As a board member and advisor to nonprofits in Israel and the US, people often ask me how they can improve their fundraising. It is often the weakest link in an organization’s set of competencies. Many organizations with dedicated teams, innovative ideas, and motivated volunteers fall short of their potential because they do not fundraise effectively.
Israel’s nonprofit sector (civil society) is a major part of society and the economy. The Taub Center for Social Policy Studies in Israel and The Center for the Study of Civil Society and Philanthropy at the Hebrew University of Jerusalem report that it is one of the largest and most active sectors in the world, accounting for about 7% of the nation’s GDP. 1500 to 1700 new organizations are established each year. They cite the Central Bureau of Statistics that on average Israeli donations account for 22 percent of revenues and foreign donations account for 15 percent of revenues.
To better understand fundraising, I turned to Stephanie Cory. Stephanie has committed her nearly 20-year career to strengthening the nonprofit sector through education. She has more than 30 years of cumulative experience as a board member for organizations ranging from grassroots with no staff to a multi-million dollar international association. Stephanie is also an adjunct faculty member for Villanova University’s College of Professional Studies where she teaches a variety of fundraising topics.
What should new (or new to fundraising) non-profits know about fundraising?
Fundraising doesn’t have to be intimidating. While the thought of asking someone for money can terrify people, it’s actually an opportunity you’re giving someone to make a difference.
I encourage anyone new to fundraising to seek out educational opportunities to familiarize themselves with best practices as well as relevant laws and ethics.
For example, making sure your organization is registered with applicable government agencies in countries, states, or territories you plan to solicit donations in. A great resource is the Association of Fundraising Professionals (AFP). AFP has chapters around the globe.
What are the different options for fundraising?
Fundraising can take many forms from the appeal letters we all receive in our mailboxes to events, grants, and in-person solicitations. When considering how best to fundraising for your organization, it’s important to think about your universe of potential donors and your budget. Direct mail appeals can be expensive, but they’re a great way to reach out beyond people who already know your organization. Events are a good way to start building relationships with potential individual donors. Grants from corporations and foundations are often a reliable source of funds for specific programs, and asking in-person is how your organization can secure larger gifts.
What is the difference between fundraising for non-profits and marketing/sales for companies? Do the same concepts in the business world apply to the non-profit world?
Fundraising is often likened to sales. Whereas sales is often about selling customers a product or service to benefit them, fundraising is about asking a donor to help others. I sometimes joke it’s selling “warm fuzzies.” Many of the same skills and traits are transferable — persistence, attention to detail, a genuine affinity for people, and a strong sense of ethics. One important distinction is compensation. AFP and other organizations have codes of ethics prohibiting fundraisers from being compensated based on a percentage of funds raised. This is contrary to the way sales professionals are paid in the corporate world where the more someone sells, the more the company and the sales professional earn.
How are fundraisers compensated? If a fundraiser cannot be compensated based on a percentage of funds raised, how are good fundraisers incentivized?
Fundraisers employed by nonprofit organizations are typically paid a salary. More entry-level positions may be paid on an hourly basis. Bonuses are appropriate for organizations to offer staff, provided they are not based on a percentage of funds raised and are a prevailing practice across the organization. Fundraising consultants generally charge on a project, retainer, or hourly basis. Good fundraisers are often intrinsically motivated to meet their goals, so in many cases, bonuses are not even offered.
How is COVID-19 changing fundraising?
With the inability to hold in-person events or meet with donors and prospect donors face-to-face, COVID-19 has driven fundraisers to use technology. Events have transitioned online, and platforms like Zoom are how meetings with donors are happening. Many organizations have also switched to focusing on retaining the donors they have instead of conducting outreach to new prospective donors.
What would you say to the following situations? These are all real stories, modified slightly to avoid identifying anyone.
A group of artists has been holding exhibits for the last ten years as an unincorporated nonprofit association. Their only costs as a group have been local advertising and exhibition space rental, which they each pitch in every event. The group decided to formally register as a non-profit organization. How would they start to fundraise?
Typically it is most effective to begin fundraising by starting with those representatives of a non-profit organization have relationships. In this case, the artists could begin with friends, family members, and colleagues who have an interest in the arts. They could also research others in the community who have supported similar causes. Many new non-profit organizations also start out by seeking grants from foundation funders. Relationship and awareness building would be the keys in this situation.
How does an organization seek out grants from foundation funders? How can organizations find grants that are available to new organizations?
Many larger foundations have websites that outline their funding priorities and application requirements. You can learn what they fund and what types of organizations they’re interested in hearing from. If a contact person is listed, it is always worth reaching out with a call or email to determine if your organization is a good fit. Some funders will consider start-up organizations while others have requirements about a certain budget size or years in existence.
A group of friends has been holding services in a pizza shop (after hours) that is owned by one of the members. What started as a few friends getting together for meaningful conversations and uplifting music has evolved into a congregation. As much as they have enjoyed the pizza shop, they have outgrown the pizza shop and are maxed to capacity. But, they lack money. What should they do?
Depending on the jurisdiction, religious organizations do not need to register as nonprofit organizations. In that case, they would be eligible to being fundraising without running afoul of the law. Otherwise, they should investigate registering as a nonprofit organization before beginning fundraising. Starting with who the congregation members know would be a good first step for who to approach for support for donations. It would also be important for the congregation members to decide if they want to be building owners or merely rent space. Owning property can be a big financial commitment for a nonprofit organization.
Small congregations in Israel are registered locally (in Israel) but not abroad. How can a religious organization know if it can fundraise in the US? Are there jurisdictions that are more accommodating to these kinds of organizations?
I would recommend these organizations contact the Internal Revenue Service in the United States to inquire about the legalities of fundraising from U.S. citizens. Without approval from the IRS as a 501(c)(3) non-profit organization, U.S. donors who itemize their taxes cannot receive a charitable deduction. In the U.S. most states require additional registration for non-profit organizations soliciting their residents. This is often through the attorney general’s office in that state. One state that does not currently require additional registration, is my home state, Delaware.
Sarh is a dance teacher who created an inspirational program for children at risk. She presented her interactive program several times but found it impossible to continue on a regular basis without getting paid. One friend suggested that she start a nonprofit and fundraise for her salary and the cost of running the children’s program. Sarah said “I just like dancing with the kids. I don’t want to manage an organization or ask people for money.” What would you say to Sarah?
I would recommend that Sarah approach existing non-profit organizations serving children at risk and determine the feasibility of offering the programming through them. Such organizations are already serving her target audience and likely have existing relationships with funders. Particularly in the United States, there are so many nonprofits started that could have been a program of an existing one. If Sarah does not want to manage an organization or fundraise, I absolutely advise her against founding a nonprofit organization. Managing and sustaining a non-profit organization is challenging.
Managing and sustaining a non-profit is challenging indeed. I have met many founders who feel burnt out because they are spending much more time on administrative and regulatory requirements than the activities they love. I have also advised several people like Sarah to keep their day jobs and volunteer in their free time.