Monday, March 19, 2012

The Two Faces of Fundraising Events: Part 2 - A Hydra Head?

In The Two Faces of Fundraising Events: Part 1, I noted that fundraising events are very popular with many nonprofits. The big charities often make a boatload of money on their "walks" and other "thons". Most staff and volunteers "get" events. They know the purpose is to raise money for the cause. Attendees understand this too and don't object to paying their share. They also feel they receive something tangible in return - a fun time, a chance to rub shoulders with community leaders and maybe even "the famous". Staff and leadership like events because they are often well covered by the media and goodness, they don't have to make a complicated "pitch and ask".

But is it the most effective fundraising vehicle?

Let's look at the potential investment numbers. Here's where the hydra-headed aspect of events raises its ugly...well, you know.

Let's suppose a nonprofit puts on an annual black-tie gala with music, upper tier catering, and an auction. Planning starts a year in advance. At least one staff member spends half of his/her time working on the event. Board members are involved in touching their friends and contacts. The President and Director of Development have roles. The event goes off well and grosses $100,000. Super, huh? Maybe. (Thanks to Nell Edgington, President of Social Velocity for the following cost presumptions. They ran a superb series of blog articles on the cost of fundraising which can be found here .)

Let's suppose some direct expenses:

Venue, music, food, decorations, invitations: $50,000

Often, this is how many nonprofits view their net profit from the event - $100,000 in gross revenue minus $50,000 direct expenses = $50,000 net profit.

But we need to consider the total costs of running this gala and how that compares to other fundraising opportunities. It is imperative to look at the indirect expenses such as:

Cost of staff members to prepare for and manage the event (hours worked by staff members times salary + benefits). 

Staff Event Coordinator's time: $15,000
President's time: $4,000
Development Director's time: $5,000

And let's also figure Board Member time utilizing the standard value of volunteer hours ($20.25): $3,000

Total indirect costs are $27,000
Add direct costs of $50,000
Total indirect and direct costs = $77,000

Our new net revenue is $100,000 - $77,000 = $23,000

The nonprofit made $23,000. Still seems like a reasonable number doesn't it? Especially, since so many new people attended the gala, and the mayor was there -- and it was mentioned on the 6 o'clock news.

But let's look at the cost to raise each of those 23,000 dollars. 

Cost to raise $1.00 = Direct + Indirect costs/ Net Revenue

$77,000/$23,000 = $3.35 cost to raise $1.00

(Also, how many of those new people are really connected to your cause? Is the mayor a prospect? Will anyone remember the 6 o'clock news?)

Now let's suppose you have a salaried staff person working on major gifts prospects. This person's salary is $65,000 per year plus benefits. Indirect costs might include leadership or Board members attending donor visits for a total of $100,000. Their activities result in $500,000 worth of donations in a year. The net revenue figures work out like this:

$500,000 - $100,000 = $400,000

... and the cost per dollar raised ($100,000/$400,000) would be $0.25.

Not only that, but hopefully you have been soliciting and stewarding warm prospects, not a random group of event attendees who may or may not be smitten by your mission.

Doing the math is illuminating.

Does that mean events are a waste of time? No. But it does depend on how you view the investment. How much staff time do you want devoted to this sort of return? Can it be spent more effectively elsewhere? Maybe you can afford to have staff devoted to events and major gift prospecting. Or, maybe you look at the value of events being more resident in their friendraising, cultivation, and stewardship value?

Do the math -- and see what makes sense for you.

Wednesday, March 14, 2012

Quote of the Week: Generosity Day Follow-up

A month ago I posted a story about an initiative to "re-boot" Valentine's Day as Generosity Day proposed by Sasha Dichter of the Acumen Fund and Katya Andresen of Network for Good.  (See my February 14th post here.) 

Their concept was to elevate the day beyond the rather benign commercialism of cards and candy and encourage more compassion and caring. In Sasha's words, "We wanted to reconnect (the day) to the core ideas of love and human connection."

The idea had its genesis in Sasha's Generosity Experiment -- a month in which he said "yes" to absolutely every request for help.

Last week he blogged about the results of this year's Generosity Day. 

