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Introduction to development and fundraising

For U.S. nonprofits and the people who work with them, the word "development" has two distinct meanings. On the one hand, it is used to refer in the most general sense to the ways nonprofit organizations supplement their earned income with donations, grants, sponsorships and gifts-in-kind. In this sense, it is common for nonprofits in the U.S. to have a development department where staff conduct fundraising campaigns and manage related activities. Of course, the same sorts of activities are found in nonprofit organizations in many parts of the world. The work is similar though the vocabulary for describing it varies from place to place.

The word development also can be used to point to an important group of nonprofit organizations — those that work around the world to strengthen low-income countries and improve the economic prospects for their citizens. This page discusses development in the former sense.

Nonprofit finances

Gifts to nonprofits from individuals, corporations and foundations in the U.S. total about $300 billion per year. (Source: The Giving USA Foundation's an annual report on charitable giving.) Of that total...

  • Individuals give over $225 billion; about half to churches and other religious organizations and the rest to a full range of other nonprofits activities.
  • Foundations account for a little under $40 billion, bequests from estates $24 billion, and corporations $14 billion (figures from 2009).

The total of contributions from all these sources was about 22% of the $1.4 trillion total revenues for all nonprofits in the U.S. The other 78% consists of program service revenue (67%) and a variety of other income streams (11%).

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Types of Fundraising

There are a lot of different ways that organizations raise funds. In large organizations, specialized staff (and consultants) in the development department may focus on one approach, working in parallel with others engaged in other ways. For smaller organizations, the "development office" may be one part of someone's job, perhaps supplemented by a supportive group of volunteers who take responsibility for an event or other fundraising project.

The planning challenge, no matter what the size of the organization, is to match the chosen method (or methods) of fundraising with the mission, the characteristics of potential supporters, and the resources available to do the necessary work.

Some widely used methods of fundraising are:

Grantseeking

The Foundation Center publishes directories of grantmaking foundations and provides access through Cooperating Collections in many libraries. Applying to foundations for grants requires:

  1. Research to identify funders whose interests might match the programs to be supported
  2. Care matching the proposal package to the specifications of selected potential funders
  3. Patience to accept the (sometimes lengthy) time required for review, and
  4. Continuous attention to the process since only a small fraction of proposals gain support.

In addition to the challenge of preparing the proposals for funding, the resulting grants (when they are received) usually involve detailed reporting requirements. Also, of course, many foundations have limitations on repeat funding.

Special events

Awards ceremonies, galas, auctions, fun-a-thons, golf tournaments, etc., are common types of fundraising. Each type has its own brand of rewards and challenges, but typically this kind of fundraising will involve a lot of volunteer effort, a lot of coordination, and several years of consistent performance and community outreach to get to the point of yielding significant support to program operations. Opinions differ about whether it's important to match the event to the mission in some way; certainly using the event as a vehicle for communicating about the mission offers real opportunities for outreach.

Special events often involve receiving significant revenue from sponsors; there is advice about the process of finding sponsors on this page.

Major gifts

Approaching people who can afford to write significant checks and enlisting them as supporters is also a form of fundraising that depends on the commitment of a team of volunteers. Sometimes the volunteers are members of the board of directors; sometimes a further committee of supporters will be recruited to help with this form of solicitation. In organizations where major gifts are an important source of continuing support, there may be a significant investment in prospect research—investigating the interests and philanthropic activities of possible donors—and in maintaining contact with donors in ways that don't involve making further requests.

Memberships

Organizations with programs that fit this model often offer discounts on admissions, subscriptions to informative magazines, or access to members-only activities in return for an annual fee to enroll as a member.

Caution: Many states' nonprofit corporation rules grant specific governance responsibilities to "members". It's important to spell out carefully what rights and responsibilities "members" have—usually in the articles of incorporation—and to be careful not to give the wrong impression about such things in any membership materials.

Annual appeals

A nonprofit may have a list of people who regularly support its mission with contributions. Addressing a letter or an email to the people on that list encouraging them to renew support is commonly done once a year, and sometimes more frequently.

The timing of such requests, and the crafting of the messages and other contents of the mailing, are questions that large organizations with extensive lists examine very carefully. Sometimes multiple tests are made to measure the rate of response to various versions. Organizations with successful direct mail campaigns of this sort will often add names of potential supporters by purchasing lists of pre-screened addresses or swapping address files with complementary organizations. For some organizations, the annual appeal is done in concert with other organizations. This approach, known generally as a "federated appeal," often concentrates on workplace giving and encourages payroll deductions that provide continuous support throughout the year.

Capital campaigns

There is a special art to raising funds when an organization needs to build a new facility or wants to create or add to an endowment (to be invested and generate income to support future work). A common pattern is to have a "pre-campaign" where a careful reading of the potential for support (a "feasibility study") is done, and a few key leadership gifts are lined up. The campaign itself may involve teams of volunteers making calls on potential supporters (like a major gifts program) and direct mail and other communications with a wider range of potential supporters (like an annual appeal). Frequently, experienced consultants are retained to assist with planning and executing capital campaigns.

Telemarketing

Instead of, or in concert with, mailing appeals, some organizations set up phone banks or hire contractors to call past and/or prospective supporters and deliver a request for support personally. Such campaigns can, of course, be expensive; for some organizations, though, the additional revenue is welcome support that would not otherwise be available.

Canvassing

Going door-to-door or standing on a busy street corner and introducing people to the work of a nonprofit is a common practice in some communities. It's hard work — most people are unwilling to interrupt their routine or their errand to listen to the appeal. But for organizations with a compelling mission and a dedicated corps of canvassers, this can be a successful way to grow the ranks of supporters.

"Fundraisers"

In addition to its more general significance, the word "fundraiser" is sometimes used to refer to activities (like a car-wash) or a sales campaign (think cookies, or holiday wrapping paper) organized on behalf of a club or community project. The actual approach to prospective purchasers is usually made by club members or other volunteers. There are firms that specialize in supporting this sort of sales campaign with goods to be sold, planning sheets, premiums for successful teams, etc. A search online for "fundraisers" will turn up a long list of options.

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More advice and information

Here are some other resources that may be helpful for exploring this topic in more detail:

  • Many books about techniques of fundraising and the management of development activities are in print. A good selection can be found by searching at Amazon.com.
  • The Grantsmanship Center offers training workshops with an emphasis on funding by government grants and contacts in many locations throughout the year.
  • Veteran fundraising executive Tony Poderis has distilled a lifetime of experience at his website Raise-Funds.com.
  • Chapters of the Association of Fundraising Professionals often have informative meetings and seminars open to members and non-members alike.
  • The Foundation Center offers online and print resources to support searching for grants from foundations — some are available without charge and others require payment of a fee or purchasing a subscription. Foundation Center Cooperating Collections are located in public libraries in all 50 states and several countries abroad.
  • There are other services available as well that can help identify possible sources of funding or that circulate notices from foundations and government agencies when grant programs are announced; again, there are often subscription charges or other fees.

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