A shared goal of Fundraisers, CEOs and Board Members is to generate “the highest returns in the long term”. Monthly givers are treasure and a face-to-face conversation is the most reliable way to attract more of these kind generous people.
Why face-to-face fundraising works so well | How face-to-face fundraising gets 300% returns | Misunderstandings about face-to-face fundraising | Which NZ charities do face-to-face fundraising? | How face-to-face compares to other fundraising strategies? | ROI_in_detail and how long is the long game? | These decisions are the responsibility of the CEO and Board | Should_you_use reserves to finance this? | Does my NGO need to move swiftly?
An alternative to face-to-face fundraising – but with limits:
What is face-to-face fundraising – which has less limits?
Face-to-face fundraising raises on-going monthly donations by direct debit or credit card. It is done in CBD and suburban shopping areas, or by door-to-door visits in suburbs. Face-to-face fundraising is different from one-off annual appeals collecting cash donations. Regular monthly donations quickly add up to significant contributions. Regular giving reduces administrative costs and allows an NGO to plan for the future, safe in the knowledge that funding is secure. A tax receipt is sent at the end of each financial year.
Why face-to-face fundraising works so well?
When was the last time you signed-up to give monthly to a charity because of a letter, a telephone call, an ad on the radio, TV or online? A letter is easy to put aside, ads are easily ignored. The strongest contributors to effective communication are those that are conveyed in a conversation: The question becomes which marketing ‘channels’ deliver your best monthly supporters at optimal net cost? When it comes to finding regular monthly supporters you can’t beat face-to-face fundraising. “No other donor acquisition method can match it for volume, cost and reliability. It has been described as the most successful mass acquisition channel in history.” – Sean Triner Mar 2009 to Fundraising Institute of Australia conference.
Face-to-face fundraising has been long dominant in most developed fundraising nations, delivering 70 to 90 per cent of all new monthly supporters.
A second reason face-to-face fundraising works so well
The first reason is because a conversation is the most powerful means of communication. The second reason is because it is ‘asking’.
The number one reason people give is because they’ve been asked. There’s no way around this, you’ve got to ask. Sometimes moving forward means just going back to the basics. Face-to-face fundraising is one of the purest forms of fundraising; it’s talking to someone you’ve never met and asking them to support something incredibly worthwhile.
People inspired to give by face-to-face fundraisers report ‘they had wanted to give to such a cause, but had not got around to it’.
Never feel apologetic for setting a strategy of asking. This is the business we are in. To alleviate suffering, to save lives, to end poverty, sickness and hatred. This is vital work. You have to ask for money to raise money.
How face-to-face fundraising gets 300% returns. It’s the compounding growth effect:
By following each colour downwards and diagonally to the right, you can see how attrition diminishes the number in each acquire-month, or tranche. The attrition is expected, allowed for and does not stop bottom line growth.
Uninterrupted face-to-face programmes accumulate a powerful momentum. This is not fundraising with hype or hope, it’s mathematics. Each of the chart’s coloured monthly tranches contributes to building a growing stream of sustainable long-term income for your cause. It is a simple and reliable strategy but requires resolute focus. Image credit www. 3.bp.blogspot. com
The growing bottom line of the chart above represents reliable, safe, compounding donation income for your NGO to do more good work.
As with the story of the tortoise and the hare, the tortoise wins because it is focused. With each tortoise representing a monthly tranche of 50 or more new supporters, the return on the cost of those 50 or more new supporters will be around 300%. If you keep more than most – see ‘keeping your supporters’ – then your returns can be over 500%.
Tens of thousands of people are signing up to give monthly
There are plenty of people willing to give to your cause, but you must ask for their gift.
In the year to 31 March 2013, charities received $42 million from monthly giving that started with a face-to-face conversation. 70,000 new supporters started giving that way during the year. The average supporter gives over $25 per month and gives on average for 4.5 years. This type of commitment gives charities a reliable and predictable source of income which allows them to plan their expenditure effectively. Over the four years 2010-2013 this equated to over 240 thousand people signing up and over $150 million received by charities via street and door-to-door fundraising . – Source: www.pfra.org.nz
Pareto Fundraising’s benchmarking data of over 65 charities in Australasia shows that after removing bequest income, two thirds of charitable donations came from regular givers, with half of that sourced by a face-to-face approach.
Is your NGO using the right fundraising methodologies for today’s world?
The generosity of the New Zealand public is amazing, particularly once engaged in a face-to-face conversation by a passionate representative of a good cause.
Face-to-Face fundraising lets you decide your net income to do your good work
It seems unusual doesn’t it, to be able to decide your own income? Face-to-face fundraising is so self-determined that if you want to do more for those you serve, you can.
NGO scaling up their income this fast have achieved five success factors:
- They’ve created a scalable systematic approach to financing
- They’ve identified their long-term financial strategy
- They’ve raised capital to build their revenue-generating function
- They’ve developed a compelling ‘case for support’
- They’ve put time into growing their board’s understanding around this
Face-to-face fundraising can be scaled up
Some fundraising strategies cannot be scaled up. For example there is a limited number of trusts distributing grants. With face-to-face fundraising, the power to scale up the delivery of your good work is in your hands. NGOs that thrive are that most effectively scale up their income generation.
Your opportunity is that most NGOs lack both the skill and the patience to invest in building meaningful monthly giving programmes, failing to secure their future. Sustained income growth can be pretty tough to achieve without face-to-face fundraising and monthly giving in your fundraising mix.
400% income growth over two years. You can grow fast and sustainably.
In 2011 one of New Zealand’s largest charities, a giant among the trees, presented to a FINZ meeting with a slide showing it had achieved close to 400% income growth over two years using face-to-face fundraising. How else could you scale up your income so much over such a short time?
Why wouldn’t you invest to get a 300% return?
In 2014 Mark Astarita as Chair of the UK’s Institute of Fundraising and heading up fundraising at British Red Cross which runs face-to-face fundraising on a massive scale – and is correspondingly able to help those in need on a massive scale – had this to say about the 2014 report Managing in the New Normal, a report by the Institute of Fundraising, the Charity Finance Group and PwC:
“more charities are developing fundraising departments….everybody wants to diversify their income…and why wouldn’t they? The returns are 300 per cent. Why wouldn’t you invest to get a 300 per cent return?” Source: Civil Society UK 8 April 2014.
Think about raising money as financing, not fundraising
Although the definition of a “startup” is an organisation that has been around for a few years, many NGOs are still in start-up mode after ten years. Sometimes they’re in this position because their leadership regards fundraising as a necessary evil rather than a strategy that brings on board a caring community as partners in doing more of the good work for which the NGO was created.
Thinking about raising money as financing, not fundraising helps us recognise monthly giving as a post-start-up new method of funding. It lifts the game to a whole new level. Visualise breaking free from dependency on unreliable income sources. For many NGOs, traditional fundraising is becoming subsistence farming. It need not be that way.
A helpful way to think about raising money as financing and not fundraising is to look to other sectors.
In the financial lending sector, they talk about ‘building a book’ of clients that yield regular reliable income, such as mortgage lending. In the magazine sector, it’s monthly subscription income. In the recruitment sector, it’s monthly invoicing of temps or contractors (filling advertised full time positions is the less reliable side of their business). In the new sector of ‘software as a service’, it’s monthly subscriptions. In the rental property sector, it’s monthly rents. Think about your own monthly Direct Debits to your telecoms, energy, gym club and insurance providers.
“The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term, is the indispensable prerequisite for success.” ~ Brian Tracy
Common misunderstandings – public perception of face-to-face fundraising
“The charity sector is finally being subjected to the same intense scrutiny that has previously been reserved for other sectors, such as banking, politics, journalism, sport, and religion. Charity boards cannot afford to be on “automatic pilot” because as well as dealing with the challenging economic climate, charities now must shift their attention to those who are “challenging our ways of working, motivations, and our place in building a better society“. – UK’s NCVO Chair Martyn Lewis 11 Nov 2013.
NGOs can and ought to spend their income in ways that get the job done. And at the same time be able to explain why their actions are the best way to create a better world. Wherever you are spending your income, you should be able to proudly stand by and broadcast to the world. “This expense is absolutely the best thing we can do right now to make the world a better place.” This can and should be be said about your investment in good staff and in getting new regular monthly supporters.
