Like all strategic planning, your fundraising plan can be guided by the question, “What will we say no to in order to protect our yeses?” When we talk about strategy in the context of fundraising, we are referring to sources of contributed revenue.
There are five broad strategies in fundraising and, depending on the organization, one or all five of these strategies can be chosen. Yet, we have found that organizations who double down on operationalizing just one to two fundraising strategies—before adding on others—are able to raise more money with those strategies. In other words, you can raise more money by doing less activity.
|Individual Giving Strategies||Major Gifts||Activating generosity through personal relationships. Typically gifts of $5,000 and above per year.|
|Annual Giving||Activating generosity through curated content. Typically gifts of less than $5,000 per year per person.|
|Events||Activating generosity through transformational experiences.|
|Institutional Giving Strategies||Grants||Activating institutional generosity through structured processes and technical writing.|
|Corporate Sponsorships||Activating generosity through meaningful value propositions.|
Why not diversify funding?
- Between earned income and contributed income, ESEs already experience funding diversity. As such, it is essential to be thoughtful about which form of contributed income will work best.
- By concentrating organizational resources on one to two strategies at a time, these strategies will be set up to produce scalable revenue.
- 90% of an organization’s development resources should be dedicated to fully operationalizing the priority strategies before adding further strategies.
- 10% of an organization’s development resources can be spent on opportunistic fundraising outside of priority strategies.
- You can diversify funding within your priority strategies. For example, a grant strategy can have a diverse portfolio of donors: federal, private, funding specific to mental health, funding specific to education, etc.
Selecting your priority strategies
Choosing priority fundraising strategies follows the same logic as selecting which form of transportation is best for your upcoming trip. The first decision to make is “where are we going?” The second decision is “how fast do we need to get there?” Therefore, fundraising strategies are chosen to match the growth trajectory of your organization.
We should not choose strategies beginning with the following factors:
- How well the organization is set up to do them
- Historic giving trends
- Existing talent
- Board member preferences
Instead, we should choose strategies by starting with the following factor:
- How quickly the organization’s revenue goal must increase in the next three years
In other words, we must first decide the organization’s three-year growth trajectory. If the growth is steep, we must select strategies that have a short return horizon. If the growth is slow and steady, we must select strategies that build steadily and consistently. In this case, we may have an opportunity to select a strategy that has a slower return horizon, but provides exponential growth over time. In short, we must know our three-year revenue goals.
Mission-driven revenue goals
Revenue Goal: The organization’s total income goal: earned income plus contributed income
Contributed Income Goal: Philanthropic giving that comes through the organization’s selected fundraising strategies
Earned Income: The revenue earned through the organization’s business enterprises
Most social enterprises set contributed income goals based on the difference between earned income and overall revenue goals. Revenue goals are often set in the following ways:
- Conservative Planning
Method: Set the same revenue goal as last year
In seasons of economic uncertainty, many organizations plan to maintain status quo. You might be thinking about the economy’s impact on your donors. You might be thinking about reducing expenses. You might have already cut expenses. You don’t want to set yourself up for failure. You’re playing it safe.
Maintaining the same revenue goal year over year assumes that the organization’s impact is also not set to grow. It assumes that the work the organization does for the sector is not essential, and thus should not expand. Nonprofits can thrive in an economic crisis if they have designed programming that meets an essential need. Donors respond to impact. Are you planning to achieve increasing breadth and depth of impact next year? Your revenue goals should reflect that.
- Siloed Budgeting
Method: Add up your line items
During budgeting season, many organizations ask department heads to add up what they expect to spend next year. Everyone sits down in front of their budgets and makes some adjustments. Maybe they’ll include a new staff person here and there, another professional development allowance, a few new laptops. These get tallied up and sent to you. The sum total of each department budget becomes your 202x revenue goal.
This method assumes that the line items in a program budget are the equivalent of the costs needed to achieve missional goals. This is true ONLY if your program budget has taken into account all costs associated with achieving missional goals.
- Steady Growth
Method: Add 20% growth year over year, or another set percentage
An easy planning tool is to set a pace for steady growth and simply plan for a 10-20% increase in your revenue goal each year. This is often done when the cost to achieve missional goals is not yet clear.
A percentage year-over-year increase does not easily correlate with the same increase in programmatic impact.
Though setting revenue goals with these three methods are common and may work for business management purposes, they are not effective for activating generosity. Revenue goals are animating to a donor. Telling a donor that you need to raise $1,000,000 in three years can be an exciting conversation. But if you put a period at the end of that statement, you lose what makes the goal compelling.
Instead, share the impact you plan to achieve in three years and the price tag for that impact. What’s really compelling to a donor is to say, when we raise $1,000,000, this impact will occur.
Therefore, we must connect our revenue goals to the cost of achieving impact. We call these mission-driven revenue goals. Mission-driven revenue goals ask the following questions:
- What are your missional goals? Missional goals are the 3-5 year aspirational outcomes you will achieve when you are wildly successful with your mission statement. Check out Seed’s micro-course on Crafting Missional Goals.
- What are the costs to achieve your missional goals? Calculating the cost to achieve your missional goals is not always the same as adding up the line items in your program budget, unless your programs are already designed to achieve your missional goals. When your goals are new, it’s likely that you’re missing key costs because your programs are not yet dialed in to achieve those goals.
