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.
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.
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.
A third category of Professional Fundraiser costs is legal compliance.
The majority of states require legal filings for any Professional Fundraisers (also called Professional Solicitors or Commercial Fundraisers in some states).
These legal requirements include annual registration and renewal forms, contract filings that indicate the nonprofit's participation and approval in the fundraiser, regular financial reports on a per-campaign business, and in some states, bonds to be posted before any donation solicitation.
Every state has its own cost and deadline requirement.
If a Professional Fundraiser operates and solicits donations in every U.S. state, the total cost for registration filings would be at least $9,695.
Per year.
And this doesn't take into account the legal hours needed to properly fill out the registration forms.
Maintaining legal compliance can get expensive very quickly.
Another critical cost is the expense of becoming educated as a Certified Fund-Raising Executive (CFRE).
Additionally, the invaluable – yet costly and time-consuming – asset of experience in professional fundraising.
Knowledge is acquired over time with education, experience, and participation in various tasks related to professional fundraising.
One of the greatest contributions a Professional Fundraiser can make to a nonprofit is the ability to leverage, experience in various fundraising activities.
This acquired of knowledge is something that a nonprofit often does not have on staff nor does not have the time, money, or the ability to go out and hire such knowledge.
Professional Fundraisers, particularly ones that are contest-oriented and held online, are often criticized by participants in the nonprofit industry.
Because Professional Fundraisers put capital at risk and seek to earn a profit, they are often regarded as “less pure” than nonprofits' own in-house fundraising efforts.
But that assertion assumes that Professional Fundraisers are only as efficient as their nonprofit customers or relationships, do not add incremental fundraising dollars, or reduce overall fundraising costs.
If this assertion were true, Professional Fundraising wouldn’t really exist as an industry because they would bring nothing to nonprofit fundraising efforts.
In fact, Professional Fundraisers provide incremental knowledge, infrastructure, capital, and energy, driving incremental fundraising and donations for nonprofits.
This occurs above and beyond the incremental expenses and profits that Professional Fundraisers receive.
Professional Fundraisers are an important part of the nonprofit ecosystem and provide an incremental good for the nonprofit industry as a whole.
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