Nonprofit Fundraising Methods: An Overview

Learn to fundraise for your nonprofit, from soliciting donations to applying for government grants.

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 are truly best suited to your organization.

When reviewing your options, try not to rely on only one type of fundraising, especially if it 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.

Be sure to register your nonprofit

If you fail to register with your state--and potentially with other states, depending on how far afield you're soliciting donations -- you risk potential problems with your donors and the IRS. (For more information on nonprofit fundraising registration, see Nonprofit Fundraising Registration--No Longer Just for the Big Players.)

Here's a look at the different types of nonprofit fundraising methods and when they're best used.

Attracting Individual Support and Donations

Ideally, the everyday people who believe in your organization's work should be its bread and butter. (The exception is if your organization's work is so technical or otherwise hard for the average person to understand or sympathize with that only government or foundations are likely to support it.) 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, social networking, and special events (see "Holding Special Events," below). It's also important to cultivate--that is, develop relationships and maintain connections with--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 a tax-exempt 501(c)(3), donors can take a tax deduction in return (if they itemize).

Soliciting Gifts From Major Donors

A certain number of individual donors will be sufficiently interested, and financially able, to make major gifts, possibly 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 house parties, luxury auctions, or gala events. (To learn more about attracting major donors, read Getting Charitable Donors For Your Nonprofit.)

Holding a Capital Campaign

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.

Promoting Legacy Gifts or Planned Giving

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 Inheritance or Legacy Gifts: How Your Nonprofit Can Encourage Them.)

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 shall benefit something more exciting than the office supply or coffee fund. A simple reminder in your newsletter that leaving a gift in their will is a great way to create a personal legacy is a good start, especially if you can point to a compelling way in which the money might be spent, such as planting a tree.

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 (assuming the stock market hasn't completely flatlined) 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.

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