At times there will be negative, misinformed or less-than-fully-informed media coverage. It’s bound to happen where there are reasons for fundraising that are initially difficult to understand. But this too will pass, the sun will come up again tomorrow.
There are close to 20 other New Zealand NGOs and the PFRA and FINZ organisations helping the public understand how this strategy brings about so much good in the world.
Email? Events? Sponsored events? Direct mail? Telephone? Raffle tickets? Christmas catalogues? Legacy appeals? Regular giving? Request from a paid fundraiser? Request from an unpaid fundraiser? Request at home? Request at the workplace? They all have their detractors.
Let’s face it; asking people to part with their money for a charitable cause will result in some people objecting to the method, style, amount or another element of the process. That does not mean that those methods are necessarily wrong. At the end of the day your NGO Trustees, CEO and Fundraiser will need fortitude and back-bone. “Be sure you put your feet in the right place, then stand firm.” – Abraham Lincoln
‘So and so’ says they don’t like this style of fundraising
You may have someone among your NGO’s leadership ‘who just doesn’t like face-to-face fundraising’. You shouldn’t let personal opinions get in the way of tested methods that help your NGO fulfil its mission. Your mission exists to change people’s lives, to repair the world. Are you really going to let personal opinions get in the way? It’s not really about us, is it? It’s about those we serve, the communities we improve, the differences we make.
Ian MacQuillin, ex Head of Comms for the UK Public Fundraising Regulatory Authority (we have an equivalent body in New Zealand) waited until he left his job to tell us what he really thinks of face to face fundraising.
As funding for NGOs tightens, your NGO could consider making a conscious determination about where it stands in fundraising. Is your organisation going to consciously restrict itself to certain styles of fundraising? Or do you want to connect with a wider base of supporters to fulfill your mission?
John Pierpoint, founder of JP Morgan is quoted as saying “a person has two reasons for doing anything; a good reason and the real reason’. With face-to-face fundraising I think the real reason for not doing it is often that so and so doesn’t like it. In the risk-averse culture of NGOs, leaders could well ask if they are in fact leading if they’re simply too risk-averse to lead the organisation in a direction that so and so has said they don’t like.
In the USA, it’s been pointed out that potentially great fundraising is often squashed by HIPPOs (Highest Paid Person’s Opinions). How sad. Let’s instead imagine a fundraising world where everyone focuses on what actually works. One way to avoid great fundraising being squashed by politics is to trial it. If you don’t trial it, you end up with strategy created around politics instead of around what raises the highest returns in the long term.
Despite being quite happy to pay a mailing house to post volumes of direct mail appeals or newsletters, some people dislike paying an agency the one-off, up-front fee for representing them in finding a new monthly supporter. Thinking of the agency as only the ‘introduction agency’ can help. They introduce you to a potentially rewarding relationship, you pay a single one-off fee for their work, the agency leaves. There’s diminishing stigma about finding life partners through introduction agencies. I hope that within the NGO sector there’s diminishing stigma about outsourcing what can be done more efficiently and effectively by others.
Deep down, no CEO or Board Member is content with fundraising that despite best endeavours doesn’t work as well as wished. Even if you ‘like’ the form of fundraising that is under-performing, there’s a felt discontent. Some NGOs shy from goals of growth and income due to a culture of martyrdom in the charity sector. Martyrdom, even when arising from frugality is unhealthy. Instead NGOs needs to think like a for-profit and get on with generating the financing needed to fulfil their mission.
Fundraising that you or anyone ‘likes’ deserves less priority than what ‘works’. There’s a happy contentment, similar to the pleasure of giving, that comes from subjugating your own feelings of ‘what you like’ to do ‘the right thing’ for the benefit of those your NGO is created to serve. The brilliance about letting go of a personal opinion, or at least letting it be subservient to the greater good, is that you allow the cause you serve to grow beyond what you can imagine and thereby pay tribute to your courage to let F2F proceed.
“The natural tendency of all human behaviour is toward the path of least resistance. When you resist this tendency, you [your NGO] become[s] stronger and more powerful.” – Brian Tracy
When NGO leaders discourage a tried and tested way of generating income, they make a choice: to motivate fewer supporters, raise less income, and do less good.
Cost of fundraising and the overhead myth
Supporters choose to support charities for the difference they can make to their beneficiaries, not how little they spend achieving it.
The best way to compare charities is by output, outcomes and impact. What has the charity done, what has it achieved and what difference has it made?
Comparing charities on fundraising and other costs is not an accurate measure. For a fuller explanation, see why three USA charity watchdog organisations have joined together to end the overhead myth. Here’s how the Irish website GoodCharity expresses it:
Spending money is necessary to grow, growth is necessary to do more good work.
Everyone wants charities to spend as little as possible on overhead. That’s backwards. Overhead is what drives growth. If charities can’t grow, they can’t solve problems. So overhead is a good thing. – Dan Pallotta
Spending more on F2F generates a big increase in net income. With that you can do more to deliver your NGO’s mission. More people are helped.
You as Board Members, CEOs and Fundraisers will appreciate that spending more to grow the good work you do will, in the short term, make your cost of fundraising ratios seem worse.
In Australia, as Sean Triner from Pareto Fundraising points out, “A charity with 40 percent cost of fundraising, growing at 50 percent each year, would be judged as ‘worse’ than an otherwise identical charity spending 10 percent on fundraising, yet not growing.” We have this same cultural obstacle to growth in New Zealand. Once recognised, this cultural rather than logical obstacle becomes one that a Board, CEO and Fundraiser can understand and resolutely take in their stride.
When preparing financial models or forecasts, you need to project net income over a longer period than one or two years. A significant proportion will still be supporting your cause in ten and 20 years time. Don’t get too hung up on cost ratios, it’s not the important measure. Having a good cost of fundraising ratio won’t pay for good work to be done. Net income will.
And while we’re talking about forecasting, the ‘average’ length of a pledge is not the important measure either. Instead, forecast the ‘total net lifetime income’ of a cohort of supporters who start giving in the same month. That’s when returns of 300 to 500% become easier to understand. There is ‘a long tail’ of income with monthly giving that extends many years beyond the average. If you fully appreciate the long tail, you’ll understand how big charities got big and why face-to-face fundraising generates the highest returns in the long run.
Think in decades, not years.
Risk and the need for ‘governance for growth’
The average charity trustee regards their principal duty as that of a custodian, making sure they hand the charity over to the next batch of trustees in a reasonably safe state. This is a conservative ‘holding’ role. In contrast, directors of commercial companies see their role as taking risk, albeit thoughtful managed risk and are more adaptive.
As Reid Hoffman, the co-founder of LinkedIn, noted: “Ironically, in a changing world, playing it safe is one of the riskiest things you can do.” Nothing important is accomplished if we only make safe decisions. This is because becoming too risk averse leads to another risk, the risk of complacency. If your NGO aspires to do more good work then what is needed is “governance for growth” with Board Members and a CEO willing to be adaptive and embrace a growth rather than holding approach.
It’s helpful for us to recognise that status quo thinking is a risk too. Big decisions frighten us only when we ignore the risk of status quo. If your building is burning, would you jump? If your NGO’s fundraising trend is like the chart to the left, might you consider face-to-face fundraising before your reserves run too low to do so?
I think some NGO leaders are frightened of face-to-face fundraising because of a fear of the unknown. I hope this website helps clarify what it is all about. The key is to find risks that are best rewarded. Boring and repetitive can be well rewarded, ask a wealthy factory owner. Predictable can be well rewarded, ask your accountant. Face-to-face is boring, repetitive, predictable, systematic. And lucrative for funding your mission.
Bob Wilson, a USA philanthropist gave away more than $600 million to a diverse range of causes and died in 2013. He was, in his dealings with NGOs often provocative, but eager to learn the counterarguments and quick to change his mind when the facts required. Are you as a Board Member, CEO or Fundraiser eager to learn the counter-arguments to a style of fundraising you perhaps don’t warm to? And are you prepared to change your mind?
