Within the above major categories, there are 6 main methods nonprofit organizations use to attain their fundraising goals. Below is a brief explanation of each and the associated pluses and minuses.
Solicitation is done either through face-to-face encounters, telephone, direct mail or of late, via social networking. Simply put, this is asking people for money. There are advantages with this method. Generally, no or very little cash outlay is required by the nonprofit. And a campaign for individual donations will broaden your organization’s donor base.
Once personal contacts are made, the possibility of these individuals giving again becomes great. In case of direct mail or social media, a large audience is reached. For face to face solicitations, gifts may be large and since it is in person, it becomes harder for the potential donor to say no.
Although direct solicitation may be an effective method, there are cons to using this method. A certain amount of market research and highly selective targeting of prospects must be done. This could be time consuming. Careful consideration of how your organization is presented to individuals should be made for them to make substantial donations. In face to face solicitations for example, a solicitor must be prepared to ask for money and be substantially prepared to explain the organization to the potential donor.
Further, the biggest disadvantage is that individual solicitation is an on-going effort. The organization receives money and spends it to keep operating, and also hopefully to reach some specific goals. And then does it again and again.
2. SPECIAL EVENTS. The possibilities with this type of fundraising are endless. This may include dinners, fairs, auctions, tournaments, races, balls, carnivals and marathons. Because events are generally perceived as fun, they attract a large number of people. It raises the organization’s visibility. It builds up the mailing list, as well.
On the other hand, a successful event requires a lot of time, and organizational and planning skills. And in spite of all the planning, an event may be ruined by inclement weather, or an invited celebrity being a no-show and many other details. And after all the effort that went into it, the money raised may not justify the amount of time and money spent organizing the event. Like individual solicitations, events are seen as a way of raising funds that are immediately needed and spent for ongoing operations and organization goals Consequently many organizations run the same event year-after-year.
3. CORPORATE COLLABORATION, also known as strategic philanthropy, corporate sponsorship or nonprofit-business partnership. Not to be confused with corporate philanthropy, corporate collaboration is an exchange - the organization offers something in return for what a company gives. For example, a company may provide products or services to an event. In return, the organization identifies them as a sponsor in publicity about the event.
This setup is obviously a win-win situation because both parties benefit. However, in order to enlist a company’s help, having the right contacts is important. Developing relations take time and effort and patience is needed to build alliances. And once again, solicitation must be done every year.
4. GRANTS. Grants can be obtained from foundations, corporations or government agencies. The pros to this method is it generates generous amounts of money. And it is more likely that once an organization obtains one grant, it can receive from others.
As for the cons, extensive research on the granting agency must be done before writing a grant. Competition is fierce and the success rate is low. Furthermore, most grants are short term and once it is used, you would have to start the process again.
5. PLANNED GIVING. This is also known as gift planning, life income giving or may be endowment building. A planned gift is a donation that is given now but is used at a later time. This includes bequests, pooled income funds and annuities. With this type of fundraising, organizations can receive extremely large gifts. Once a planned giving program is set up, it will bring in a constant source of funds. On the other hand, with this type of method, you would obviously have to wait several years before the funds can be used. Careful planning and foresight is needed to set it up properly.
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As compared to traditional fundraising methods described above wherein the money that comes in is used up, an endowment provides a stable dependable regular yearly source of income to use for operations, programs, facilities and even new offices. If the endowment fund is substantial, it will earn more for the organization yearly. This translates to less time and effort spent on annual fund raisers, less stress on the organization’s volunteers and most importantly, this demonstrates a charity’s commitment to the future and builds confidence in donors that their contributions are put to good use. For more information on Endowment Funds, click here to read What is an Endowment Fund.