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Raising money for a charitable or nonprofit organization is always a challenge, whether in good times or bad. But you can make it easier for your nonprofit if you learn about all the different methods of fundraising, and choose those that work best for your organization.
When reviewing your options, try not to rely on only one type of fundraising, especially if means depending on sources that could dry up all at once, such as government or foundation grants. By the same token, scattering efforts and trying every type of fundraising method simultaneously is a recipe for trouble. The wise nonprofit will carefully plan an array of fundraising methods to employ in the coming one to five years, based on its internal strengths and assets.
Here's a look at the different types of nonprofit fundraising methods and when they're best used.
Ideally, the everyday people who believe in your organization's work should be its bread and butter. Their donations are a sign of community relevance and support and (conveniently enough) come with very few strings attached. And their combined power may help you weather difficult times (for example, if you lose a major grant).
Most organizations reach out to individual donors through a combination of direct-mail appeals, newsletters, and special events (see "Holding Special Events," below). It's also important to cultivate your donors. Once you get new donors, work to strengthen their engagement with your nonprofit. This often leads to sustained or higher gifts. (For more ideas on bringing in new donors, read Nolo's article Getting Charitable Donors For Your Nonprofit.)
A nonprofit can solicit many types of individual donations, whether in the form of cash, pledges, stock in a company, property (real estate and personal), and more. And assuming your organization is tax-exempt, donors can take a tax deduction in return (if they itemize).
A certain number of individual donors will be sufficiently interested, and financially able, to make major gifts -- in the thousands of dollars and up. However, such gifts won't usually come in response to the same sort of outreach used to reach most individual donors.
The nonprofit's executive and development team will need to concentrate on developing genuine, personal relationships with potential major donors. Traditionally, requests for large gifts are made during a formal meeting, in which one or two people from the organization's staff approach the donor with a compelling case for support (and, if appropriate, mention how the donor will be recognized for the gift).
Other methods of attracting high-end gifts include planning special tours and trips, and holding luxury auctions or gala events. (To learn more about attracting major donors, read Nolo's article Getting Charitable Donors For Your Nonprofit.)
While also primarily focused on individual donors, a capital campaign happens outside a nonprofit's regular, annual fundraising program. It's typically a coordinated effort to raise a large sum of money for a particular project or goal, such as a new building or an endowment fund. It may involve teams of volunteers, with specific outreach goals.
Once a nonprofit is established enough to assure its donors that it will be around for years to come, it can start encouraging them to leave gifts via their estate, most likely through a will, trust, or other beneficiary designation. (To learn more about leaving gifts through an estate, read Nolo's article Nonprofit Fundraising Through Inherited Gifts.)
Though some donors may take care of this on their own initiative, the nonprofit can support such plans by offering information (in publications, seminars, and personal meetings) about how such gifts will be put to a meaningful, lasting purpose. It's good to be able to assure these donors that their final act of goodwill benefits something more exciting than the office-supply or coffee fund.
Any nonprofit can solicit basic estate gifts, but more sophisticated organizations can also offer more complex giving vehicles, such as charitable annuities and charitable remainder unitrusts. The basic idea is that donors give assets to the organization for investment, but either continue to derive some income from the investments during their lifetime, or give the organization the income and require that the principal ultimately be returned to the donor or heirs. The donor gets tax benefits, and the nonprofit gets an immediate source of income.
Almost every nonprofit, big or small, holds a special event or two each year -- whether it's an impromptu garage sale or a gala annual dinner. Events are a fun and easy way to mobilize volunteers who aren't otherwise interested in fundraising.
But there's a catch. The bigger the event, the greater the risk of it turning into a financial flop. And even successful events often produce a relatively low return after you consider all the hours that go into them.
Still, events can serve purposes other than straight fundraising, namely to raise the organization's visibility and bring in new members. The key is to identify the main purpose of the event (for example, is it a friend-raiser or a fundraiser?) and then plan with that in mind.
An increasingly popular method of nonprofit fundraising is to enter the world of business, and sell goods or services to regular (or charitably minded) consumers. This can encompass anything from kids selling cookies to museums running gift shops to organizations providing their own clients with job training, perhaps in bicycle repair or Web design.
It's important to remember that a nonprofit is a business, and is allowed to make a profit -- so long as it doesn't use those profits for the personal benefit of those in charge. But running a business does have tax implications, and may lead to the nonprofit having to pay tax on the earnings or, in a worst-case scenario, losing its nonprofit status. (For more information, read Nolo's article Tax Concerns When Your Nonprofit Corporation Earns Money.)
When it works, business activities can provide a source of income with almost no strings attached -- no foundation reporting requirements or donor wishes to worry about. But launching a business can be a risky proposition even in the for-profit world, so it's best to start small, get good advice, and be realistic.
Nonprofits are entitled to seek grants from foundations -- fellow nonprofits, often started by wealthy families or corporations, which give out money for specific charitable purposes of their choosing. The grant is usually for a specific amount of money, either paid in advance or on a reimbursement basis.
The best thing about grants is that they're usually for a reasonably large sum of money -- at least a few thousand dollars, and often far more. They often allow a nonprofit to start a new project or hire a new staff person.
The worst thing about grants is that they don't come with any guarantee of renewal. In fact, the opposite is true since many foundations prefer to move on to the next new thing, and expect that your group will have used the grant as leverage with which to increase other forms of support. Grants also tend to come with stringent oversight and reporting requirements.
To apply for a grant, an organization can make use of research tools provided by groups like The Foundation Center (at http://foundationcenter.org). Application procedures are usually spelled out by each individual foundation. Be sure that your group or project really fits the foundation's eligibility requirements -- a common complaint from foundation grantmakers is that nonprofits submit inappropriate grant proposals.
Another source of grant funding is local, state, and federal government agencies. These grant amounts are often high, so that some nonprofits subsist almost entirely on government money.
The downside is often overwhelming application requirements -- mounds of paperwork, and added requirements such as the formation of oversight committees. Also, government funders tend to be risk averse, preferring established nonprofits with proven records of success to new, grassroots initiatives.
The business sector, sometimes in an effort to boost its public image, is also a potential source of nonprofit funding. The largest gifts are typically available through corporate foundations, as described above.
However, nonprofits can also request other forms of gifts -- for example, a company sponsorship of a sports team or a table at an event, in-kind gifts of equipment and goods (including for an auction), or volunteer help from the company's staff. Find out the business's specific procedures, and whether there's a person dedicated to working with charities, before making your pitch.
To learn more about all aspects of these and other fundraising methods, get Effective Fundraising for Nonprofits: Real-World Strategies That Work , by Ilona Bray (Nolo).
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