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How Successful Nonprofits Fundraise when Starting and Growing

How Successful Nonprofits Fundraise when Starting and Growing

Have you ever wondered why some
nonprofits grow successfully while others struggle to raise enough money to
keep their doors open? Or are you thinking of starting a non profit or
trying to fundraise for an existing charitable organization, and wondering
how to approach it? I’ve had several people ask me to share some insights on
this so I hope this video will help you out. Welcome back to another video! I’m
Amber Melanie Smith, nonprofit founder, executive director, and speaker on
leadership, service, and all things social impact. I make videos helping aspiring
changemakers with tips and strategies to help you change the world while living a
life of impact and purpose. At some point every effort to change the world
involves that thing that changemakers love to hate and hate to love – that’s
right – money! I’ll cover a variety of aspects of
raising money for charitable organizations and social impact projects
in future videos, but for this video I want to focus on two questions. 1: how
are successful nonprofit organizations raising money? and 2: what are the
different ways that organizations can raise money? Stick around to the end of
this video because I’m going to break this down into two parts. First I’ll talk
through five different ways that successful nonprofits are raising money.
Secondly, I will talk through how to plan for the long term to help your
organization grow significantly. Okay, so let’s talk about one thing that
successful nonprofits all have in common when it comes to fundraising – they all
have diverse funding sources – but there is an exception! Having diverse funding
streams is a good practice for start-up nonprofits and small and medium sized
organizations. When you’re starting out diversification is a really smart idea.
Ah, but here’s the exception! Once you get a bit larger, it turns out that
diversification of funding sources may not be as critical as when you first
began. There is a fascinating study by the Bridgespan Group – they looked at the
fundraising habits of a hundred and forty-four large organizations, all with
at least 50 million dollars in annual revenue. What they found was that these
very large organizations – so we’re talking groups like Habitat for Humanity
or the make-a-wish Foundation – once they got a bit larger, they actually relied and
focused on a single fundraising source to achieve their really large size. Of
course, being big just to be big should not be the goal of any nonprofit or
social impact effort. The ultimate goal of course should be to make a positive
change to address a social issue to solve a problem, and then move on to
address the next problem, or disband, because hey, mission accomplished.
Sometimes being a big organization is required in order to meet your goal, and
sometimes being a small organization is just as good to get the job done. Okay, so
let’s dive into those five diverse fundraising strategies that successful
nonprofits are using to raise money. So as I mentioned earlier, new small and
medium-sized organizations often find a lot of success by having diverse funding
streams – so that means more than one method of raising money for their cause.
I also want to make a note of something important, and that is that no matter
which of these methods you undertake or others there are a couple things you
might need to do before you can get started fundraising. The first is that
you’re going to need to train and get help from your nonprofit’s board of
directors to support all fundraising efforts for your organization. Secondly
you will most likely need to obtain a charitable solicitation license to
enable your organization to start fundraising. About 40 out of 50 of the
states in the United States require this license before nonprofits can fundraise,
so be sure to check out your state’s Secretary of State website to see if
your organization will need to do that. So let’s get into it with these
fundraising strategies – first there’s a common misconception that grants are
actually a top way that nonprofits are bringing in money to operate that is
actually not true individual donations are the top way that organizations raise
money across the country every year in fact they make up about 70 to 75% of all
donations made across the United States each year so it’s a really good idea if
you are new or small or medium sized organization to be really working on
cultivating great relationships with individual donors individual donations
can take a lot of forms they can be one-time or occasional small gifts here
and there they can be responses to a campaign or a fundraising email or a
letter that you send out they can be recurring donations which means that a
donor has very generously decided to commit a certain amount of money to your
organization every single month sometimes this is even odd matically
withdrawn from their bank account so if you can set up a system like that it’ll
really help you sleep well at night because you can count on those donations
coming in each month another way that individuals make donations
through major gifts now what a major gift is depends on your organization
smaller organizations may consider a gift to be major if it’s 500 or a
thousand or two thousand dollars whereas larger organizations might look at a
major gift as something more like five ten or twenty thousand dollars getting a
major gift can take a while because it takes a little bit of time to build a
trusting relationship with a donor who might be inclined to make such a sizable
donation to you but it is totally worth it to get started building those
relationships early the second type of funding source you can use to diversify
your funding base is corporate support similarly to grants there’s a
misconception that corporate sponsorships and corporate grants are
large sources funding for nonprofits and that’s just not the case annually
corporate contributions make up under ten percent of donations across the
country but depending on the mission and specific activities that your cause is
trying to undertake corporate support could be a good fit for you
there are a lot of different types of corporate support some companies have
their own foundation that is the way that they do their charitable giving
some of them have sponsorships for events some of them do matching
donations so this is when an employee who works at their company makes a
donation and the company has a policy of matching whatever that individual
employee donates to your cause as well a lesser-known way that companies can
support organizations financially is through volunteer grants this is when
employees from a company volunteer for an organization and the company has
something that’s called maybe dollars for doers which is where when an
employee volunteers and gives their time the company matches that employees time
with a financial donation so some companies will do something like for