On the question of risk, here’s a counter-argument. Imagine what would happen if the face-to-face fundraising sector imploded once you’ve built up a base of 1,000 supporters giving $30 a month. You’re enjoying an income of $30,000 a month. Let’s say further supporter acquisition becomes impossible. The likelihood is low, because it’s been a reliable system for over 16 years. The impact of the risk of suddenly stopping is low because for months and years after, you’ve got a gradually reducing monthly income, plenty of time for you to come up with Plan B. Once supporters have been with you for 12 months, their drop off rate is around 1.5% to 2% each month, giving you plenty of time to adjust.
Compare the risk of having $30,000 income a month from three other sources: $10,000 from grants, $10,000 from corporates and $10,000 from a street appeal. What’s your risk exposure if your grant application is declined, your Auckland-based corporate relationship becomes suddenly managed out of Sydney and it rains on your street appeal? I’d rather have my eggs in 1,000 baskets than three. Much less risky.
A base of 1,000 supporters spreads funding risk across professionals, the trades, retirees and young high earners. A cross section of a caring community. Face-to-face fundraising by it’s very nature is diversification and reduces risk. And opens you up to bequests which many other means of income generation don’t.
Do you have a money-raising and growth-orientated CEO and Board?
In the USA, members of the Board can be expected, with regards to raising money ‘to give, get or get off’. If money is your NGO’s constraint towards doing more good work, what attributes will your NGO look for when next making your next CEO or Board appointment?
The title of this website is Monthly Giving for stable growth. The key for a Board to achieve stable growth is to have ‘stable financial growth’ as one of a few tight goals, publicly stated and relentlessly pursued. It helps us focus.
Has ‘governance’ inadvertently become one of your Board’s few ‘tight goals’? Some Boards suffer from governance becoming the end in itself, rather than the means to direct resources towards achieving goals.
Do we “go-along-to-get-along” in our discussions? Are we too polite to actually hold to a tight goal of ‘stable financial growth’? Roger Craver writing in the USA-based paid subscription blog www.theagitator.net on 19th May 2014 remarked “sadly, too many non-profits are willing to tolerate the disease of ‘congenial dysfunctional politeness’ when it comes to governing boards. Rather than encourage board members to question organizational assumptions and ask strategic cage-rattling questions, most groups are perfectly content with a go-along-to-get-along culture. The result more often than not: Stunted growth. Unenthusiastic or ineffective program execution. Poor morale. Lack of innovation and growth-oriented investment.”
Many NGOs muddle along for two related reasons:
- If at Board level we are overly focused on pleasing others, there is insufficient of the robust debate that eventually arrives at an agreed focus on a tight goal of ‘stable financial growth’.
- A tight goal and focus doesn’t please all the diverse opinion-holders around the table. It is simply less politically attractive than a ‘let’s-be-all-things-to-all-people’ strategy where the holders of different opinions feel their hobby horse is accommodated.
Perfect or preferred fundraising
Chasing perfect or preferred fundraising is the luxury of the idealist. Seasoned professionals care more about how to raise the most money.
Boards have a fiduciary duty to ensure that the organisation has the financial wherewithal to do their work. That requires a board to take responsibility for fundraising. I believe focus (prioritisation) is the key to successfully raising funds for an NGO’s good work. A focus on the fundraising activities most likely to generate the highest returns in the long term.
Inefficient ways of raising funds are unsustainable and yield smaller and smaller returns. You need to do the right thing strategically and morally. Personal taste is no predictor of success in fundraising. Wishful thinking and human nature urge us to get it wrong. We like some things. We turn our nose up at others.
Unless you believe your preferred fundraising will solve the problem you show up to fight everyday, it’s a dereliction of your duty as a CEO, Board Member or Fundraiser to not focus on fundraising that may be less to your taste. Some NGO leaders use the economy to excuse poor fundraising results. When actually the problem is that they’ve imposed their preferred fundraising on the NGO and it’s not working. Has their ambition for their cause slipped?
You want a fundraising miracle? Sorry, need to go elsewhere. There is no perfect fundraising model, just as there are no perfect cars. But the imperfection of cars doesn’t keep us from buying one – we pick the model (and the attributes that goes with it) that best serves our needs.
But face-to-face fundraising seems too much like selling
You’re asking someone to give you money for something for which they will receive no tangible benefit. Of course that’s difficult.
Some people’s preferred or perfect fundraising is to raise money without asking. Forget perfection, just ask. And scale up those asks by having a face-to-face fundraising team. This multiplies the number of ‘asks’ being made, because you can only make a limited few yourself. If you don’t ask, you don’t get. It’s that simple.
The line between polite persuasion and being too pushy is a fine one. New face-to-face fundraising representatives representing your NGO will, from time to time, need your grace while they learn to present your cause and skilfully read the body language of those they are speaking with.
As Daniel Pink writes in his new book ‘To Sell Is Human’ “the ability to move others to exchange what they have for what we have is crucial to our survival and our happiness. It has helped our species evolve, lifted our living standards, and enhanced our daily lives. The capacity to sell isn’t some unnatural adaption to the merciless world of commerce. It is part of who we are.” Hat tip to www.clairification.com/ The screen shot below comes from www.fundraising.co.uk/blog/ well worth subscribing to.
There are wonderful people out there who if someone speaks with them are willing to support those who your cause serves.
The financial capacity to support your cause with a monthly gift of $25 or $30 is within reach of many, it just takes around 40 conversations, the better part of a day for newer representatives, to find each lovely person for who your cause sufficiently aligns with their values. That’s why the costs in face-to-face are up front and substantial, it’s the cost of the asking.
Single, once-only fees are charged by agencies who do this asking work on behalf of an NGO. Like an introduction agency they charge a fee for their services, before leaving the two parties together without their further involvement. A NZ Public Fundraising Regulatory Association survey found 82% of F2F fundraisers active on 3rd April 2014 worked for agencies. The rest were engaged direct by the charity. All were paid. Read more about the PFRA below.
Which New Zealand charities do face-to-face fundraising?
Around 19 of these 22 current charity members of the New Zealand PFRA are regularly doing face-to-face fundraising.
Three lessons from looking at others doing face-to-face fundraising
- These charities are not doing F2F because they are big. Most are big because they invested in F2F.
- They continue F2F because it works. (These charities banked around $42 million last year from supporters originally inspired by face-to-face).
- The F2F strategy built/ is building these charities into powerhouses able to deliver more good to those they serve.
Public Fundraising Regulatory Association (PFRA)
There is effective and sustainable face-to-face fundraising in NZ only because 100% of charities doing it are signed up to the PFRA and follow a strict code of conduct and maintain high standards. Click to learn more.
How face-to-face compares with other fundraising strategies for sustainable growth
Government funding is rarely a sustainable growth strategy
In the UK, austerity measures have pushed many charities that were overly reliant on public service contracts to crisis point. Closures and mergers are thinning their ranks.
In Australia, the age of eligibility for superannuation is being raised. Few NGOs would be banking on funding increases.
In NZ with less austerity, with a government yet to address the superannuation and aged health care costs of the baby boomer generation, your organisation may be heading for funding difficulties if you rely on government funding.
Trust and grant fundraising will help you grow – up to a point
With a limited number of grant providers in New Zealand, a systematic focus on say nine (if you are a regional NGO) yields a fair, sometimes substantial, return. In the sense that you can grow from receiving no income from grants to the yield of the nine, it is a growth strategy.
If you are new to grants and haven’t applied before, you can grow that income. And you should. After your first nine semi-reliable applications, you work harder and harder for smaller and smaller return. Grants are rarely a growth strategy beyond that for three reasons:
First, they can’t be scaled up because there are a limited number of grant providers. Second, your overall grant income is likely trending downwards because grant providers face an increasing number of applicants for a declining pool of funds. Thirdly, grants are often for ‘restricted purposes‘ and few can be used to fund sustained growth or ‘capacity building’.
Grants, typically, are for specific ‘restricted purposes’, the money comes with strings. However, raising money from individuals for ‘unrestricted purposes’ has its own strings too, different strings.
The strings that attach to fundraising from individuals are considerable. Some organisations are better not to go there unless they are committed for the long haul and have investment reserves. Fundraising from individuals is not free, nor is it cheap. It requires investment and often for the long term. It is not a quick fix. Normally, money that is invested now may not see any return for at least an entire year.
