Earlier this spring, The Giving Institute hosted an interesting webinar on “The Cost of Fundraising” presented by fellow Giving Institute member, Melissa Brown of Melissa Brown and Associates. Melissa began by pointing out the fact that there are a lot of gaps that exist in fundraising costs today. In fact, the majority of organizations only track revenue as a cost of fundraising, failing to account for things like staff time which technically should be a considered a cost as well. She also emphasized that in order to determine an accurate cost of fundraising for your organization, it’s important to examine the whole development program, dividing the total amount raised by your total fundraising budget.
This topic reminded us of a recent conversation we had with a nonprofit who reported that their event had just “raised” $34,000. When we questioned whether this number represented the event’s net profit, they realized that it had actually yielded $17,000. We also inquired as to whether staff time had been factored into this estimate and unfortunately it had not. This example serves as a perfect case in point for the importance of tracking all costs associated with fundraising.
There are more details to factor in than meets the eye, that’s for sure. It’s no wonder more organizations don’t track their fundraising costs more precisely. In fact, due to the breadth of information needed to accurately track fundraising costs, its often recommended that nonprofits begin considering and planning for the cost of fundraising several years out. And, because there are no standardized guidelines that lay out a plan for this yet, we as fundraising consultants have work ahead of us, educating nonprofits on the importance of not only tracking fundraising costs but how to do it correctly. Especially since many donors these days, particularly high net worth donors, care greatly about the percentage of funds raised actually going to the organization’s services.