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Even as we slowly begin to find our footing after the unfortunate state of economics
communities, and individuals, are looking to give back to those in need. Goodwill has never
been more present but it has come with a price, literally in this case. Donors want to know
non-profits are spending their gifts wisely; with most if not all of the money going toward
the cause itself.
The 80% rule has become a standard in the fund-raising industry. While there are
government grants and the like which can be applied for those infusions of funds are not
enough to keep a non-profit running. Ongoing donations are the life blood of charitable
organizations, the cash flow that keeps the lights on.
Some would have you believe the answer to that question doesn’t exist. In
particular, Mal Warwick is quoted as saying:
The statement itself does have merit, but can also be challenged. While no standard
may exist to determine the exact cost of raising a dollar there is enough historical data to
determine a spending threshold. That is to say, how much or little a non-profit is willing to
spend to maximize the cash-flow for the cause itself? Given the unique nature of non-
profits that exact figure can be somewhat elusive.
Typically, the overall cost to raise a dollar (CTRD) is 20 cents. For every dollar
raised 80 cents goes to the cause while the remaining 20 goes to the fund-raising
organization. For click2cause specifically that 20% goes to such things as H.S.T, credit card
processing fees, web development, security, and hosting etc. To put this into a somewhat
exaggerated real world perspective let’s take a look at Apple Inc.
In 2011 Apple’s net income was $211 billion. If they were functioning as a non-
profit it would mean $169 billion of their earnings would go to their charity of choice,
leaving “only” $42 billion to operate with. Okay, that’s still a pretty high number to get
one’s head around. Let’s make it a little easier and replace billions with hundreds. This
would mean that of the $211 earned only $42 would remain for operating costs. Not a lot of
money to run a business with. Again, this is a hyper-real example but helps illustrate just
how small the portion of donations is that goes to the organization itself.
In addition to the average CTRD value fundraising activities themselves can each
have a different ratio in regards to how much is earned for the charity and organization. The
Association of Fundraising Professionals breaks down activities as follows:
1) Direct Mail Acquisition: $1.25 to $1.50 per dollar raised, with 1% rate of
return
2) Direct Mail Renewal: $.25 per dollar raised with 50% rate of return or better
3) Special Events: Net return of $.50 per dollar raised
4) Corporations and Foundations: $.20 per dollar raised
5) Planned Giving: $.25 per dollar raised
6) Capital Campaigns: $.05 to $.10 per dollar raised
Of course, it will be the non-profit’s sense of efficiency that will be the most critical
variable when seeking to maximize the CTRD. Organizations such as click2cause.com,
with well thought out work-flows and delegation procedures, will find a greater return on
the dollar than others. Charities that capitalize on technology can also get more out of each
donation. While processing online payments may cost 3 - 7% on the dollar, the ease of
A Dollar Earned: Making
Cents of Donations and
Fundraising for Non-Profits
By: Bob Starr
completing such transactions for the donor helps to build a consistent model for continued
gift giving.
As one can see, the cost to raise a dollar can vary greatly. Moreover, it takes a
considerable strategy to align fundraising initiatives with organizational spending. When
properly structured, however, non-profits can find a successful balance between a scalable
organization and advocating a worthy cause to help those in need.
Further Reading