So yes, grants bring in money but they don’t build an organisation’s capacity to sustainably do good work. We ought always to think about financial sustainability and fundraise for “the highest returns in the long term”.
There is both ‘opportunity lost and opportunity cost’ when your NGO’s focus is on methods of fundraising that are unlikely to generate “the highest returns in the long term”. Maintaining a laser-like fundraising focus is simple, yet profound. Easy, yet very difficult to do. Strategic thinkers decide where to focus, rather than just doing what is important. They consciously put aside important’ projects or important opportunities to focus on those that are a better fit for their strategic direction.
Strategy is about focus …”People think focus means saying yes to the thing you’ve got to focus on…… It means saying no to the 100 other good ideas that there are. The clearest example was when we had been pressured for years to do a PDA … If we had gotten into it, we wouldn’t have had the resources to do the iPod. – Steve Jobs
Here’s an observation by Caroline Fiennes, once the CEO of a grant applying NGO and now Director of Giving Evidence:
If you haven’t got an established grants fundraising programme, here’s a March 2014 view in a newsletter from a NZ provider-writer of applications that it may take time to establish relationships with a Charitable Trust: “Charitable trust fundraising is now very competitive. New applicants without a prior history of funding are often given a lower priority in favour of trusted organisations that already have a proven track record. Thus making it difficult for those organisations who have not already formed strong relationships in the sector.”
I spoke to a CEO of a health charity who remarked that when he was CEO of a sports organisation, he’d win 10 out 10 applications. He hadn’t won any of his first ten as a charity CEO.
The limits of each strategy should be recognised. You may win $8,000 every four years from a Trust, with a decline (for your application work) each other year. I call this an Annualised Yield Value of $2,000. Gross yield, because it’s before the costs of preparing the applications you didn’t get and before the costs of preparing an Accountability Return for the one you did.
Some strategies like grant fundraising work well for raising ‘tagged’ funds and can be done with less investment. In contrast, mass or direct marketing fundraising (mail appeals and F2F) is expensive, it requires investment and its cost of fundraising ratios will always look high to the outsider.
But low cost-of-fundraising ratios don’t fund good work; net income does.
Mass or direct marketing fundraising is predictable and the best source of raising ‘unrestricted’ income. With direct marketing, the cost ratio settles down over a five to ten year timeframe. In the short term, the higher ratio simply reflects worthwhile growth.
Inspiring your existing supporters to give monthly will help you grow
Generally speaking, on an annual basis each person that moves to monthly giving gives two to three times more money, some even more. They do so because they’ve been asked, and because it’s as easy to give $20 a month as two cheques of $50 a year. Importantly, supporters will stay with your organization longer because the relationship is stronger because not every interaction is an ask for money. You will be regularly reporting back on how their gifts have made a real difference to those your organisation helps.
Reports from the USA suggest supporters who change to monthly giving stay with your NGO three times longer. Their increased annual giving, together with giving for more years, creates eight to ten times more income per supporter.
However, people who give by cheque or credit card in response to mailed appeals have formed the habit of giving in this way and only a small proportion will take up your offer to convert to monthly.
Using the telephone is the best way to achieve this, so it’s not a cheap exercise. Invitations by mail often achieve only a low response, less than 5%. Don’t count on it being easy or quick to convert existing supporters to monthly. You may need repeated asks to get a total 10% or 15% to take up your offer.
By the time an NGO has engaged a specialist call centre, the cost has risen and the question starts to be begged: was the direct acquisition of monthly givers by face-to-face perhaps a quicker more reliable route?
Many small NGOs do not have the capital to embark on a face-to-face campaign. In 2014 and 2015 I’m doing conversion-to-monthly work for two such organisations and finding it easier than when I did similar work in 2008. It’s easier because more people, particularly baby boomers, are familiar with internet banking and setting up Automatic Payments.
To build a large supporter base you’ll need to use face to face (F2F). I’ve nine years of experience of this, using four different agency suppliers.
- Zero to 1,000 monthly givers over 24 months: My work for a small charity starting face-to-face door-to-door (F2F-D2D) fundraising won the 2012 Fundraising Institute of New Zealand Donor Acquisition Charity Fundraising Award for Excellence. This raised $372,000 per year. We changed the operating name of the charity one month before starting, proving a recognisable name is not needed for F2F-D2D to work. And we had better retention than at two international NGOs where I managed large monthly giving programmes.
Here’s two examples of my work, using the mail and telephone to inspire givers to commit to regular giving:
- 13 to 395 regular givers over 40 months: My work for a small charity using the mail to inspire their existing mail givers to give regularly won the 2015 Fundraising Institute of New Zealand Donor Acquisition Charity Fundraising Award for Excellence. Between 2016 and 2017 this work contributed to an anticipated $1.6 million in future Gifts in Wills, a synergy of such magnitude it took me by surprise.
- One to 260 monthly givers over 10 months: My work for a small charity using a specialist call centre to inspire single occasional gift givers to give monthly now produces predictable and reliable funding of $62,000 per year. After the call centre completed their telephone campaign, the ongoing fundraiser’s time to steward these monthly supporters has only needed to be one day a month.
I offer you one or two days a week to build your regular giving programme.
There are new emerging ways of finding new monthly supporters, such as paying a call centre to phone those who have completed survey questions on-line or over-the-phone indicating a willingness to donate to your charity or charities in your sector. Leads for phoning can also be sourced by banner adverts and from petition campaigning. NGOs testing these new ways are not abandoning face-to-face which is tried and tested, they are supplementing it. These leads and their conversion by phone are a supply method with less certainty and volume.
Corporate fundraising is hard to create sustainable growth from
Large companies are increasingly viewing values and charity as critical to commercial success. They will happily invest in activities that boost their customer appeal. Yet, corporate giving to charities remains at a very low level. The exceptions are worth nurturing but not through rose-tinted glasses. More at “The inconvenient truth about corporate fundraising”.
Major gifts are rarely a sustainable growth strategy
Major gifts are (or should be) the most cost-effective form of fundraising. Raising $1 million from a handful of major donor-investors is said to be simply easier – and more sensible – than trying to raise $1 from a million supporters.
“When major donor folks claim that their approach is better because it has a much lower cost of fundraising ratio than “mass market” giving (or should do), they are perfectly right. But it is also much riskier than regular giving programmes and tends to produce mostly restricted income.” Source: Fundraising Myths: No 7: My fundraising method is better than yours
Mid level giving, such as a $5,000 single gift or $10,000 over two years is something that many NGOs could scale up. A growing pool of monthly givers lets you identify those who have the financial capacity to invest further in what they and your NGO want to achieve. This requires a one-to-one, as opposed to a many-to-one, relationship. It does take more time and again tends to produce mostly restricted income.
Community fundraising is rarely a sustainable growth strategy
This encompasses street appeals, theatre previews and third party fundraising such as that done in conjunction with service clubs.
If you’re fortunate, a Service Club might arrange some community fundraising for you, in which case you bank and thank. More often such fundraising is time-consuming at significant opportunity cost.
I love it that in life there are generalised statements we can make – and there are stop-you-in-your-tracks exceptions. For me the resolution is this: The exceptions should be taken opportunity of, but the strategy should not be seen through rose-tinted glasses. I take my hat off to two exceptions in the case of community fundraising. Auctions and online-community fundraising can be high performers. Or abject failures. That the outcome can be so widely different is what a commercial investor labels a risk, and investors wisely discount projected returns and their allocated investment accordingly.
The community fundraising strategy can’t be forced, just taken opportunity of if the right circumstances arise. To attempt to grow it beyond its natural yield is a blind alley. When we’re down a blind alley, we have no option but to turn back. At significant opportunity cost of not having earlier chosen a smarter way.
Event fundraising is rarely a sustainable growth strategy
Some events don’t raise a lot of funds. Some raise lots. How’s the balance of these in your NGO?
