What Your Board Needs to Know About Individual Donations
Every nonprofit organization hopes someone will make a significant donation to rescue the nonprofit from their financial challenges. Are you waiting for Super Donor to save you? Unfortunately, Super Donor is not coming. Nor is he or she sending a check.
This article shares what every board member needs to know and do to obtain individual donations.
1. Why do people give money to nonprofit organizations?
Key reasons include a sense of community or duty and the opportunity to payback, change lives, and to help in time of need. Most donors also say that they give because they were asked.
2. What are some examples of how individual donations helped nonprofits?
- Tom and Dorothy Morris of Ft. Lauderdale, Florida left two million dollars to the University of Georgia’s College of Veterinary Medicine in a bequest.
- Eight-year-old Caelan McNamara raised $10,000 to help 97 children from around the world who were born with a cleft lip or palate receive corrective surgery.
- An anonymous donor gave the Twin Cities Food Bank a check for $40,000.
3. Is this a common source of nonprofit income?
Yes. Individual donations, depending on the reference, are the second or third largest source of all income. Regarding size, they rank after mission earned income and sometimes after government funds. Individual donations represent 75 percent of all donated revenue and over 20 percent of all nonprofit income.
Different nonprofits vary in their receipt of individual contributions. Likewise, efforts to obtain donations vary from passive to complex systems involving multiple staff members and consultants. For groups that receive large lump sums from other sources, i.e., the government contracts, starting an individual donations program creates significant challenges. Efforts begin with $10 and $20 gifts and initially cost more than they earn.
4. What forms do individual contributions take?
Many. Here are six forms:
Nominal Gifts- These are donations you receive from anyone, even if they lack passion for your cause. On Saturday morning, members of the baseball league solicit funds outside the supermarket. While you lack baseball passion, the kids are cute. You give five dollars.
Annual- Annual gifts reflect connections. Your nonprofit send a solicitation letter from everyone associated with the organization. You meet with donors with the potential for larger donations face-to-face. Annual appeals help nonprofits identify people who actually contribute dollars to your cause. The goal of annual appeal drives is often to identify new and upgrade existing donors, rather than money.
Special Events- Your organization holds an event, like a gala ball, intimate dinner, or educational workshop. You request an entry fee and additional donations during the event. You consider your special events successful if the organization makes 50 percent or more of the event’s cost. Events deepen relationships and connect people in your community with each other. When done well, they educate people about your cause and raise money.
The following three forms of individual donations involve greater effort, relationships, and rewards. They focus on donors who give consistently to the organization.
Major gifts– You request donations from individual donors with means, connection, and passion for specific efforts. Each organization determines its definition of an amount that equals a major gift. The process of identifying candidates, preparing to ask them, and asking them for gifts is deliberate and methodical.
Planned gifts– According to Wikipedia, planned gifts are “several specific gift types that can be funded with cash, equity, or property.” Planned gifts have tax and estate implications that require the help of the donor’s advisors. Donors who give planned gifts have means, connection, and passion.
Bequests– These gifts are the largest subset of planned gifts. They involve connection and passion — and to a lesser extent, means. These gifts literally represent money that donors cannot take with them. Bequests represent excellent opportunities for people concerned about having enough for their own needs and family obligations, but who want to support a nonprofit they love in a meaningful way. The average estate gift is $70,000.
5. What are the benefits of individual donations? Besides money, individual donations offer ways to meaningfully involve people. When gathered, donors create a community that supports, uplifts, and promotes your mission. From the nonprofit culture’s viewpoint, individual donations represent the purest form of income. Individual donations reflect the presence of people who love your mission enough to invest their personal income.
Finally, since all nonprofit income is founded on relationships, successful individual donations programs refect excellent people and communication skills. They reflect the nonprofits ability to see the benefits the organization provides from an outsider’s viewpoint.
6. What are the risks? Almost every nonprofit desires individual donations. Obtaining them, renewing them, and increasing their size requires disciplined work and frequent rejection. Since the best asks are face-to-face, the rejection may feel personal.Not surprisingly, most nonprofits express less interest in the rejections aspect of the process! Obtaining individual donations is part art, part science, and challenging.
