Take a sneak peek at some popular fundraising methods
Nonprofits need to raise money to support their missions and programs — but with so many different fundraising methods to choose from, how can you know which option will work best for your organization? Before making a decision about how you'll meet your fundraising goals, consider the pros and cons of various fundraising methods.
Individual donations may come in the form of cash, pledges, company stock, property and more. You might approach potential donors through tactics such as face-to-face appeals, phone calls, direct mail, newsletters, social media or events. Once you develop a donor base, keeping donors engaged maximizes the chances of subsequent donations.
Your nonprofit is more likely to succeed at obtaining individual donations if your work is relevant to the community. This method might be more challenging, however, if your work is difficult for the average person to understand.
Keep in mind the time it takes to research the market, figure out your target audience, and create mailings that accurately and effectively explain your nonprofit's mission and the benefits to the community and population served. If you make face-to-face appeals, you'll need to provide training so fundraisers can answer potential donors' questions. If individual donations become your bread and butter, you'll need to continue soliciting on an ongoing basis.
Online crowdfunding allows your nonprofit to use social media to raise money, with typically small donations coming from a large number of people. What makes crowdfunding different from other fundraising methods is that it leverages the social networks of everyone who participates in the campaign. This enables connections with potential new donors that might never have been otherwise established.
To make crowdfunding work for your nonprofit, visit crowdfunding sites and look at successful campaigns. On your fundraising webpage you'll need to tell a compelling story about your mission that people will want to share — and that will encourage action. You'll also need your supporters to share their participation through their own social networks.
If you don't engage your supporters, a crowdfunding campaign may flounder. Your organization will need to plan several pushes in marketing to get the momentum started, keep it going and meet your fundraising goals. This requires planning and creativity.
Gifts from major donors
Gifts from major donors, people able to give thousands of dollars or more, can go a long way toward helping your nonprofit meet its fundraising goals. But direct mail, phone calls and emails aren't likely to help you secure this kind of donation. For this fundraising method to be effective, your leadership and development team must develop strong relationships with possible major donors.
To ask for a sizable gift, request a formal meeting to explain what need the gift could meet and how the donor will be recognized. You might also be able to attract major donors by hosting special events, such as a trip or gala. If these kinds of events are beyond your capacity, look for something exclusive you can offer, such as a behind-the-scenes tour of a special aspect of your work.
If your nonprofit needs to raise money for a large capital project, such as the renovation of your facility, a capital campaign may be a smart option. This fundraising method may bring in a lot of money, new supporters, and make your nonprofit more visible in the community. A capital campaign can also bring together your board, staff and volunteers as you work toward an exciting goal.
But make no mistake, capital campaigns require intense planning. Before you start this type of fundraising initiative, leadership must examine the feasibility of the campaign and increase the visibility of your organization. You'll need commitments from your board members to donate major gifts and encourage others to do the same. Other musts are a strong financial base, donor support, committed leadership, dedicated volunteers, and a database or other system to effectively track the details.
Legacy gifts or planned giving
Planned gifts, which can be pledged now and available later, may include bequests, trusts, pooled income funds and annuities. This fundraising method can bring in extremely large gifts, and once the program is set up it becomes a steady source of income. However, these programs also require careful planning, foresight and prospect research. More importantly, your organization might have to wait years before it can use the money.
Dinners, fairs, bake sales, auctions, tournaments, races, balls and carnivals are all types of special events nonprofits use to bring in money. These events can raise your organization's profile in the community, build your mailing list and attract a large number of people. Special events can also mobilize volunteers who might not otherwise be interested in fundraising activities.
But successful events require time and meticulous preparation. Even with careful planning, the celebrities you invite might not show up, a storm could hit on race day or you might not raise enough money to justify your efforts.
Fee for service
For example, a museum might open a gift shop. This method can be an effective way to raise money and, with this type of income, your organization doesn't have to worry about foundation reporting requirements or donor wishes. But running a business within your organization may pose tax issues.
Before going this route, do your homework and seek out tax advice. Make sure the time needed will be justified by the profit gained. Often, a product or sales program is best used to complement, rather than replace, other fundraising methods.
Corporate gifts are another source of fundraising income — typically in the form of cash, in-kind contribution, or sponsorship of a team or event. Your nonprofit might use an in-kind gift, such as show tickets, to raise money through a raffle or auction. Local companies might be willing to lend a staff member, such as a restaurant chef, for a night.
To raise money through this approach, you'll need to identify companies that have a strong presence in the community and a commitment to your organization's cause. Check if any board members have personal connections that can be leveraged. Find out if the company has procedures for handling these types of requests. Make sure you understand what the company has to gain from the gift and be prepared to give several options for donating.
Of course, results aren't guaranteed. If you don't have an existing relationship or the company is already sponsoring another event, you'll likely be rejected. Your fundraising team might need training and support to remain positive and motivated. Also, while you'll want to recognize corporate gifts, you'll need to be careful to avoid outright advertising — which could have tax implications.
Your organization might connect with a social venture firm for funding. Such firms provide funds to nonprofits doing on-the-ground service, often bringing the tools of venture capital to bear on the nonprofit mission. Social venture firms often engage themselves with nonprofits in long-term partnerships rather than short-term or one-time grants. These partnerships are often more collaborative and interdependent than conventional donor-grantee associations, with the funding partner helping to ensure accountability and effectiveness in the organizations it supports.
In the U.S., a federated fund mobilizes a single fundraising effort — often in a workplace — and then distributes the funds it raises to a diverse range of nonprofits or other recipients. Employers may encourage employee donations to federated funds by matching funds and automatically deducting donations from paychecks.
Federated funds often have strict eligibility criteria and elaborate application requirements, especially for new applicants. Because the charitable focus of a federated fund is arrived at by committee — and sometimes cultivated over a long period of time — federated funds tend to favor established nonprofits as funding recipients over more unique or potentially innovative organizations.
Grants of various types are another potential source of nonprofit revenue. Government, foundation and United Way grants are popular in the U.S. In the U.K., funding may come from European Union bodies as well as from central government and local authorities. If you're considering applying for a grant, you might choose those to help scale or replicate the things your nonprofit is already doing. Most grants aren't intended for start-ups or experimental projects.
Forbes: 7 crowdfunding tips proven to raise funding by Chance Barnett (2014)
Nolo: Nonprofit fundraising methods: An overview by Ilona Bray
The Chronicle of Philanthropy: It's time to cut through the hype of impact investing by William Burkhart (2013)
The Fundraising Authority: 10 step guide to cultivating corporate sponsors by Joe Garecht
The Fundraising Authority: How to use crowd-funding sites to raise money for your non-profit by Joe Garecht
Raise-Funds: Should your organization sell products and services to raise money? by Tony Ponderis
Society for Nonprofits: Pros and cons of fundraising methods
Endowment Development Institute: Top 6 types of nonprofit fundraising: Pros and cons (2015)