Here is some of the feedback he received. 
One person shared that she approached an elderly woman on the street and gave her a rose, only to be told that this was the first Valentine's Day flower she'd ever received. Another woman finally had coffee with someone she'd long thought could be a new friend -- and she was right. A third person told an 80-year-old woman how beautiful she was and the woman shed a tear, saying that no one had told her that in years.
Much more than any statistics about the word spreading far and wide, it is these actions that made Generosity Day real, these actions that created innumerable moments of joy. We heard stories of anonymous acts of kindness, outrageous over-tipping and heartfelt thank you notes. We heard about people paying strangers' tolls on the parkway, folks passing out croissants to the morning-rush crowd, and loads of people who spent the day or night volunteering. We heard from people who were donating money, and those who were donating blood. We heard from so many people who made the day better for others and experienced the joy of generosity themselves.
Oh, the bliss of giving and the blessings of generosity!

To further quote Sasha Dichter, You too can be part of this movement, today or any day. All it takes is the decision to say "yes".

Sunday, March 11, 2012

The Two Faces of Fundraising Events: Part 1

The Run Walk Ride Fundraising Council's sixth annual study revealed that in 2011 the top 30 fundraising races, walks, and other athletic events took in $1.69-billion, up $40.8 million or a 2.46% increase over 2010. 11.6 million people participated in some sort of "thon fundraising" according to the study. This was an increase of over 200,000 over the previous year.  36,422 events were held by the top 30 event sponsors. (The American Heart Association held over 24,000 separate events alone in 2011.)

The top five grossing events were:
  • American Cancer Society - Relay for Life - - $415,000,000
  • Susan G. Komen for the Cure - Race for the Cure -  $131,315,739
  • March of Dimes - March for Babies - $105,000,000
  • American Heart Association - Heart Walk - $99,088,367
  • The Leukemia & Lymphoma Society - Team in Training - $87,511,103
It seems as if the "fundraising event" is a favorite for every nonprofit. Looking at the numbers above it is easy to see why it is so tempting. Even a more modest event can gross significant dollars and attract many new prospective supporters.

Let's consider the "good face" or advantages of event fundraising:
  • An event can attract new supporters such as hard to engage donors, government officials, corporate leaders, and local or national media personalities.
  • It can often raise significant gross revenue.
  • A well executed event can help burnish your brand and enhance your charity's awareness in the community.
  • It can unite supporters in a sharply focused common goal.
  • It can provide a compelling platform for media exposure and raise public awareness in your cause.
  • It can present an opportunity for nonprofit leadership to interact with important community representatives.
  • An event can be specifically tailored to leverage your charities brand.
  • People like to hobnob with their peers or with the socially elevated. 
  • You can obtain sponsors that might not ordinarily associate with your organization.
  • Events can be a nice way to thank current supporters.
  • Successful events tend to increase in effectiveness over time.
And now the disadvantages or "bad face" of event fundraising:
  • They can take a year to plan and three years to reach optimum revenue returns.
  • An unsuccessful event can tarnish your organization's reputation and brand.
  • Events suck-up a tremendous amount of staff time managing volunteers and interacting with vendors.
  • They can have high initial costs, hidden costs, and can even cost far more then revenue raised.
  • Events could be the victim of unrealistic expectations ("American Cancer Society raised $415 million, why can't we raise a percentage of that?")
  • Attendees may have no long-term interest in your organization and will need to be kept engaged through future events.
  • They could be sensitive to outside influences such as disasters, wars, or scandals.
  • There are tens of thousands of events each year with probably hundreds in your own backyard competing for the donor's attention and engagement. Many events will be run by big, national charities that could overwhelm any marketing presence you may attempt to create if you are competing with them for airtime and "share of mind".
These "good and bad" elements of events don't even tell the entire story. It really depends on how your organization looks at events. Do you consider them an important revenue generating activity or do you look at them as more of a friendraising, cultivation, and stewardship opportunity? This is a critical distinction that I will explore more in my next post.

