Shining a Light on the True Cost
I include this so I don't leave someone wondering, but the bottom line is that percentage-based pricing is considered unethical by the Association of Fundraising Professionals. It is not illegal. But since it can cause a person to, in the worst case, exploit a potential donor, it is considered unethical. For example, if I know I will earn 5 percent for every dollar I earn going door to door for your NPO, I may not be as honest as I should be, and I may try to take advantage of someone to get a larger donation (so I get a larger paycheck). If you want to learn more about this subject, you can read the AFP's position paper by clicking here.
Your FSP cannot afford to work for your NPO without making a profit; somehow, someway, it is being compensated. None of the ways described above (except percentage-based) is wrong; they are just different means to accomplish the same end. You need to choose FSPs with pricing models that make sense to you and you feel best represent the interests of your NPO.
There's more to be said on this subject, so this old dog will continue it next week in this column. Also, if you send a question or comment to me at Pamela@pjbardeninc.com, I will try to answer it or may include it in a third column.
This subject can sometimes be an uncomfortable one for NPOs to discuss with their FSPs, or when you do discuss it you can end up more confused than enlightened, so let's shine a light on it together.