Should We Use Paid Professional Fundraising Companies?
Updated: January 28, 2020
Fundraising is an uncomfortable and burdensome event dreaded by nonprofits. Few people enjoy approaching friends and strangers to beg for money for a charitable cause. While it may be tempting to hand off the work to a professional company, nonprofits should thoroughly investigate the company, review the fundraising contract, and consider negative marketing implications.
Pennsylvania (and many other states) publish annual reports identifying professional fundraising companies who solicit funds on behalf of charities. This report is an important starting point for nonprofits considering whether to engage a professional fundraiser. The most interesting (and often astonishing) information in these reports is the percentage of donated funds the nonprofit receives after paying the professional fundraiser.
Fees can drastically diminish the amount netted
The fee charged by many professional fundraisers, as indicated in Pennsylvania’s annual reports, consume most of the raised funds. It is not unusual for professional fundraisers to take 75% to 90% of the donated funds, netting the nonprofit with a mere 10% to 25% of the donated funds. This means a fund drive raising $100,000 might only net the nonprofit $15,000. With ever-shrinking budgets, $15,000 may facially appear to be better than nothing, but there are other considerations.
Consider donor perception
Nonprofits must also consider donor perception and negative feedback. Donors expect their donation to promote the nonprofit’s mission rather than private fundraising companies. Unfortunately, most people do not pay attention to the caller’s rapid-fire statement that the caller is a paid solicitor. This leaves the donor unaware the caller will receive a cut of the donation. Were the donor to realize this, telephone donation success rates would plummet.
Nonprofits should consider the form of contact the professional fundraiser will make with the potential donor (i.e. mail, telephone, e-mail, etc.) and the anticipated donor response. Positive and negative responses vary by:
- method of solicitation (ex. unsolicited telephone calls are often negatively perceived)
- prior support of the cause (ex. generally you receive a better response contacting past donors than by contacting people unassociated with your cause)
- timing (ex. donors are more likely to feel generous at certain times of the year or following certain events, such as natural disasters)
- type of cause (ex. certain causes tug at our heartstrings more than others, hence the numerous unsolicited calls we receive for obscure “veterans” and “pediatric cancer” causes).
Professional fundraisers can be useful, but do your research
I do not intend to disparage an entire industry (there are professional fundraisers who provide a fair return to the nonprofit), but there are many unscrupulous companies whose commissions and fees consume most of the raised funds, leaving little to the nonprofit.
The bottom line is both the nonprofit and the donor should ask the pointed question of how much of the donation will the nonprofit actually receive.