A senior UK fundraising director wrote: “Costs are often widely underestimated because only direct costs are included. Events are one-off by their very nature. They are high-risk. They often consume massive amounts of a charity’s time and energy to achieve, at best, marginal financial returns.” A USA fundraising consultant writes:
Are you hoping improved fundraising success for your NGO is just over the horizon in the form one lucrative signature event, a major grant, a new government contract or corporate sponsorship? Such hoped-for income is mostly determined by others and largely beyond your influence; in contrast to the sure self-determined income made possible by F2F. Are you growing weary on the fundraising treadmill, seeking year-to-year, gap-filling funding?
Direct mail is a sustainable growth strategy for some. Not for many, and getting harder.
Raising funds by direct mail is wonderful, if you’ve already got a large enough mail supporter-base. There’s no question about that.
If you can grow your direct mail supporter base by emergency and disaster appeals, your acquisition of new supporters replenishes the natural attrition. It’s when you need to grow the number of givers in ways other than disaster appeals that difficulties arise.
Acquisition of new direct mail supporters by list rental is risky, becoming more difficult. That said, there are a few good fundraisers and NGOs able to make it work. It can work well if your cause is at the right end of ‘the innocent victim spectrum’ such as Stroke or Cancer, or you’re raising funds to train cute puppies into guide dogs. It gets increasingly hard if your cause isn’t like these.
Response rates when mailing to a rented list are generally between 1.5% and 4%. And there’s the grim statistic that in most cases, less than half of newly acquired mail supporters make a second gift. 2nd gift rates used to be around 50%, many find they are now around 30%, some are getting 20%. The maths isn’t what it used to be. Read – have we reached peak direct mail? by Sean Triner, Pareto 2015 .
The initial response rate can be raised by including a ‘premium’, such as a sheet of sticky self-addressed labels. The value of using premiums is a grey area on which opinion is divided.
Spreadsheets can model all this of course. However to nobody’s actual surprise, the revenue is not as predictable as Excel would lead us to believe, though the costs are dead on.
Why do I use the words ‘to nobody’s actual surprise’? Because there is little prior certainty in this high-stakes game, it’s not an exercise that can be relied on as much as face-to-face where the range of outcomes is narrower, more certain, more reliable, less risky.
There’s ‘nobody’ close to the action of finding new supporters by direct mail who is unaware of the many and difficult-to-make assumptions, presumptions and leaps of faith that are modelled in those reassuring-looking spreadsheets.
A return on investment can be delayed for years later than with face-to-face. Theoretical breakeven in the third year is not unheard of. Acquisition cost that is never recovered is not unheard of. Attempting to find new supporters by placing inserts in magazines are much the same, a few NGOs can make them work, most can’t.
Does face-to-face raise eight times more than a direct mail supporter acquisition strategy?
A 2008 Australian case study reported in the paid-subscription area of Fundraising & Philanthropy magazine compared the estimated Return on Investment (ROI) over five years of new supporters of Wesley Mission acquired by direct mail and by face-to-face during the last three to four years. Their projections showed face-to-face fundraising bringing them an eight times higher ROI over five years despite a higher upfront cost. Anything with an eight times better ROI deserves our close attention.
Reports from the USA suggest supporters who change from giving by direct mail to giving monthly stay with your NGO three times longer. Their increased annual giving, together with giving for longer, creates eight to ten times more income per supporter. Again the question starts to be begged: is the direct acquisition of monthly givers by face-to-face perhaps a quicker more reliable route?
Those doing face-to-face continue to do so because it works well and comparably better. Otherwise they wouldn’t do it. In their view face-to-face is more predictable, more reliable and ultimately quicker in providing the highest returns in the long term. With face-to-face fundraising, you don’t face the angst of your acquisition mail appeal investment being successful at a 4% response rate or unsuccessful at 2%. Neither do you face later angst if only 30 or 20% go on to give a second gift rather than a hoped-for 40%.
It might take three years to learn whether your direct mail acquisition has been a sound investment. With face-to-face fundraising you learn in three months if each ‘acquire month’ is successful, because attrition in the first three months is the bulk of first year attrition and it then levels off in a predictable manner.
Acquisition results are less volatile with face-to-face fundraising than with direct mail. Inherent in the volatility or unpredictability of results in acquisition by direct mail is that different ‘lists’ are rented. Picking a winning list each time is another angst, a deep responsibility.
Is it realistic to expect anyone to be sure that this list, combined with that message, that premium and that creative design, posted at this particular time of year, will result in x% first gift response rate and y% second gift rate and z% third gift rate, coupled with an average first gift of $a, second gift of $b and 3rd of $c? There are 11 variables here – you need a lot of stars to line up to make the investment worthwhile.
How the Nonprofit Sector Can Move From the Foothills to the Mountain Peaks was a report from the USA in April 2014 about overcoming barriers to growth. It includes this example illustrating how fresh thinking around supporter acquisition by direct mail can prompt alternative methods to be considered:
Face to face offers volume, predictability and low risk (you usually only pay for donors you get, whereas with other methods you normally have to pay for the media). Also, face-to-face can be outsourced giving the organisation a smaller liability in terms of internal costs. Hat tip to Sean Triner of Pareto Fundraising, blog post 03.06.2009.
With direct mail there is volatility and unpredictability in results when you are acquiring new supporters. In the investment world, and fundraising is an investment, volatility and unpredictability create anxiety.
Face-to-face is remarkably consistent within a known range, therefore predictable, reliable and less risky. There’s nothing volatile or unpredictable in the shape of these 12 face-to-face fundraising attrition graphs over six years is there?
Anything with repeated consistency lends itself to being turned into ‘a system’ that accommodates the known attributes of the trend. Which is why face-to-face is such a reliable system of financing your NGO’s good work.
While you’re looking at the chart, note that door-to-door fundraising in the suburbs (the triangles) has less attrition. This is why around 70% of face-to-face fundraising in the UK and NZ is done door-to-door in residential suburbs and not in the CBD and shopping areas. If you’re a CEO and Board Member who is anxious about your representation in CBD and shopping areas, you may be less anxious about it being done door-to-door in a lower profile way. Door-to-door is my recommendation for most NGOs.
Here’s a comprehensive discussion of the merits of face-to-face and direct mail written in February 2014 by Sean Triner of Pareto Fundraising. It’s bullish about both but does refer to some uncertainty around the results of direct mail. For example the sentence “Of course, direct mail doesn’t work every time, or for everyone, but across the sector it has done very well recently.”
Silver bullet fundraising is rarely* a sustainable growth strategy
* however, read next section for silver bullet fundraising that is.
Digital fundraising is often seen as a silver bullet. Digital works well in supporting offline asks, such as those made face-to-face. Donations are often made digitally online after an offline ask.
For down-to-earth context around digital fundraising, read this 2014 article from benchmarking data on 60 Australasian charities on the 101 fundraising blog where you’ll also learn about the realities of targeting younger adults, another oft-touted silver bullet.
Silver bullet fundraising that is a sustainable growth strategy
Roger Craver The Agitator blog 11.11.2014 identifies one strategy that ‘amounts to a silver bullet’. It is to rigorously and effectively reduce your attrition by ceasing to treat supporter service initiatives as a cost centre and a burden. I’ve had personal experience of starting up a face-to-face programme where monthly tranches in their third year had already achieved returns of 300%. These tranches were on track to achieve returns of well over 500%, some of them over 600%.
“In short, service is the new sales and by extension, a new way to fundraise that delivers spectacular ROI”.
How long is the long game with face-to-face monthly giving?
Is your garden an instant wonder after six months? Does your two year old child need much help? Is your five year old an adult? Good things take time. Parents, gardeners and business people are used to return after investment. Some business people describe their start-up business as being expected to ‘wash it’s own shirt’ at 12 months, which means achieving monthly cash flow breakeven point.
It will take a further year to recover the investment made in the first year and business-minded people accept that. This is much like face-to-face fundraising, it suits leadership prepared to play and reap the rewards of the long game.
Is a net three million dollars achievable over five to ten years?
These high level channel decisions are the responsibility of the CEO and Board
Your board’s definition of governance encompasses the horizon, the long term. Individual financial supporters (the high majority of philanthropic giving) should be playing a significant part in your NGO’s long term future.
So how will you attract more individuals to financially support your cause? Choosing the right channel to speak with potential individual supporters can mean the difference between limping along at status quo or gaining strength and growing by leaps and bounds.