In the meantime, consider these questions:
  • How do you calculate the financial success of a major event?
  • Do you rely upon gross revenue compared to direct expenses?
  • Do you understand what your indirect costs are and why they should be included in your calculations?
  • Are there more effective means to accomplish the same end?

Monday, March 5, 2012

Weekly Quote: Enchantment

"The greater your goals, the more you'll need to change people's hearts, minds, and actions. This is especially true if you have few resources and big competitors. If you need to enchant people, you're doing something meaningful. If you're doing something meaningful, you need enchantment.

Enchantment is the process of delighting people with a product, service, organization, or idea. Its outcome is a voluntary and long-lasting allegiance that is mutually beneficial. In other words, it's the purest form of sales and marketing."
Guy Kawasaki
(Best selling author and one of the Apple employees originally responsible for marketing the Macintosh computer. He has just released a new book called Enchantment: The Art of Changing Hearts, Minds, and Actions.)

I would add that enchantment is the purest form of sales, marketing, and fundraisingAre you delighting your donors? If not, how could you bring joy, happiness, and a "tingly glee" to their giving experience? 

Friday, March 2, 2012

They Could Have Given More

"I could have given more."

That is what was revealed in just released preliminary results from the fourth annual Cygnus Donor Survey. Close to 50% of donors surveyed agreed that they could have given more money last year but held back.

The big question is - why?

Tabulation of all the data is not yet complete so Cygnus President Penelope Burk cautions that these preliminary findings are not statistically relevant. But they do begin to hint at what donors are thinking, specifically in relation to the survey question, What could unleash your philanthropy at a whole new level?

Here are a few feedback snippets from this question:

Being reminded of how long I have been giving and what that has added up to over time would, in itself, be a new incentive to giving more.
...having more control over managing my giving through an online portal available on the websites of charities I support.

...knowing that the money I give is making a real difference in people's lives (not just a drop in the ocean of need).

...having the names and phone numbers of real people on not-for-profit websites so that I can contact someone if I need information. It would also be good to have the names and photos of Board members...

...seeing charities with similar goals come together in a single organization with a unified fundraising program.

...knowing that my giving produces results...providing measurable results.

...helping believe there is something I can do.

I think people are tired of hearing about big insoluble problems and interested in hearing about people who say: "Yes, but there is a way to get at this and we are going to start the ball rolling!"

...showing donors they are connected to the people who need our help.

...having the need for funds translated into personal stories.

So what does this preliminary feedback tell us about why donors could have given more last year but didn't? Here's what I believe donors want:
  • Empowerment: Make the giving experience easier and give the donor some control. Retail institutions like banks, investment firms, e-vendors and others are providing the consumer with online tools to pay bills and manage their budgets, identify wish-list items, or receive purchase suggestions based upon past actions. Donors want and expect this sort of control with their philanthropic activities as well. Imagine if they could log onto your website, view their giving to date, find out exactly what your charity has done with their money, and receive suggestions of other projects they might be interested in based upon their past giving.
  • Impact: There is more and more talk about "charitable fatigue". Some issues seem so overwhelming that they might never be solved. Communicate to supporters that they really are making a difference and illustrate how in a compelling, genuine way. Report back to them on a regular basis. Have the information come from field workers, program directors, or aid recipients.  Assure them that there are solutions to critical issues and they are helping to advance those solutions through your charity. 
  • Transparency: Prove to them that you are using their funds in an effective and efficient way. If that means partnering with similar institutions, do it. If it comes down to justifying increased funding for infrastructure in order to serve the mission better, so be it. Respect their intelligence and tell them straightforward what you need in order to be successful. Be honest and forthright.
  • Authenticity: Don't feed supporters blathering generalities. Don't ply them with self-congratulatory drivel. Provide exhilarating and bona fide tales of transformation. There is a reason why storytelling has been foundational to every civilization down through history. It makes your mission come alive. Surely, you have scores of great stories. Share them!
  • Immediacy: Help establish a robust and uninfringeable connection between the donor and the beneficiary of their giving. 21st Century philanthropists want to hear directly from someone they helped, see a video of their contribution at work, or even go out into the field to experience firsthand the impact of their funding. 
Do these things and you will be less likely to hear, "You know, I could have given more."