Nonprofits that succeed with individual donations grow more and more open and outwardly focused. For those who have not succeeded, creating a culture of philanthropy often represents a large cultural shift. Nonprofits that succeed adroitly balance donor and organization needs. The recent National Public Radio scandal highlights the dangers of being “too eager” to obtain money. High-net-worth donors can demand or suggest actions that get their recipient nonprofits “off track.” The impact can be subtle or dramatic.
Most critically, long-term individual donations require that your organization be healthy and led by healthy, mature people. Fundraising is relationship-based. Donors seek attractive, self-assured, and inviting relationships. Poor relationships housekeeping will impede your success.
7. What is the general process of developing individual donations?
Individual giving involves two levels:
Level One- A numbers game. You create as large community around your cause as possible and encourage people to donate to it. Over time, you help them to renew and increase their donations.
Level Two- A strategy and execution exercise. You identify a subset of passionate, committed donors with means and focus development efforts on them. This level gets the right players on the bus, finds out what motivates them, designs requests around mutual goals, and asks these donors to make significant gifts.
8. Who makes a good prospect for large donations?
The three classic tests of donor readiness are ability, passion, and connection. Ability involves the financial means to make a gift. Passion is that they care about your cause. A connection is based on a relationship with your organization: they volunteer, use the service, or otherwise know about you. Of the three, you have the most control over connections. You can offer opportunities for people to increase their relationship with the organization.
Industry-wide, 90 percent of individual donations come from 10 percent of your donors. Most large donors make small first gifts to test the waters. For large donations, develop personal relationships with around 10 to 20 people from your donor pool. Listen to their needs and interests. Develop opportunities that match their interest and your nonprofit’s needs. Ideally, a team of two visitors, one of whom is a peer who has made a similar gift, requests a major gift in person.
This section discusses what board members can do to support individual donations.
9. What questions should we, as board members, ask about individual contributions? Inquire about your success. How many people do we have on our contact lists? How many donors do you have? What is the range of gifts? How do these numbers compare to industry averages? What plans exist to identify new donors, keep current donors, and upgrade them? How do we acknowledge and thank donors? What kind of gift do you need from us each year? How can I help you to meet potential donors? What training can you offer to help us be comfortable asking friends and acquaintances to be involved with this organization and even for money?
10. How can I help as a board member?
Individual donations begin with the people closest to the organization. The board, volunteers, staff, and customers make gifts first. Why? This group knows and loves the organization. It is closest to it. You believe the cause is worthwhile. Some organizations set a specific dollar amount for board donations. Others ask for a meaningful gift each board member determines individually.
Besides giving first, share your passions with your connections. Sharing can be as simple as sending an upcoming special events announcement to your email list with a personal note. You can call five people with personal invitations. For larger organizations, consider serving on committees that plan for and ask for gifts. Make calls to set appointments. Call to thank donors. In all cases, help the nonprofit to meet new people who are potential donors.
11. What if this is scary for me?
If you feel uncomfortable asking for a gift or sharing a list of friends, tell your staff. Insist that they help you to find the training you need to make this process something you want to do. Fundraising is a group effort. Insist your organization do individual donations well. Learn how they will treat any names you give them. When the preparations are adequate, brave the waters. Believe that when your friends and contacts know what you know, they will want to help.
Are You Sure Super Donor is Not Coming?
Don’t wait for Super Donor. Instead, invite a large community to help your nonprofit. From within them, identify those with means and commitment. Build connections. You might never know if Super Donor is within your reach. Be pleasantly surprised when Super Donor’s check arrives. Outsiders will call it luck. Know that the gift is the result of your careful work to invite individuals to share in the work your organization does to change lives.
This article is part of a series on nonprofit income sources in the free newsletter Added Value. Find back issues at https://www.kedconsult.com/newsletter-archive/
Need more help? Buy these audio downloads: Money-tastic #2: Nonprofit Income Opportunities and Money-tastic #3 Creative Revenue Streams for Your Nonprofit.