Choosing the right marketing channel is something which comes more naturally to those with a corporate background. We all like to think we’ve got a degree of business-like thinking, but it’s little compared to someone who’s had a career at Unilever, Visa, Proctor and Gamble or Nestlé.
So thinking from a disciplined business-like viewpoint, carefully consider the available channels of email, postal mail, telephone and face-to-face. Which channel should you as a CEO or Board member be encouraging or directing your hard-working Fundraiser to use? There is a lot of marketing noise out there, which of these channels has sufficient marketing cut-through?
It’d be more palatable if there was a choice of how to substantially move the needle in fundraising. For such luxury of choice to exist, there would need to be a number of similarly effective strategies. There isn’t.
So the question becomes not so much whether face-to-face fundraising is a strategy you like, but what else might be your fundraising vehicle for growth if it is not chosen? It’s one of your most important high level decisions with far reaching consequences. “Don’t call it decision-making, call it choosing consequences” is how one successful leader expressed how decisions should be made. Somehow this subtle shift in emphasis makes any decision easier, especially when you realise that not making the decision also has consequences.
Ann Rand is quoted as saying, “You can avoid reality, but you cannot avoid the consequences of avoiding reality.” You could paraphrase it this way: You can avoid F2F, but you cannot avoid the consequences of avoiding F2F.
Fundraisers are often under pressure and it’s hard to see the wood for the trees. The high level channel choice decision is not one that you as a CEO or Board Member should leave to a Fundraiser. For you can be sure that without appetite and direction from the Board, the CEO won’t press for the face-to-face channel; and without a CEO’s commitment and direction, a Fundraiser will be too busy trying to meet short-term income goals to advocate for it.
Experienced Fundraisers are hard to find. Many NGOs trim the level of expertise required to fill the position. If your NGO has done this, you as a CEO or Board Member have a greater need to get to grips with high level fundraising channel decision making, if you want your organisation to grow.
Many NGOs accept the need for fundraising but resist the idea that paying for experience improves the outcome. They view the cost of the experienced fundraiser as “taking away” from the amount the money they raise rather than “increasing” the amount they raise.
Experienced fundraisers aren’t cheap. But would you want a less expensive, half-experienced electrician to wire your house? OK, so we’re in a doing-good sector. Would you settle for a less expensive inexperienced doctor or nurse? Or your child taught by a half-good teacher?
Here’s a March 2014 snapshot of the job board of Execucare which specialises in recruitment for the community and voluntary sector that includes charities, arts, medical and educational organisations. Execucare, with its specialised sector expertise, can guide you with all aspects of recruiting experienced fundraisers. Link to Execucare
A fundraiser who hasn’t done Face-to-face fundraising rarely advocates for it. After all, you as a CEO probably didn’t deem face-to-face fundraising experience to be part of that person’s experience when you appointed them.
To compensate, Boards and CEOs should take leadership responsibility for providing an environment where F2F can at least be carefully considered and in many cases trialled. If there’s no leadership around implementing a strong monthly giving programme, you may face years of talk – with status quo or declining results.
Here’s a job advert where the NGO’s leadership of Board and CEO have determined the type of high level ‘channels’ that will make a significant difference and are appointing accordingly:
The purpose of this role is to significantly grow the supporter base. The ideal candidate will have 5+ years experience in individual giving fundraising. This will include experience in developing acquisition channels such as face-to-face, other street acquisition programmes or have experience in direct marketing and telemarketing.
In contrast, here’s the run-of-the-mill job advert where the NGO’s leadership of Board and CEO haven’t:
We are seeking a fulltime Fundraising/Marketing and Communications manager to lead, manage, grow and diversify our fundraising activities – this position will be particularly focused on delivering long term sustainability.
The person who takes the second position will soon be desk-bound trying to be all things to all people. Your appointed Fundraiser can’t make the volume of necessary asks themself.
As a Board Member and CEO, the best way you can support an appointed Fundraiser in this predicament is for you yourself to carefully consider the channel of face-to-face monthly supporter fundraising using a third party agency.
In the screen shot below Liz Tait, former head of direct marketing [which included a massive face-to-face programme] at British Red Cross observes:
“Many charities do not achieve their full potential simply because their fundraisers are not showing their trustees what is possible and are not asking for help …
The second bullet point above illustrates how experienced fundraisers can add value to your NGO’s cause.
Together with many senior and seasoned fundraisers, I recommend face-to-face because there is science, research and over 15 years of testing that makes it ‘the most likely to generate the highest returns in the long term’.
Nothing significant has ever been accomplished unless someone believed it could be done. And then, most importantly, someone decided that it must be done. As a CEO or Board Member or Fundraiser, do you believe face-to-face ‘could be done’?
David Ogilvy, referring to the responsibility of the individual, said “Search your parks in all your cities, you’ll find no statues of committees.” Could you be the one that believes it can be done?
Each of us fundraisers has our own unique experience to bring to the table. My experience happens to have included seven years of managing face-to-face programmes, first for two large international NGO’s then a F2F start up for a small and relatively unknown NGO. You may wish to consider supplementing your own in-house fundraising experience with mine as an external contractor. Want to consider it? Go to the right-hand main menu item Services for a carefully considered approach.
If you haven’t got the budget for both your own in-house fundraiser and someone external for two days a week, make sure that next time you fill the position, you specify strong individual giving fundraising experience as an important part of that person’s experience, preferably face-to-face.
“Nothing sharpens your decision-making prowess quite like establishing a new fundraising operation, with the heart-thumping expectation of growing income quickly. Opportunities abound but how do you make the best of them?” NZ case study: Four fundraising scenarios. What would you do?
What will remain after you end your tenure as CEO or Board Member?
Actions taken during your tenure will determine if your organisation is financially resourced to do fantastic things. Will you be remembered for introducing sustained and sustainable funding growth? In the words of the screen shot below, will you be honoured for introducing guaranteed income?
Source: Gimmee…A guide for organisations new to fundraising – Joe Saxton March, nfpSynergy 2011
Link to nfpSynergy Our personal work contribution to NGOs shouldn’t just be what we ‘do’, it has to be what ‘remains’ after everything that is temporary fades away.
Return on investment in detail and how long is the long game?
Looking back, what would you say to the person who started a modest face-to-face fundraising programme ten years before you took your role, which now provides your NGO with tens of thousands of dollars of monthly net income and an enviable Return on Investment?
Will you as CEO or Board Member be remembered, thanked and honoured for introducing financial sustainability and returns of 300 to 500%? The chart below illustrates the returns from monthly supporters and the time frame.
Return on investment – reducing the investment for smaller NGOs by sharing a fundraiser
In Ireland, hard hit by the recession, Simon Scriver (Dec 2013) predicts “2014 will see charities begin to take the idea of merging to the next level: sharing administration costs; forming one ‘super’ board could work in some cases.”
A 2013 UK report for NGOs by Joe Saxton of nfpSynergy, titled Strength in Numbers, advocates sharing of ‘direct marketing fundraising’. Face-to-face fundraising is direct marketing fundraising. 5 reasons are to: 1. Cut costs. 2. Efficiency – more hands & minds on deck. 3. New ideas & undiscovered solutions. 4. Pooled leadership skill. 5. You’re a larger client for a specialised face-to-face agency and senior Fundraiser.
I share my expertise between NGOs. These NGOs share a seasoned fundraiser, not through collaborative design but by hiring me to work in their premises for part of the week. It happens because I like working for different causes. Two-day-a-week assignments suit me.
Return on investment in further detail
A strong monthly supporter programme is based on supporters making pledges for an agreed-but-not-binding minimum two year period. The average length of support in New Zealand is between four and five years, with some pledges still running at 20 years. There is a long tail of income with monthly giving.
The return on investment increases with time to around 300%. Or 500% if you get good at keeping your supporters. The cost of fundraising correspondingly drops to around 20 to 25%. Put another way, the NGO spends $1 to raise $4 or $5 over four to five years. Re-invest one of those early ‘extra-raised’ dollars and that one too starts raising a lot of money. Keep this up for ten or more years and your NGO is fuelled by compounding financing.
Most NGOs don’t want to spend more than 25 to 50c to raise a dollar. Many realise they need to spend more initially, with the cost of raising that dollar dropping as time goes by.