every hour that employees volunteer we give that nonprofit ten dollars so if
you have a lot of employees from a particular company who has this policy
in place volunteering at your cause could equate to a significant donation
over time and finally another great way to get corporate support is through
in-kind donations that means donations of goods or services instead of cash
so an example might be a donation of software or a laptop or building
supplies something that will help you achieve your mission though it’s not
cash 1/3 funding source that organizations can use to diversify their
funding base is grant foundations as I’ve mentioned before grants are not
something that you really want to rely on as a non-profit they are great
however for giving your organization or a new program or project a boost to get
things started or to help you meet a larger fundraising goal each year
financial donations from grant foundations make up about 16% of
contributions across the country now there are two types of grant foundations
Community Foundation’s and private foundations Community Foundation’s can
be found in cities across the country and normally have something like
Community Foundation in their name so you know that it is a Community
Foundation while some Community Foundation’s do
have their own grant funds that they disperse a lot of them rely on what’s
called donor advised funds so this is when a private donor wants to start a
fund to be able to give money away to nonprofits but they don’t want to manage
the administrative duties of that fund themselves so they go through a
Community Foundation to help them facilitate grant making and tracking all
of their impacts usually how this works is the Community Foundation keeps tabs
on the interests and causes that donors are passionate about and make
recommendations to those owners to match them up with causes perhaps like yours
that could be of interest to them as a donor often Community Foundation’s will
also have a specific theme or issue that they are focusing on for a period of
time in order to make a dent in an issue that their specific local community has
said is important to them the second type of
Foundation is a private foundation and this usually means that it’s a
foundation started by an affluent family who wants to give away funds on their
own and handle those administrative tasks now the best way to get funding
from either of these types of foundations is honestly to build a
relationship with these foundations it’s really hard to get a grant from cold
calling or writing a grant if they don’t know who you are if they haven’t heard
of you if they haven’t met you it’s a lot easier if they know you you’re
trustworthy they know you’re good works in the community it’s a lot easier data
grant in that case a fourth strategy that successful nonprofit organizations
can utilize for a diverse funding base is fundraising events now I’m not gonna
lie there are a lot of downsides to holding a fundraising event they are a
bit of work they’re a little unpredictable you never know who’s gonna
show up you never know who’s gonna donate so they can be a bit of a risk in
fact as you get more sophisticated and more experienced as a non-profit a lot
of people will advise you to start moving away from fundraising events or
at least focusing on one no more than two major fundraising events throughout
the year the reason being of course just what I
said there are a lot of manpower a lot of work to put on and sometimes the
payoff is not what you hope for but if you are a newer or smaller organization
a fundraising event could have some other benefits too like raising
awareness and building up your network of future potential donors a fundraising
event is at least something that you can do before you have built up that strong
base of donors already so it’s a good way to introduce yourself to people give
them a fun experience and get your name out there there are a plethora of
fundraising event ideas out there from your standard gala to your 5ks
you’ve got peer-to-peer fundraising which is great especially if you
integrate some kind of online component to that this is where people are kind of
your champions for fundraising they go out and they ask all of their friends to
fundraise for you and hopefully bring in a lot more donations and introduce a lot
more people to your cause that way too the fifth
fundraising strategy and a really key strategy that many many successful
nonprofits undertake is called earned income so there’s this common idea that
nonprofits have to rely strictly on donations in order to operate but that’s
not entirely true you can get earned income or fees first service might be
another way of calling it and what this means is that you are selling some kind
of service or good to raise money for your organization these are not
considered tax-deductible donations however they are a fee for service
whenever someone is getting something of value in return for the money they are
giving your nonprofit organization it is either not tax deductible or you can
only deduct the value of the difference between what they donated and the value
of what they got in return earned income is a huge way that successful nonprofits
are staying afloat in fact almost half of all revenue of nonprofits nationwide
comes in through earned income or fees for service now note I said revenue not
donations before I talked about the breakdown of different donations in the
country but this is just revenue so half half of all revenue is coming in through
these earned income streams for nonprofits often nonprofits with an
earned income fundraising strategy might be called social enterprise
organizations social entrepreneurship is when you combine a social good mission
like those of nonprofits with businesslike strategies examples of this
might be when a non-profit charges a reasonable fee for their services so
examples might be clinics or housing support or consulting it can also
involve selling an item like food or clothing or furniture so there’s two
catches two earned income though the first is that whatever you are doing to
generate income it has to align with the mission of your nonprofit organization
otherwise you might get hit with taxes due to having unrelated business income
say for example that your nonprofits mission is to help formerly incarcerated
individuals find employment so let’s say you start a service to raise money for
your nonprofit by providing moving services for your neighborhood and
hiring the clients that you’re serving those formerly incarcerated individuals
to be the movers or managers of this program that example aligns with your
mission in this case because remember your mission is to find employment for
formerly incarcerated individuals which you’ve now done however let’s say that
same nonprofit ran a thrift store it did not employ any of the clients in its
thefts or it was just a thrift store out there raising money for its organization
even if all the money goes back into its programs which as a nonprofit it would