- What are the administrative or indirect expenses associated with those missional goals? That cost to achieve missional goals plus administrative expenses becomes the pre-fundraising revenue goal.
Brief side note on admin expenses:
The social sector is shifting away from the belief that overhead expenses are a necessary evil. In fact, donors are beginning to value organizations that make strong investments in infrastructure. The pay-what-it-takes model for grantmaking is taking root across leading foundations. This model understands that indirect costs (the cost of doing business) are just as valuable as direct program costs and should be funded flexibly. The model does away with capping administrative costs at 15% or a similar fraction. In short, Seed considers your administrative expenses as intrinsically valuable.
- Add to that the cost to fundraise. A healthy investment in fundraising will vary between $0.20- $0.30 to raise $1. During times of investment, that cost can increase to $0.50.
- Add to that the costs to run your enterprises.
These five factors will result in an organizational revenue goal that is activating to donors and allows you to achieve transformational impact within your program.
Evaluating the strategies
Now that you have the revenue goals, you can return to the process of selecting fundraising strategies capable of achieving those goals on time. We have seen each of these strategies work well for ESEs. Workforce development is a highly fundable mission across strategies. Thus, it will be important to consider the following factors as it relates to your unique context:
Sustainability: How well can the strategy withstand volatility?
Return on Investment (ROI): How well does the strategy pay in relationship to time and money spent?
Return Horizon: How quickly does the money come in?
Scalability: How easy is it to build exponential revenue growth over time?
Needed Infrastructure: How complex is the operation of this strategy?
|Sustainability||Return on Investment (ROI)||Return Horizon|
(5 stars is most preferred)
In addition to the above factors, we have outlined features that are unique to each strategy as you consider which to prioritize first.
When to consider:
- There is evidence of current donors with untapped major gift capacity and propensity
- You have access to significant connectors
- Specific program goals inspire transformational gifts
- You are prepared to clearly demonstrate impact
- You are prepared for a 6-8 month investment cycle
- At least 10 hours/week to dedicate to this strategy
- A system to manage donor portfolio (i.e., a full time officer holds +/- 100 donors on portfolio at a time)
- A travel budget (if national organization)
- Staffing: Major Gift Officer and Portfolio Specialist
Deep Dive: Major Gift Overview
When to consider:
- You have a high tolerance for a long runway (e.g., you will not receive a return on investment for 18 months)
- You have the ability to make an upfront investment
- You’re prepared to apply direct response science to the fundraising operation
- You have a competency and proclivity to storytelling through words and imagery
- Staff with a test-and-learn propensity
- Ability to write, manage a communications calendar, analyze and report on tactical performance, etc.
- A robust CRM system to support gift acknowledgement and receipting
- Strong communication and online giving platforms
- Staffing: Annual Giving Manager, Database/Reporting Manager, Donor Relations Specialist, Communications Specialist
Deep Dive: Annual Giving Overview
When to consider:
- Your programming benefits from telling a story in a specific time and place
- You have the proclivity for designing and producing transformational experiences
- The life stage of the organization matches the lift necessary to host a successful event (e.g., cost to raise $1 is less than $0.35 by year 3)
- You have the reach to efficiently exceed participation goals
- A CRM, gift acknowledgement, and receipting process
- Strong communications platforms
- Staffing: Events Manager, Events Specialist (logistics), and a Communications Specialist
Deep Dive: Events Overview
When to consider:
- You have a strong outcome-driven logic model fueled by clear program design
- You have a program model that appeals to multiple funding priorities (i.e., workforce development funding and mental health funding might apply to your program)
- You have strong evaluation and reporting infrastructure
- An investment in evaluation
- A portfolio management process
- A grant language sourcebook
- A process for field-generated reporting
- Staffing: Relationship Manager, Grant Writer/Report Writer
Deep Dive: Grants Overview
When to consider:
- Your programming naturally produces one of two opportunities: expanding public reach and/or mass volunteerism
- You’re willing to invest in the development of sponsorable assets
- Understand and accept the liabilities of corporate alignment
- Marketing and collateral assets
- A system to manage sponsorship portfolio
- A travel budget (national organizations)
- Staffing: staff to fulfill sponsorship benefits (Fulfillment Specialist), manage volunteers (Volunteer Coordinator), and develop sponsorships (Sponsorship Officer)
Deep Dive: Corporate Sponsorship Overview
Making a decision
In short, 90% of your time and fundraising budget should be dedicated to the 1-2 strategies you are working to fully operationalize. After those strategies have reached the status of a “well-oiled machine,” your organization is ready to add another strategy to your portfolio.
In order to determine which strategies should be prioritized:
- Look at your organization’s revenue goals. Evaluate the growth trajectory of the next three years.
- Evaluate each strategy using the factors of Sustainability, Return on Investment (ROI), Return Horizon, Scalability, and Needed Infrastructure.
- Evaluate each strategy using Seed’s scoring rubric in order to have a quantitative comparison.
Additional Resources: Do you want to spend more time on this?
2 min: Review a case study from a REDF-supported ESE that went through the process of evaluating their fundraising strategies.
3 min: Review an overview document of a strategy you are curious about.
6 min: Read Seed’s blog post on Mission-Driven Revenue Goals.
20 min: Take Seed’s online microcourse on Missional Goals.
Seed is a community of professional fundraisers and nonprofit leaders who strengthen and scale culture-building institutions in the social sector. Seed’s consulting team has supported REDF’s portfolio since 2019.