The 19 or so NGOs in New Zealand using face-to-face fundraising to grow their good work banked almost $42 million from face-to-face in the year ending March 2013 and much the same in the year ending March 2014. That $42 million raised for their good work last year represented substantial investment in earlier years. Returns come after investment.
Here’s how the return on investment is achieved. Investment is the purchase of an asset with the intention the asset will ‘return’ future income. The word ‘future’ does not mean ‘immediate’ or ‘year-one’. It never has, despite the claims of some of the media who aren’t familiar with the broader picture. It’s a fact of life that ‘return comes after investment’.
Members of the public agree to regularly give a monthly donation with their stated intention that their monthly gift continue for a minimum of two years. Giving should be a joy, not a burden. Not everyone wishes to or is able to sustain their original intention to give two years their best shot. That’s people, that’s life. Every dollar contributed by someone who pulls out early still helps the NGO do it’s good work. Similar to every dollar given by those who sustain their monthly donations for twenty years.
Across a large number of individuals, reliable and predictable patterns of attrition-retention emerge and these ensure everyone’s contributions are, in aggregate, valuable and contribute to making the world a better place.
It may cost an NGO say $230 to find a monthly supporter who signs up to give $30 a month. On average around 20 to 25% of initial supporters don’t proceed with their pledge past three months. The supporter may have a partner who wasn’t part of the initial conversation and doesn’t support the decision to give. People change their mind. This early reduction in supporter numbers over the first few months is expected.
Over the course of that first year, the cohort of kind and generous people may give an average $302. The average second year income, averaged from lots of supporters similarly attracted, may be $224, the 3rd $178, 4th $140, 5th $110, 6th $86, 7th $67, 8th $53, 9th $42, 10th $33, 11th $26, 12th $20, 13th $16, 14th $12, 15th $10 and so on.
The cumulative lifetime giving value of the average supporter above will likely be $700 to $1,000 depending on how well the charity keeps the supporter informed about the impact of their gifts. These are returns of around 300 to 500% on the cost of attracting the average monthly supporter.
There is a long tail of giving with monthly supporters, during which a proportion of supporters will increase the amount of their monthly gift and a proportion will include your NGO within their Will. This long tail, long term aspect is why it is so much a Board and CEO responsibility – they are charged with the responsibility for the long term and only they can release investment.
With monthly supporters, the expense is incurred up front in finding that supporter. Once that supporter has come on board to support, there is further expense but it is small (such as email news of how you are spending their kind gift) and occasional letters (such as annual tax receipt time). These ongoing expenses are easily managed and represent only a small portion of annual income. Here’s a USA example of one supporter who’s lifetime of monthly giving and later bequest gift totals to $31,250.
Conservative medium term forecasting probably underestimates what happens over lengthier periods. The true yields, inclusive of bequests and major gifts are likely better. There’s more about bequests later.
Nobody likes the expense of finding new supporters and the sector takes every effort to minimise it. Unfortunately it’s a commercial reality that charities face. Attracting new supporters is essential to help those we are here to serve.
Should you use Reserves to finance the investment in getting started?
The article above made me curious about the forms of fundraising Marie Curie focused on to fund their cancer care nurses and hospices. Here’s a link to their website, showing it’s face-to-face for monthly supporters and you can read about this.
Low alternative investment yields favour an NGO investing in face-to-face. Here’s an Australasian view that “good fundraising” should be included among an NGO’s investment portfolio. Not all forms of fundraising produce returns of this magnitude. Face-to-face does.
Most charities invest their reserves in the financial markets, employing fund managers in the hope of generating a better than 5% annual return. But what about investing in the charity’s future as well for a 300% five-year return?
John Stewart quoted above has served as the Deputy CEO of Barclays bank and been Chief Executive of National Bank of Australia. In 2014 he is Chair of Legal & General a British multinational financial services company.
In July 2014 a toolkit was released by the UK’s Institute of Fundraising around ‘The seven pillars of great fundraising’. The 3rd ranked discusses investing from reserves. It’s worth noting too that the call is for a minimum five-year view.
In the UK, Giles Pegram CBE, as Appeals Director, took the National Society for Prevention of Cruelty to Children (NSPCC)’s income from donors and supporters from £3 million to £145 million per annum, of which 85 million came from regular givers and on his consultancy website shares his philosophy that:
“fundraisers have a responsibility to encourage their Organisations to be aspirational in their Missions and Objectives, and not to be constrained by the limitations of incremental fundraising.
Face-to-face fundraisers are no more intrusive than the formidable ladies who were to be found on our High Streets in the sixties and seventies with their tray of flags. Woe betide you if you weren’t wearing one by the time you got home.
Second, the [total] average gift of a donor recruited this way is higher than any other means, by quite a margin. After initial attrition, they are loyal and have a high lifetime value.” – Giles Pegram CBE
It is entirely in line with fiduciary duty to invest reserves judiciously in good fundraising.
“Charities need to review reserves and overall expenditure very carefully before either cutting or under investing in fundraising if they want to survive or preferably thrive in the future. Yes, cost ratios will rise, but hopefully against overall increased income and funds to serve the mission and vision of organisations.” – Tony Elisher 19.06.2014 101 Fundraising blog
At the July 2014 UK Institute of Fundraising conference, plenary speaker Alan Clayton referred to Professor Adrian Sargeant’s research that distinguished great-fundraising charities as those growing fundraised income by 20%, 25% and 30% year-on-year cumulatively. This doubles, triples or quadruples voluntary income over 5 to 10 years. This is in comparison to the majority of charities that are either flat-lining or bumping along.
The great-fundraising charities Alan Clayton said are growing this fast because they are slam-dunking investment into great-fundraising they know works.
Is it time to change the fundraising strategy you focus most on?
The bullet points below are from a power-point slide from a well known national NGO, from a fundraiser’s presentation to a FINZ meeting in 2009. Since 2009 the NGO has grown strongly and is able to do more good.
“We exist to make things better …
- To do so, we need to raise more money
- We need to change our fundraising focus. We want to raise more money, so …
- We want more ‘regular givers’. Regular givers are those who commit to making a donation automatically every month.”
Change is reality, it always has been. If you haven’t significantly changed your fundraising for years, you are likely being left behind. A key word here is ‘significantly’.
There’s many NGOs who try harder at what they’re aleady doing, they try to do it better each year, they get busier. Most times the financial results don’t ‘significantly’ change. Take this year’s fundraising plan. What was the thinking behind it? Chances are you sat in a series of meetings. You talked and out came the white board and together you mapped the perfect year ahead that financed the operational budget you needed to meet. Yes the plan felt an awful lot like the one you did last year (and the year before), but this time you were going to have ‘more success and be ‘innovative’. You were going to tell ‘stories’ and be ‘emotional’. Oh, and you were going to add a few ‘thank you’ messages along the way to ‘surprise and delight’.
How’s it working so far; any significant improvement on last year?
How many times would you walk into a wall before you decided to have your glasses checked? So why is it that every year many NGOs fundraise the way they always have, expecting results to be significantly better? If you look at the history of innovation, slightly better doesn’t get you anywhere.
Slightly better is often too small to generate a substantial difference to the bottom line. As a result, it can be soon forgotten and another round of talk-talk takes place, that in turn ends up with much the same result. Often ‘slightly better’ thinking leads to being too busy to take care of the future.
Only by adopting new mindsets and methods can organisations double or quadruple their income. You will likely have to change more than you are initially comfortable with to get a better result, to get significant change.
Many NGOs have built up a time-consuming, energy sapping bog of activity under the heading of fundraising. Events, payroll giving, auctions, receipting $5 direct mail donations, wondering whether to include a mailing to a supporter who hasn’t given to the last six appeals, picking up coin collection boxes, arranging the bucket collection, small value long-shot grant applications.
With face-to-face fundraising, you can pole-vault over the time-consuming, less effective tasks you’re busy with. Focus on embedding face-to-face fundraising and momentum will carry you up and over the bog of typical fundraising inertia. Don’t put off starting while you tidy up the rest, just get on with it and you’ll find yourselves vaulting over the bog.
