How to Pay for Fundraising Costs: Can It Be Fast, Cheap and Good?
“Jim Jarmusch once told me, ‘Fast, cheap and good. … Pick two. If it’s fast and cheap, it won’t be good. If it’s cheap and good, it won’t be fast. If it’s fast and good, it won’t be cheap.’ Fast, cheap and good. … Pick two words to live by.” — Tom Waits
Many nonprofit executives still struggle with how to pay for fundraising. That’s a shame because fundraising done well pays for itself. Yet the dilemma is real and persistent.
Over my 35 years as a professional fundraiser, the majority of nonprofit CEOs and board members I’ve encountered seek a fundraising program that could be described by all three of Jim Jarmusch’s characteristics — fast, cheap and good — despite the irrationality of that.
Most end up with fast and cheap, but not good.
If that’s what you want, at least be clear about it. As a stopgap solution at times, it’s better than nothing. Yet it’s not a place to stop.
Some nonprofit leaders inquire about commission-based fundraising, which the fundraising field strongly rejects. Here, I’ll suggest a few ways to break out of the impasse of how to pay for fundraising.
The Development Long Game
Advanced fundraisers by definition play the long game. The long game is all about deeper donor and funder relationships, with a laser focus on legacy or planned gifts because these are vastly more lucrative than cash donations within a donor’s lifetime. Yet most nonprofit organizations focus almost solely on their current annual revenue needs and invest little on fundraising programs and the required development infrastructure.
To avoid distractions, let’s focus on the best and the brightest nonprofits — the ones that earn high returns from their fundraising programs and don’t hesitate to pay for fundraising because they understand its value.
The Best and the Brightest Nonprofits Choose Fast and Good Fundraising
Bread for the World, United Jewish Appeal, Habitat for Humanity, The Salvation Army, Covenant House, Amnesty International — just to name a few of the best charities. Recognize them? Their names convey substance, quality and longevity. Their donors and funders don’t just give once, but over and over again. Why? Because all of these organizations invest in fundraising and in fundraising’s children: marketing and communications.
The leaders in the nonprofit world choose fast and good. Fast because they choose to be nimble and poised to seize market opportunities. Good because they won’t compromise their commitment to their mission with anything less. Of course, they built themselves up over the years to enjoy the privilege of taking that position. It didn’t happen overnight.
In their early days, these nonprofits raised unrestricted support. General funds allowed them to pay for prosaic expenses that were not strictly program expenses, but building up unrestricted reserves indirectly helped their programs to flourish.
Top 3 Ways to Pay for Fundraising Costs
I’ve relied on these methods hundreds of times to help nonprofits break through to the next level of organizational advancement.
1. Build the Development Costs Into Your Project or Organizational Budget
Paying for fundraising costs should be seen as part of the cost of doing business — just like the fees related to an IT contractor, architect, or attorney. Yet most of the capital campaign or annual- fund-drive budgets that I see exclude development costs. This is an easy fix. When you build the fundraising expenses into your cost of doing business, your goal will be higher, and that helps you secure larger major gifts.
2. Draft a Fundraising Plan
By drafting a fundraising plan, you can show that plan to funders or thoughtful major donors, and have a conversation about why this is a tipping-point investment for them to make.
The goal is to ask the funder or major donor to underwrite the plan. Explain to them how nonprofits that realistically invest in their fundraising program are more sustainable than those that underinvest in or ignore figuring out how to pay for fundraising costs.
Most development plans first analyze an organization’s current fundraising capacity and then explore its future fundraising goals and the development capacity required to succeed. I often conduct a strengths, weaknesses, opportunities and threats (SWOT) analysis of both the organization and its development program, and then assess the current development team and its ability to meet the organization’s fundraising needs. Many funders interested in capacity-building become engaged when they see a real plan.
3. Set Aside a Portion of New Funding or Donations
A third way is to set aside a portion of any new funding or donations you receive to help pay for fundraising costs. I generally urge setting aside 10%. Those set-aside funds build up fast. This method is successful for incremental growth.
I’ve used this tactic alongside the first two ways I suggested and, in fact, recommend using all three ways in coordination to pay for your nonprofit’s fundraising costs.
The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.
Laurence is author of "The Nonprofit Fundraising Solution," the first book on fundraising ever published by the American Management Association. He is chairman of LAPA Fundraising serving nonprofits throughout the U.S. and Europe.