Are you tempted to hire a professional fundraising company for your next donor campaign, membership renewal, or fund drive?
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 an annual report identifying professional fundraising companies who solicit funds in Pennsylvania 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 telephone fund drives. Many donors prefer to write their checks directly to the nonprofit rather than use the professional fundraiser intermediary.
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:
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.
Christine Jarzab Kuntz is an attorney specializing in the life cycle of businesses and nonprofit organizations. She is enthusiastic to share her knowledge, tools, and tips with the business and nonprofit community. She enjoys the excitement of tutoring start-ups, tackling the challenges of established businesses, and counseling her clients' transitions through all stages of the business life cycle.