WP Remix


I came across an interesting article in Fast Company Magazine tonight about overhead costs in the not-for-profit world. The author, Nancy Lublin, does a great job in a very concise manner of educating Fast Company readers that overhead costs aren’t the best or only metric for evaluating nonprofit organizations.

Most donors understand that nonprofits don’t work in some alternate universe where there are no expenses involved to conduct the business of raising funds. Some, however, believe that the business we’re in should find a way to do what we do at no cost so that 100% of funds raised can benefit whatever our mission is. This simply isn’t possible.

I hear this often in the annual giving world. Annual giving is inherently more expensive than major gift fundraising. The cost to raise a dollar is simply higher when you’re dealing with mass mailings, telemarketing and other forms of fundraising that acquire first time donors, renew donors with smallish gifts and do all the work necessary to build a pipeline for major gifts in the future. While this makes sense, some are quick to ask why nonprofits should continue to invest funds in such an ‘inefficient’ part of the development program.

The best answer to this question is to look at each and every major gift donor your organization has and see where s/he started their philanthropic relationship. Usually it’s with a smaller gift, many years ago, that was appropriately recognized. Over time the relationship grew, the donor became more involved and interested in the work you’re doing. The gifts became a bit larger and eventually the organization is able to help that donor realize their philanthropic dreams by making a major gift. Everybody wins, and the investment made many years ago in a program that looked inefficient in the short-term suddenly looks like the best investment you ever made.

In the business world, they might call that a loss-leader. In ours, it’s just a strategic investment in the future. If you invest wisely, have a solid case for support and engage your donors appropriately, it’s one of the best investments you can make.

If you’re reading this, I’m probably not telling you anything you didn’t already know. But it’s nice to be reminded that the work we do is important and ultimately leads to the kind of transformational gifts that make our programs successful.

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2 Responses to “ROI in the Nonprofit World”

Anonymous July 10, 2009

Annual Funds never get the credit they deserve for maintaining so many donor relationships. Major gift officers come and go, but the annual appeal is always there. Good investment.

Anonymous July 17, 2009

This is a great topic! So much of what we do in annual giving is transactional, centered around a dwindling budget, and focus on a goal full of numbers that anyone with a report would’ve never set for us. Our success is rarely based on the new relationship with built with someone who was once a non-donor and the opportunity of deepening that relationship over time, the relationship we are rebuilding with a donor who had a long lapse in their giving, or the relationships we maintain with our constituents to keep them giving year after year. We simply move from project to project trying to get the next dollar and donor that will make us more successful than we were the previous year.