization will earn from those fees. Because memberships may not make sense for all nonprofits, evaluate this strategy with your board of directors to determine whether or not to include it as part of your overall fundraising plan.
- Planned Giving: Many people hesitate to discuss planned giving because it involves someone’s death. Yet, this strategy gives donors who care about your mission an opportunity to make a lasting impact on your organization. As such, discuss planned giving as another way donors can positively impact your nonprofit by leaving a legacy. Once you secure a few people who plan to leave a legacy to your organization, you can publicly acknowledge those gifts to help encourage others to do the same.
- Gift Pyramid: Ideal for nonprofits with a specific fundraising goal, gift pyramids often play a role in a major event. If you need to raise $100,000 at your annual fundraising gala, for example, you can break that amount into different donation levels based on what you believe donors may feel comfortable giving. If you know a few people who might consider donating $25,000, you can set your top donation level there. If a donor who made a $25,000 donation last year can’t do so again this year, your other potential donors can help you avoid worrying about securing that top-level contribution.
Once you set a top donation level for your gift pyramid, you can then break down the rest of your fundraising goal into blocks of $10,000, $5,000, $1,000, $500, $100, or whatever amounts you and your team believe will work best to form the pyramid. Most gift pyramids reduce the donation block amounts by half at each level and double the number of donors needed. In general, think about creating your gift pyramid so it includes one top gift, several major donations, and many smaller donations.
Gift pyramids typically rely on the idea that most of a nonprofit’s funding will come from a few donors. However, some newer nonprofits may receive many smaller donations as they build a donor base while more established organizations may receive fewer, larger donations.
- In-Kind Donations: Often just as helpful as cash contributions, in-kind donations can include the free use of facilities, office supplies, and other materials. Many organizations rely on this type of donation as much as they do on cash contributions. For example, shelters and nonprofits working to resettle refugees often depend on in-kind donations of furniture, clothing, books, and other necessities.
- Crowdfunding: This increasingly popular method provides another great option when a nonprofit wants to achieve a specific fundraising goal. While individuals typically create crowdfunding campaigns for a family member or friend in need, nonprofits can use these campaigns to raise money for specific programs or even their startup costs. If you plan to pursue crowdfunding as one of your fundraising strategies, remember that each crowdfunding platform has its own rules and you must deliver on any incentives you provide.
- App-Based Fundraising: Yes, there are now even apps to help with your fundraising efforts. You’ve likely seen campaigns calling for text-based donations. A variety of software programs enable nonprofits to request donations through the simple format of texting. Because many people use smartphones on a daily basis, this technology makes it easy to connect with potential donors via mobile devices. Many nonprofit organizations also make it easy to donate to them by using quick response (QR) codes or other mobile-friendly options, such as creating their own apps or sending monthly text messages to update supporters about their activities.
- Online Fundraising: Don’t forget to use your website and social media channels to support your fundraising efforts. You probably already spend a lot of time driving people to your website, so make sure they see a way to donate when they arrive. Prominently display donation options, make the process easy, use compelling imagery, and let donors know how you’ll use their contributions. Follow a similar approach on your organization’s social media channels, leveraging special features now offered on many social media platforms to make it easier to request donations.
How to Draft a Fundraising Plan
Once you identify your target funding sources and the fundraising strategies you want to pursue, it’s time to draft your fundraising plan. Follow these five steps in order to create an effective plan:
- Set Preliminary Goals. Start by thinking about the cost of operating your nonprofit and carrying out its mission over the next year. How much will you need to establish and run your organization? Once you estimate these costs, set reasonable goals for how much you’ll then need to raise. While goal-setting may prove challenging when you start out, you’ll likely find it easier to determine how much you need each year as you build a fundraising track record.
- Consider Who You Know. Think about the people within your and your board members’ personal and professional networks. Consider individuals, corporations, and anyone else with an interest in supporting your cause. Next, brainstorm who you’d like to know as well as who might make a good partner or supporter of your nonprofit. Be sure to consider all possibilities within your network.
- Conduct Thorough Research. Strong fundraisers do their research. Investigate the interests of people you know and where they work as well as local businesses and local “celebrities” who may have a connection to your cause. Search the internet, social media platforms, and even the local news. What you can find in some unexpected places may surprise you.
As part of your research, remember to estimate prospective donations. Consider major donations you likely will receive, the amount of grants and corporate donations you’ll aim to secure, and even how much you think you can raise through other fundraising strategies. Be sure to allocate plenty of time for this step because it’ll require careful, extensive research.
- Estimate Your Fundraising Costs. In order to make money, you need to spend money. As you develop your estimate, factor in your nonprofit’s normal operating costs as well as other expenses associated with specific fundraising strategies. If you host a fundraising event, for example, you may incur costs related to facility and furniture rentals, food, decorations, and other items necessary to stage the event. While nonprofits often can access reduced rates or in-kind donations for their needs, it’s still important to plan for all potential fundraising costs to help you create an accurate plan.
- Outline Key Tasks and Assign Owners. Map out all of the activities required to put your fundraising plan into action and then assign owners responsible for each. The owners could include members of your staff, individual board members, and other appropriate persons. Because fundraising represents such a major — and important — part of running a nonprofit, everyone’s involvement matters.
Fundraising is a vital component of running a nonprofit that requires detailed planning and a lot of work. By carefully considering key fundraising sources and strategies, and then drafting an annual fundraising plan, you can help set your nonprofit up for long-term success.