In this blog, we’ll talk specifically about Professional Fundraisers who engage in charity auctions, sweepstakes, charitable goods donations (like event tickets) and other forms of money-raising activities for nonprofit organizations.
We will discuss the costs that Professional Fundraisers absorb and how they are a net, positive good for nonprofits.
1. Cost Transference
One of the misunderstood aspects of Professional Fundraisers is that there is cost transference.
In economics, cost transference is the transfer of costs from one entity to another, usually through outsourcing.
Nonprofits engage in cost transference to Professional Fundraisers.
Critics of Professional Fundraisers fail to recognize that Professional Fundraisers absorb much of the costs that would otherwise be incurred by nonprofits. Professional Fundraisers bear the burden of paying for those costs themselves.
Additionally, Professional Fundraisers often are more efficient and productive in the way in which they pay for expenses and execute on their objectives. They're experts in what they do.
2. Table Stakes
The first category of costs are expenses associated with the establishment of the marketing and sales mechanisms to solicit donations or participate in raffles, drawings, or other charitable activations.
These costs include building out contact lists, sending regular emails, website costs and upkeep, event management software, and other technologies.
We call these costs "establishment costs," or Table Stakes.
Table Stakes can be the rather mundane costs needed in order to participate in fundraising – but if a nonprofit doesn't have the infrastructure, budget, or capability to build out these simple basic costs, then their ability to get off the ground to raise money in the first place is nonexistent.
In this area, Professional Fundraisers often enable the capacity of nonprofits to raise money when they could not do so otherwise.
Additionally, Professional Fundraisers are able to establish these infrastructure assets and spread the cost of those infrastructure assets over several nonprofits that they work with, limiting the costs for the nonprofit.
In the same way an airline can spread out the cost of its airplane for multiple flights and donations, a Professional Fundraiser can spread out the costs of databases, websites, software, and related technologies with multiple nonprofits or charities.
The next category of costs is marketing and communication costs associated with advertising of promotional events, and related fundraising activities.
Marketing costs are for communicating with potential donors, charity auction participants, or sweepstakes participants for the nonprofit.
One of the most critical assets or capabilities that a Professional Fundraiser has is a customer, donor, or contest participant database.
Building a database of engaged prospects or donors is time-consuming, expensive, and requires multiple iterations of effective messaging and alignment with various nonprofits.
Once the database has been established, the database allows the Professional Fundraiser to market through emails, texts, outbound calls, ad retargeting, and other effective methods.
Additionally, Professional Fundraisers can target marketing through social media with custom (related) audiences.
Targeted group advertising on mediums such as Instagram, Facebook, or Twitter to contest or sweepstakes participants is a cost-effective method to increase donor participation.
Marketing to previous sweepstakes or drawing participants is usually much more effective than marketing to just the general public.
Once established, the database can be an extremely critical point of leverage for any nonprofit looking to raise money.
This is another category of significant costs transference from the nonprofit to the Professional Fundraiser and is a cost and capital efficiency that is beneficial to the nonprofit.