Guest post by Kristin Fehrenbach, Senior Consultant at Graham-Pelton
Does your nonprofit fundraise efficiently? At the end of a campaign, do you come away feeling that you generated the most possible revenue for the resources and time that you put into it?
You might not have a confident answer one way or the other. Few organizations do. It’s always possible to find new and more efficient ways to generate revenue by streamlining processes and better prioritizing the allocation of resources.
We see the concept of efficiency crop up time and again in the nonprofit overhead debate. A blind focus on reducing overhead costs, and therefore operating more efficiently on paper, can bring negative outcomes for nonprofits, their partners, and the sector as a whole.
But there’s a big difference between cutting costs to the point of harming your mission and adapting your strategic plans to raise more with the resources already available to you. Making the most of your opportunities simply makes you a better steward of your organization’s mission and good work.
What are the foundational strategies and practices that organizations (of all sizes) should adopt in order to maximize their fundraising returns on investment? Let’s take a look.
Robust Development Strategies
Nonprofit development consists of all fundraising activities, but it often refers specifically to forms of revenue generation that involve strategic relationship-building, like major gift fundraising and grant seeking.
This area of development is an important place to focus your efforts because it can be particularly efficient—the work of one team member to secure a major gift can result in more revenue than you might raise from a short organization-wide campaign. It’s labor intensive but often results in bigger returns than broad campaigns that target larger segments of donors.
Even if your nonprofit doesn’t have a dedicated development department or major gift officers, understanding and adapting development fundamentals will help you raise more, and more efficiently. Here are the essential concepts to keep in mind:
Segmentation. The process of grouping your donors into discrete segments based on shared characteristics (e.g., average donation amount, length of relationship, age, location, etc.) allows you to easily focus your outreach to particular audiences. This then leads to reduced costs and an increased likelihood of success, as you’ll only be targeting those who are most likely to respond to your ask. Segmentation also gives you a valuable framework for learning more and continually improving. By measuring success among particular segments, you can better understand your performance and refine your strategies over time.
Qualification. Prospect qualification involves frequently reexamining what you know about major gift prospects to ensure they’re still top candidates for outreach. This helps you avoid wasting both their time and yours, and it ultimately leads to better experiences. You’ll need to determine the criteria for qualification or disqualification, like active engagement over the past X months or an explicit “no, thanks.” Then, set up a process for regularly requalifying your prospects to keep your outreach lists effective.
Stewardship. You already express appreciation for all your donors, but stewardship goes a step further. By intentionally fostering and growing your relationships with your most impactful donors, you can drive increased engagement and retention. Securing gifts from retained donors is much easier than depending on constant outreach and acquisition, making stewardship an important part of fundraising efficiently. A portfolio-based prospect management system can help keep the stewardship process as organized as possible.
Development comes in all shapes and sizes. You might have a large team dedicated solely to finding and building relationships with high-impact donors, or you could be a small shop that finds the time to stay in touch with its biggest supporters.
Either way, infusing your efforts with these fundamentals (and backing it all up with proper data collection and hygiene) will help you secure larger, higher-ROI gifts.
Forging and Strengthening Partnerships
Nonprofits rely on all kinds of external partners, including corporate sponsors, foundations, peer organizations, government offices, and major donors, to engage the community and make progress toward achieving their missions.
If you’re looking for ways to fundraise more efficiently, remember that you don’t have to go it alone.
Partnerships can unlock new ways to generate revenue while sharing the work or lowering the costs of rolling them out. Your community is probably full of individuals and other organizations that want you to succeed or that would benefit from collaborating on a program or campaign. Here are a few common examples of revenue-generating partnerships:
Corporate sponsorships, either as structured ongoing agreements or one-time campaign or event arrangements
In-kind gifts of supplies, equipment, services, food, entertainment, and event space
Fundraising match challenges in which a sponsor or major donor matches all gifts made to a campaign within a particular timeframe
Co-hosted events with partner organizations, lowering upfront costs
Workplace giving programs, like ongoing matching gift programs or special campaigns
Cause marketing or commercial co-ventures with businesses
Take stock of your nonprofit’s current partnership roster. How are you sourcing potential partners? Can you go further or be more intentional about identifying and stewarding your relationships with partners? Even a small amount of extra work to build your partnership program can result in beneficial connections that help you raise more and reach larger audiences.
On a related note, remember to look to your internal partners, as well! Your staff members keep your organization running and growing. Retaining them and developing their skills over time can significantly reduce what can be a major drag on nonprofits’ growth—employee churn and training costs.
Diversified Revenue Sources
Generating revenue from a variety of diverse sources is always important for nonprofits. This is especially true amid today’s turbulent economy and as the philanthropic landscape recalibrates from the drastic impacts of the pandemic.
Specifically, nonprofits should stay on the lookout for new revenue streams or forms of fundraising that can deliver high ROI. The benefits or returns of these activities should outweigh the new inputs they require, at least once you get your new strategies established and running smoothly.
Major gift fundraising is an excellent example, but what else? Consider these examples:
Peer-to-peer fundraising. Although they still require careful management and input, well-targeted P2P campaigns can help you reach much broader audiences organically. Do-it-yourself peer-to-peer fundraising, in which supporters can launch their own giving pages at any time, can also become a reliable passive revenue stream when effectively promoted.
Planned giving. Bequests and other forms of planned gifts are often larger than cash donations that donors would otherwise consider. They usually require individualized attention and cultivation, but they bring the benefit of being accessible to more of your donors because planned gifts are given from assets rather than cash on hand. Once established, a planned giving pipeline can provide stable, predictable future income.
Grant seeking. Grants often make up a sizable portion of nonprofits’ revenue. If your nonprofit hasn’t devoted much time or strategy to grant seeking, this should be an area to examine. Putting in the work to identify ideal opportunities, prioritize them, build relationships with funders, and hone your proposal skills can result in steady future support that becomes more efficient over time.
Online merchandise sales, particularly through platforms that facilitate the process for you. For instance, platforms that allow you to design merchandise that is then printed and shipped as needed (and that charge you a percentage of the sale) can create a helpful revenue stream without requiring you to cover upfront costs, keep an inventory, or invest in eCommerce capabilities.
Of course, all new revenue-generating activities require some amount of upfront and continued investment. But practice and dedication (even if only a couple of hours a week) can go a long way to set your nonprofit up for success with grant seeking and planned gifts, for instance.
If you want to diversify your revenue streams, start exploring your options! Understand the gaps in your current strategies and what the necessary investments will be, then use those insights to determine your best opportunities.
Remember, operating efficiently and generating healthy returns don’t always mean cutting expenses.
The most sustainable way to strengthen your nonprofit’s bottom line will actually be to start fundraising in smarter ways with a focus on the long term. Implement development best practices, ensure your data collection processes are up to par, rely on your partners, and look for new, high-ROI fundraising opportunities.