When it comes to fundraising, schools typically work outward from the central core group of people who are dedicated to the organization and mission, toward people who are less aware and less dedicated. The core group is comprised of parents, teachers, and a few community folk. Typically the aim is to pull people on the periphery closer, and find new ways to engage the loyal core group.
Events are one avenue of fundraising, but are usually highly inefficient. Staff and volunteers can sink hundreds of hours of time into an event and get less out of it than they might have garnered through an appeal letter. Events also can take time away from your mission, strategic plan and above all, the children. What’s more, events can burn you out and it may take you weeks to recover. Work performance where it matters most, quality teacher-child interactions, is often compromised for the chance to meet an annual fundraising goal.
Most schools do not know how to manage fundraising events effectively. I would even go so far as to say that most fundraising events thrown by schools or small non profits lose money, often without realizing it.
SO WHAT’S THE PROBLEM WITH EVENTS?
There are many, but let’s stick to the biggest: hidden costs.
Barbara did not like fundraising. She would much rather spend her time on programming or daily operations. She had big dreams for what her school could be and she wanted to focus on those, which meant that every hour she spent away from that should be as effective as possible. After all, the school’s reputation was beyond reproach as demonstrated by generations of happy, healthy and successful children, a hefty waiting list and top notch staff.
Fearful of the change in funding due to the new political climate, the increase in federally mandated minimum wage and the relocation of a nearby factory where 40% of her parents worked, Barbara felt compelled to generate revenue. Feeling the pressure, Barbara exclaimed, “Let’s hold a fundraiser!” Barbara rallied the troops and began preparing for a GALA. She secured a location, notified the local media and solicited staff and parent volunteers.
Barbara estimates that she and paid staff spent 100 hours on an event that brought in $2,500, so it would appear the school made $25 per hour through the event, but after adding in the average of $15 per hour it cost to pay staff, the take was more like $10 per hour.
Down the street at Kids Corner, Sonia was under the same political and financial pressures. Reading the same financial forecast as the other schools, Sonia took tried another tact. Tech-savvy Sonia composed and mailed a fundraising appeal letter to parents, alumni and community leaders and businesses. After deducting expenses for mailing supplies, postage and staff time, Sonia figured the yield by this approach was about $85/ hour.
What are the lessons?
1. Staff – The cost you don’t see
Staffing is not free. Even if salaried, labor costs may not show on the event budget, which takes into account revenue and expenses without staff time. Staff time still has to be accounted for.
Questions to Ask:
- How many hours were actually spent on the event by each and every staff member, manager and volunteers?
- At what rate? Document how much each person costs.
- Were hours estimated after the fact or diligently tracked during planning?
2. Opportunity Costs
Opportunity cost is a business term to describe something we all intuitively know: you can’t do two things at once. Simply put, if you spend $10,000 to buy a new car, you cannot spend the same $10,000 to remodel the bathroom. Not being able to remodel the bathroom is the opportunity cost of getting the new car. Similarly, if you spend your weekend catching up on work, you didn’t spend your weekend on chores around the house. Spending your money or effort on one thing prohibits the other. In the business of education, time and energy, are also equivalent precious assets.
In scenario #1, Barbara and her staff invested 100 hours of time and got just $10 per hour in return. Think about what else they could have done with that time! By spending time on an event that nets $10 per hour, Barbara passed up the opportunity to net $85 per hour using Sonia’s approach.
3. Just Say… “Thanks”
A misconception about fundraising events is that the school must give the donor something in return for their gift. Consider that acknowledgement, especially public recognition, rather than a “Major Donor Event” may be enough. If the donor pledged $500 and you reciprocate with a meal for two that costs you $100 per person (excluding staff time), was it really worth it?
4. Donor cultivation and acquisition costs
However, if the event is not a fundraising event but designed to bring people closer to your organization, then this event serves a different purpose. Donor cultivation events can serve their purpose but be wary of the same concerns as the fundraising event, i.e., hidden expenses that must be accounted for. Be cognizant of what donor acquisition costs.
If, after reading all of the above admonitions in Barbara’s cautionary tale, you insist on throwing an extravagant evening ballroom GALA with full course meal and live auction, here is a short list of best practices: 1
- Consider sending an appeal letter. Donors may appreciate giving without the obligation of appearing at a formal event. Your profit margins will be outstanding from an email or personal letter.
- Everyone pays. This holds true even of the Board of Directors. This may seem harsh, but it doesn’t take many free meals and giveaways to sink the profitability. Alternatively, a reduced ticket price may also work.
- Target business sponsors. Local business might be interested in flashing their brand in front of philanthropic friends and families.
- Accept credit cards. Spending by credit card instead of cash is easier. The credit card industry thrives on this concept.
- Make registration quick, simple and fast. Avoid long frustrating lines at the door.
- Function like a bank. Theft and oversight can cost you thousands. Imposing moderate safeguards on the handling of cash and credit cards makes it clear that someone is paying attention.
- Consider a breakfast event. It is cheaper to host, fast and convenient, and accomplishes the same purpose as a fancy dinner.
- Document in real time. Document hours spent by all in real time, not a rough guesstimate after the fact. Maintain records on time allocated to events and any other special projects for that matter.
- Manage expectations – Tell parents up front of all the opportunities along the way where they will be expected to volunteer time, money or both. Parents can feel somewhat overwhelmed when the school is constantly shaking them down. By giving them advance notice parents will be able to budget and decide where they plan to give rather than feeling punch drunk by frequent solicitations.
Terms to Remember:
- Fundraising – seeking to generate financial support for a charity, cause, or other enterprise
- Donor – a person or group that gives something (such as money, food, or clothes) in order to help a person or organization.
- Opportunity Costs – A benefit, profit, or value of something that must be given up to acquire or achieve something else.
- Breakeven – the point at which cost and income are equal and there is neither profit nor loss.
- Revenue – the amount of money that a company actually receives during a specific period
- Profit Margins – the difference between a product or service’s selling price and its cost of production or to the ratio between a company’s revenues and expenses
1 The Little Book of Gold: Fundraising for Small (and Very Small) NonprofitsJun 26, 2011 by Erik Hanberg