that could be a situation in which you would get hit with having to pay taxes
because it’s unrelated business income the second catch to earned income is
that in many cases earned income cannot make up all of your organization’s
revenue as a 501c3 tax-exempt public charity you are expected to raise at
least one-third of your annual revenue from public support meaning those
donations grants corporate contributions etc so not earned income earned income
is still a great way to raise money and raise a decent amount of money to
support your organization and help keep it sustainable as you grow it’s just not
something you should rely on purely for all of your fundraising now one funding
source that I’m not really going to get into in this video is government grants
especially local government support the reason for that is they can be pretty
tricky to get and they’re usually a better fit for pretty specialized
organizations that fulfill a big need that the local government has so I’m not
going to get into that right now but if you guys are interested in hearing more
about that I will be sure to drop some resources in the description below for
you to learn more you might have noticed a common thread between all of the five
funding sources and strategies that I just described and that is relationships
in all cases across the board and any kind
fund-raising having strong relationships with the people in your community the
potential funders and your existing donors that you are already supporting
you are going to go a long way in making sure that you get that sustained support
that grows and grows over time so honestly one of the best things you can
do when you’re just starting out is to just get out there meet people go to
networking events speak at as many venues as possible to get your mission
and your the name of your organization out there just start making sure people
are hearing about you hearing your story and coming to love what you do at the beginning of this video I talked
about how diversifying your funding base is a good strategy for new small and
medium sized organizations but then I talked about larger organizations so now
I want to get into longer-term thinking what do you do when you’re at that
larger size and you need to take it to the next level to become one of those
massive organizations because that’s the only way you’re going to effect
widespread positive change that you need to affect so here’s the thing there is
not a single fundraising strategy that is a one-size-fits-all solution for some
organizations focusing on earned income could be the best fit for others it
might be individual donations and for others it might be government contracts
or grants so in order to think ahead and grow to that massive size like those
organizations like Habitat for Humanity or Make A Wish Foundation that I
mentioned earlier you have to focus on finding the right fit for your
organization and what I mean by the right fit is that it’s a fundraising
strategy that you excel at and makes sense for your specific mission and the
program activities that you undertake as a nonprofit organization so a few
examples let’s say you fulfill a big need that you’re a local or county
government might otherwise be fulfilling if you didn’t exist as a non-profit well
in that case you might actually be really good fit for convincing your
local government to support you with a government partnership or contract or a
government grant and the reason for that is you are providing a value to the
local government and reducing their workload if you’re thinking that
individual donations might be the biggest fundraising source for you as
you grow as an organization there are a couple ways to think through if that’s
the case if you have a compelling story a strong brand and a message and a
mission that is very clear and easy to to understand then your cause might be a
good fit for getting a large amount of it support from individual donations
those organizations that have become very large from the help of small and
medium-sized donations are the ones that have very simple easy to understand
messages and missions they are also very emotionally compelling messages and
missions great examples might include ensuring that no child goes hungry or
that all animals are treated humanely a third example is if you’re thinking
through the Earned Income it’s going to be your biggest source of income in the
future to keep your organization sustainable you might want to consider
if you have a logical way of selling goods and services that align with your
mission examples might include selling meals out of pay which you can
restaurant providing consulting services to other charities as long as that’s
aligning with your mission or running a thrift shop or other store that has a
tie-in to your mission or you just accept that you are gonna have to pay
some taxes on that unrelated business income finally as I mentioned earlier
when you are that medium or large size as an organization you’re thinking far
ahead your long term strategy to become a really large organization have a lot
of reach and a lot of impact you’re going to need to focus on what your core
competency is as an organization when it comes to fundraising so you want to
think about as an organization what do you bring to the table what can you do
better than other organizations out there that is just the thing that you do
and you’re known for it so are you great at mobilizing volunteers are you really
good at creating compelling digital content or storytelling or public
speaking do you have access to an affordable storefront and a reason to
sell goods or services in that storefront combining the fundraising
strategy it makes the most sense for your particular mission with the skills
that you bring to the table best it’s going to make sure that you are able to
raise enough money to sustain your organization and grow it to whatever
size it needs to be to make the impact that you are looking to make whatever
stage you are at in working with a nonprofit organization whether you are
startup small or growing to medium or large size
I really hope this video is helpful to you I want to hear what are some
creative ways that you’ve raised money for charity or seen other nonprofits
raise funding please share those in the comments below I’d love to engage with
you I really hope you liked this video if you did please give it a thumbs up
and don’t forget to subscribe because I’m making weekly videos on all things
social impact service nonprofits leadership and more finally once again
if you are on Facebook please stop by my group change the world or bust and join
in on conversations with myself and other changemakers on changing the world
as always I’ll leave the link to that group and all of the other links to
things I talked about below in the description thanks so much for watching

  • Have you started a nonprofit or are you working or volunteering with one? What are your organization's most successful fundraising strategies?

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