Include consideration of future bequests
In the screen shot below, Roger Craver is referring to a book by Erica Waasdorp: ‘Monthly Giving, the sleeping giant, how small gifts can become the most powerful tools to support any organisation’
The more supporters we have, the more bequest potential there is. Pareto Fundraising’s benchmarking finds this to be an average $38,900 in New Zealand. How much would you invest now for an average $38,900 bequest?
You likely know the number of supporters you have; so plug that number into the calculator below. It’s worth a quick play to marvel at the later-arriving income we don’t readily impute today when making decisions about how much to invest in finding new supporters.
BEQUEST POTENTIAL CALCULATOR from the USA.
Don’t be unduly discouraged by reports that face-to-face acquired monthly supporters have low bequest potential. Such reports may apply if you source young supporters in their 20s to 30s from CBD streets. I recommend sourcing more mature supporters by going door-to-door in residential areas where an average age of 40 is achievable.
There are close links between bequests and mail supporters. But cost-effectively sourcing new supporters by mail is more challenging.
Here’s a screenshot from one NZ National NGOs Annual Report in 2012. While bequests are unpredictable, with a large base of engaged individual supporters, you’ve got improved opportunity.
In the USA every morning 10,000 people wake up 65 … and that won’t stop for the next 22 years. In New Zealand, with the population bulge of baby boomers starting to retire, we can expect to see continued growth in bequests due to the sheer volume of people moving into this new phase of life. The growth in the share and housing markets will increase the value of estates. However, health costs because we are living longer will eat into people’s retirement savings.
Decisions about whether to, or when to, embark on monthly giving should include consideration of future income from bequests.
Does my NGO need to move swiftly and get started?
My view is that if your NGO has the capacity and finance to do so, you should move swiftly and get started.
The cost of getting new supporters is rising. To get one more monthly supporter on board takes an increasing number of conversations compared to earlier years. Conversations have a cost and that cost passes back to the NGO. More conversations will move from middle New Zealand alone to lower socio-economic areas where kindness is as prevalent as a lack of capacity to sustain monthly gifts. So delay will cost your NGO in two ways: you’ll pay a higher price and you’ll receive less lifetime-giving income.
Another reason to get on with it is the bequest potential associated with a growing bulge of baby boomers reaching the end of their lives. See this chart from the UK which has a similar demographic bulge of baby boomers:
If you want “the highest returns in the long term” , you won’t overlook that those bar charts above show a doubling.
There’s a third reason to move swiftly and that’s growing competition. Mark Astarita is Chair of the UK’s Institute of Fundraising and heads up fundraising at British Red Cross which has a massive face-to-face fundraising income. A 2014 report Managing in the New Normal, a report by the Institute of Fundraising, Charity Finance Group and PwC.”highlighted that competition from other charities was the sector’s largest concern, and that more charities are developing fundraising departments, and Astarita highlighted this as a potential problem. “Everybody wants to diversify their income, and many of them want to start fundraising,” Astarita said. “And why wouldn’t they? The returns are 300 per cent. Why wouldn’t you invest to get a 300 per cent return? “Competition is bothering people an awful lot, and they are right to be bothered.” Source: Civil Society UK 8 April 2014.
The good-news side of face-to-face being too daunting for many NGOs is that it means less competition for NGOs doing it.
Here are two more views on whether you should move swiftly. The first is written by Ian MacQuillin in the UK’s Guardian Professional, 20 July 2012:
“Face-to-face fundraising has been consistently performing well for 15 years and for the last ten at least, people have been predicting its demise. Despite predictions that face-to-face fundraising is doomed, it continues to deliver thousands of new donors to charities. Face-to-face fundraising is thriving despite media attacks …and the recession.
Every year, someone predicts the demise of street face-to-face fundraising (F2F). Consider this statement from a leading consultant: “With hundreds of thousands of new donors being signed up … this will lead to a saturated market within a few years when the cost of signing up numbers will increase to a point where it is no longer effective.”
The trouble with future gazing is that the future doesn’t always do what you thought or hoped it would. The comment above was made in 2000, a year before the UK Public Fundraising Regulatory Association (PFRA) was formed; two years before chuggers were called chuggers. Yet F2F is still thriving. It has survived media attacks … and the recession.
Ten years ago, doorstep and street fundraising were delivering almost equal numbers of donors. But now doorstep fundraising is responsible for more than 70% of sign-ups (though we ought not discount the 480,000 donors recruited through F2F on private sites, such as festivals and shopping centres).”
The second view is from the USA and relates to monthly giving in general rather than face-to-face in the specific:
Chuck’s analogy of there being only so much land to go around is interesting.
In New Zealand there were 8 PFRA members in 2008 and 23 in 2013. In March 2011 there were 44,000 sign ups, in March 2013 there were 66,000.
In May 2014 a major energy retailer stopped going door-to-door to door to find new customers and instead mailed out stickers reading “Please do not knock. No salespeople, thank you”. These stickers have been widespread in Australia for some time, where face-to-face fundraising continues to thrive. These stickers aren’t a game-changer, but they do marginally remove some of the land.
I don’t think anyone has the answer to how many the land can sustain. Do you want to wait until that’s learnt or would you like to get started? Are there comparisons to be drawn with the business world in which they talk about first and early-mover advantage?
But it won’t work for our cause
Are you wondering if your cause is attractive enough? Most causes resonate with a sufficient number of people to be marketable by face-to-face fundraising. Reflect on the unsurpassable power of asking face-to-face and remember the adage ‘people give to people’.
Many NGOs can find something they do that is compelling. If your NGO can articulate, with external help in constructing this if necessary, an immediate, urgent and ongoing need for support then you can build a monthly giving programme.
Using the F2F ‘channel of communication’ and an agency supplier, you will be represented by people who are skilled and passionate about your cause. A Feasibility Study will inform a decision as to whether to proceed to the next stage of a Trial. This is the carefully considered approach I offer.
Are you wondering if your NGO is too small? I’ve done a successful start up programme with a small NGO. To run a successful face-to-face fundraising programme, I think you need a minimum administrative staff of a 0.6 FTE CEO, a 0.6 FTE finance officer and a full time administrator/reception person. That’s an absolute minimum and would require exceptional buy-in and focus by all concerned.
Are you wondering if your NGO’s geographical area is too small? To launch a continuously-running, stand-alone face-to-face fundraising programme delivered by a main agency supplier, I think you need a minimum area equivalent to Greater Wellington.
If you only operate in a smaller area, you could consider a programme that runs for a period and then stops for a period. Or collaborate with another NGO. You may have to be creative. Creative entrepreneurship starts with what you know: face-to-face fundraising works and monthly giving is what we want for stable growth. You then get creative around what you know and adapt it until it works.
You may have to create more income by focusing on a lesser number of fundraising strategies.
If you can’t engage one of the specialist third party marketing agencies, you may have to directly engage your own face-to-face representatives.
An Australian consultant foresees older people being part of our presently young-dominated face-to-face workforce. There’s a five member door-to-door fundraising team in Ireland carried out by contractors in their fifties, directly engaged by the charity. Because the charity profiles each contractor on their website, my guess is that it is a stable workforce.
Kiwis are great innovators, they embrace change, they aren’t put off by the first ‘no’ and work hard.
We’re not alone in the world though and there is much to be learnt from overseas. In 2014 the USA DMANF Nonprofit Federation Leadership Summit, open to senior level executives by invitation only, is promoted in a way that suggests fresh-thinking ways in which we could approach the toughening fundraising landscape in New Zealand:
Are you wondering if you need to raise awareness of your NGO first? I’ve got personal experience that you don’t. I managed face-to-face fundraising programmes for two well known international NGOs before starting up a programme for a relatively unknown children’s charity that changed its operating name a month before startup. The success of the face-to-face fundraising programme at this newly renamed children’s charity won the 2012 Fundraising Institute of New Zealand Charity Donor Acquisition Award.
Would you like to build a base of committed supporters and a sustainable, growing stream of long-term income?
Ready and want to get started on making the world a better place?
Go to the right-hand main menu item of Services for my recommended five next steps
John Barnett MFINZ (CFRE, 2010-2016)
Lower Hutt New Zealand
Mobile +64 (0)21 063 1590
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