Fundraising in Challenging Times: Addressing the Cost of Business

With the funding community and many individual donors reducing contributions to nonprofit organizations during this recession, fundraising professionals are working feverishly to offset diminishing contributions from longtime supporters.

Below are points for consideration as nonprofits refine fundraising activities for the next 12 to 24 months.

1. Understand which programs are core to your mission, and the revenue and expense associated with each program, for informed decision-making.
In collaboration with your organization’s leadership, assess each program, identifying how it is aligned with your organization’s mission and how it contributes to the bottom line. In this economy, you may want to consider directing resources and fundraising efforts toward the programs that best deliver on the organization’s mission, with a full understanding of the revenue necessary to support those programs’ expenses.

Although contributions are harder to identify and secure in the recession, organizations with programs that reflect their missions position themselves better for focused conversations and stronger relationships with funders.

2. Develop a clear understanding of your organization’s full cost of operations in an effort to have accurate fundraising targets.
This includes planning for building reserves that cover upkeep of your facility and equipment, and for cash on hand that can cover periodic cash flow shortfalls or unanticipated emergency needs.

3. To realize revenue targets, redirect resources from annual events to developing a stronger business plan.
With many supporters of galas or annual events cutting back on sponsorships due to their own economic challenges, nonprofits must consider the resources they expend (time and expense) in relation to likely diminishing returns. While nonprofits typically view annual events as tradition or “low hanging fruit,” a well-developed and implemented business plan will reap returns that exceed the annual event for years to come. A business plan also can demonstrate that your efforts are focused on delivering on your mission — an area of giving that we’ve seen is not reducing as quickly as special-event sponsorships.

4. Consider co-fundraising with organizations with like missions to save costs and potentially tap into larger audiences of funders.
Collaborations or strategic alliances can be cost-effective and have the potential to increase fundraising dollars for organizations with limited resources. Additionally, raising funds with a similar organization ensures funders and individual givers that a larger body of work is being funded and more individuals in need are being helped.

5. Diversify revenue (with caution): Seek ways to deepen your “market penetration.”
Consider new or additional funding sources or revenue streams that are aligned to the work of your organization. Ideally, seek new sources that are within the market segment (e.g., government contracts, foundation contributions, individual donations) you already target, rather than diversifying into new “markets” or lines of business. The reason: Accessing new markets often creates additional costs.

6. Communicate with your funders, clients, community members and others about the financial condition of your organization.
It is important, especially in this economic environment, to stay in front of funders. Be candid about the impact the recession has had on your organization, and outline your specific strategy to adjust. Share details from your financial analysis so funders can understand your short-term needs and the long-term impact of gifts, grants and donations. Emphasize your commitment to your mission and the urgent needs your programs address. Thank your donors frequently, and make outreach personal.

Gar Kelley is vice president, mid-Atlantic region at Nonprofit Finance Fund, a national leader for 30 years in nonprofit, philanthropic and social-enterprise finance.