3 Fundraising Mistakes That Can Cost You Millions
Today’shashtag#FundraisingFriday is a guest post fromAndrew Olsen, CFRE.
We all make mistakes. That’s how humans learn and grow. But some mistakes make a bigger negative impact on our work than others. That’s why I wrote the book, 101 Biggest Mistakes Nonprofits Make And How You Can Avoid Them.
Today, I’d like to share three significant mistakes that cost nonprofits millions each year with insights on how to avoid these costly mistakes in your own work!
Mistake#1: Not investing in hiring and retaining great talent
Leaders are under immense pressure to tighten budgets. It might be tempting to focus on how you can save money in your recruitment efforts and “get the best possible deal” when hiring someone for a key position. But this can do more harm in the long run than you think. Especially if you’re hiring a fundraiser.
Paying a market wage is table stakes these days. If your people are under-compensated, no amount of passion for your mission will make that ok. You need to pay people what they’re worth.
But compensation isn’t the only issue here. The other is creating an environment where people can do their best work and feel valued. The job of a leader is to create a culture where people can thrive, where a multitude of ideas are welcomed, and where each person feels valued for what they uniquely bring to the organization.
Focus on these areas and it will help you keep more of your people and develop them into the leaders your organization needs for the future.
Mistake#2: Not prioritizing relationship fundraising
Relationships are messy, complicated, and take a long time to develop. It’s so much easier to launch a new social media campaign, send out one more email appeal, add another direct mail campaign, or host another event. Those transactional tactics are predictable, and you can pretty much “know” what you’ll get out of each one. The same is rarely true for relationship fundraising, at least at the start.
However, developing long-term, trust-based relationships with donors and community partners helps you create funding streams that can completely transform your organization. These kinds of relationships take longer to develop, require more emotional energy, and don’t show results (typically) as fast as other fundraising tactics. But, if you focus on the right things (trust, transparency, shared mission and vision for the world), relationship-based fundraising can help you achieve significantly more impact than any transactional fundraising effort ever will.
Mistake#3: Focusing on return on investment instead of long-term net revenue
It’s tempting to focus on return on investment. You want to see the immediate impact of every dollar you spend be maximized. But there’s a problem with this thinking. Often, growth over time requires investing more and generating lower returns in the short-term to help create the scale necessary for transformational long-term growth.
Here’s an example:
Let’s say your board or CEO sets a goal of achieving a 4:1 return on investment for every dollar spent in your fundraising program. Any fundraising tactic that produces less than 4:1 is sidelined because it doesn’t meet your efficiency target. This causes you to focus on just a few tactics that help you raise $1 million each year for four years. At 4:1 ROI, your net income on this is $750,000/year, or $3 million in cumulative net income.
However, over that same time period, had you allowed for a 2:1 ROI instead of a 4:1 ROI, you could have used other strategies and tactics that are less efficient, but that raise more total revenue. Those tactics might have helped you raise $2.5 million per year for four years. At an ROI of 2:1, your cumulative net income on this program would be $5 million.
Over the same period, you’d net out with an additional $2 million to spend on programs if you simply adjust your efficiency metric and focus instead on maximizing long-term net income.
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
ANDREW OLSEN, CFRE
Andrew’s personal mission is to help leaders increase mission impact by developing healthy cultures that accelerate revenue growth. Throughout his career, he is proud to have helped worthy causes raise over half a billion dollars to change the world. He is a business leader with a passion to serve others, and to enable them to solve our world’s most pressing problems. From serving on numerous nonprofit boards, advising a start-up at the intersection of tech and philanthropy, to running a major division in a Fortune 500 advertising holding company and now leading a service firm, he is convinced that what matters more than anything is the quality and diversity of talent around the table. Talent, not strategy, sets the trajectory for your growth. He is a two-time best-selling author (check out his books atandrewolsen.net), and the host of a top-ranked nonprofit leadershippodcast.
Download his book, 101 Biggest Mistakes Nonprofits Make And How You Can Avoid Them
