Why I won’t work for a percentage of funds raised

My “day” job is consulting to non-profits, usually in the area of fundraising.  If you’ve been following this blog, you’lI know that I walked away from a wonderful position at a wonderful organization to hang out my own shingle.

I’m learning that quite a few non-profits are in a bit of a spot – – they need to start fundraising, but they don’t have money to support fundraising.  So they decide to do some fundraising to raise money so they can afford to start fundraising.

I find myself being given offers of work with the promise that I will be paid a percentage of the donations that are raised.  Although some fundraisers accept this type of arrangement, I’m not willing to do this.  I decided to include a page on my website regarding why I’m unable to follow this practice.  But first, I’m posting the key points here.  So don’t look for it at my website yet.  (But if you want to go to my website anyway, it’s at http://www.begifted.net.)

So, why are my fees not based on a percentage of money raised?

From a non-profit’s perspective, paying a fundraiser a percentage of funds raised makes perfect sense.  First of all, the organization doesn’t have to pay until actual money comes in the door.  Secondly, the fundraiser is presumably motivated to bring in as much money as possible.

However, there are several flaws with this payment model:

–          When money becomes the primary motivation for a fundraiser, the organization is at risk.  Good fundraising is based on relationships, but when money becomes the primary motivator, relationships are sacrificed for “quick wins.”   This can have serious financial and public relations consequences for the organization.

–          Good fundraising is a collaborative effort.  Ultimately, the organization raises the money through its promise and delivery of value to the people/issues it serves, a worthwhile mission, a solid reputation, and commitment to good fundraising practices.  A fundraiser’s success is dependent upon the support, connections, and decisions of the executive director and the board.

–          There are too many variables outside the fundraiser’s control.  Mismanagement, bad luck, or poor fundraising strategies in the past may have soured the public’s attitude towards a particular organization.   Or the Board may disregard certain recommendations made by the fundraiser, recommendations that may be critical to fundraising success.

–          Donor trust is eroded.  Most donors understand that running an organization incurs expenses.  When a fundraiser is paid by the hour or by the project, it is similar to paying for any other service, such as those provided by accountants, lawyers, cleaning companies, and internet providers.  However, donors do not like a percentage of their money being diverted from the “cause” and into someone’s pocket.  From the donor’s point of view, the fundraiser provides the same service to a $100 donor that she does to a $1 million donor, so why must the $1 million donor be penalized for making a larger gift?

–          The relationship is to be between the organization and the donor, not the fundraiser and the donor.  An hourly or by-project fee encourages proper relationship alignments.

–          And finally, the Association of Fundraising Professionals, of which I am a member, very strongly states that a percentage-based payment model is unethical.

Regrettably, some non-profits respond by telling me they’re unable to hire me, because they simply can’t afford to pay for fundraising until they raise some money.  Besides, their cause is so good that perhaps, they hint, I should work pro bono.  However, just about all of the non-profits I’m coming into contact with have causes that are so good that I should work pro-bono.  We call this “volunteering” and that’s not what I’m trying to do for a living.

Having said that, as a new consultant, I’ve allowed myself to work dirt cheap these past few months, because some of the causes really have resonated with me.  I’ve decided that my next step will be to put together some recommendations that I can give non-profits (for free) to help them find money, until that magical time when they can invest money into resource development.

And because my bills haven’t stopped coming in, and because I’ve already reduced my lifestyle to as Spartan of a level as I’m willing to go, my fees have now gone back up to something a bit closer to the standard fee of a new consultant.  I do feel good that no matter how hungry I’ve been these past few months, I’ve stuck to principles that I know are ethical.

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Steward your prospects, cultivate your donors

What is the difference between cultivation and stewardship?

For people in the fundraising realm, this seems like a no brainer.  Cultivation is the process of bringing donor prospects closer to your organization.  Stewardship is the process of helping them feel so good about their donations that they’re inclined to give again.  These are very simplistic definitions and they omit a lot.  However, they’ll do for the purposes of this essay.

I’m asking this question because I’ve seen non-profits miss the boat on either end.  Following are true cases.

Organization 1:  This is an excellent organization whose good work is well-known.  They fundraise aggressively.  They are constantly on the lookout for new prospects, and they burn through them quickly.  They spend a lot of time and attention strategizing on the best approach for each prospect.  They bend over backwards to do whatever a prospect requires to help him or her come to a gift decision.  Some gifts have been years in the making.

However, such a high percentage of their fundraising resources is dedicated to prospecting, cultivation, and making the ask that the fundraisers complain that they can’t steward their donors properly.  Indeed, quite often a fundraiser will encounter a past donor who is very angry at the organization for “taking the money and running.”

Sometimes donors will make requests or even demands that the fundraiser has no time to fulfill.  Or, the fundraiser tries to fulfill a request, but is stalled by fellow staff members who don’t put the donor’s request high enough on their own priority lists.

Organization 2:  They are relatively new to fundraising, but because they are also a very good organization well known for its work in the community, they should be a good “sell.”  They have hired fundraisers in the past, with the simple directive of “Go out and bring back money,” without providing the fundraiser the internal support and endorsement required.  Being a small nonprofit, they have very little cash flow now, and the fundraiser’s salary maxes them out.  They have no time to assist the fundraiser, nor do they want to “trouble the Board” with what they perceive as administratia.  There is no time or patience with the cultivation process.  Gifts should start coming in within weeks of a fundraiser’s coming on board.  And the executive director is reluctant to divert resources on a group of people who “haven’t given us anything yet.”  In other words, when the prospects ante up, then they’ll feel the love.

What is the difference between cultivation and stewardship?  It’s all a matter of which side of the gift the organization is willing to show that love on.

But to a donor, it makes no difference.  They see the pre-gift love and attention as an implied promise of how they’ll be treated after they’ve made a gift.  If the love is lavished during the courting process, they will expect great joy and an enhanced relationship after the gift.  If there is no pre-gift love and attention, a donor will assume that they will be treated with the same disinterest after a gift is made.  Therefore, there’s not much motivation to make a gift.

Cultivation and stewardship are just about the same.  Love your prospects, love your donors.  Give them everything they need to know about your organization before and after their gift.  Invite them to events.  Make them feel important.  And more importantly, make them feel heard.  Let them know that their opinions count.