How to Think About the Cost Of Major Gift Fundraising–a six-part series

#5 – Why Spending More Money on Major Gifts Is Worth It

722 people gave $8.1 million in one year.  Those same people gave $3.6 million the following year.  And it wasn’t one big gift that went away!   So $4.5 million, from hundreds of donors,  just flew out the window!!

One of the reasons 55% of last year’s revenue evaporated at this non-profit was a lack of management and proper strategy.  (By the way, we find that most major gift files are losing value at a rate of 35-60% per year). But the other big reason was a reluctance to invest in the major gifts team.

I remember talking with the manager of this medium-sized non-profit, trying to convince him that it might be wise to spend more money.  He wouldn’t hear of it!  Sadly, the manager’s manager was so out of touch with the program that the organization continued to lose money year after year.

This is one of the most amazing dynamics I find in many non-profits today.  There is a source of revenue (major gifts), that gives a return of anywhere from 3:1 in the early years to 10:1 or more as a mature program, that is under financed and neglected while management scurries around trying to find more money.  It’s like a tragic comedy.  Sadly, this situation is played out in thousands of great causes every day.

Why does this happen?  Several reasons:

  1. There isn’t a culture or understanding of major gift 1:1 fundraising.  We all talk about the donor pyramid.  But we mostly love the bottom of the pyramid, where we acquire donors and cultivate them using direct marketing strategies and techniques, vs. the top where major gift activity happens.
  2. Most outside counsel (agencies) are direct marketing oriented.  And the agencies or consultants that provide major gift services are either capital campaign oriented or focused more on moves management and donor strategy rather than a fully integrated major gift plan that also involves donor file analysis, donor qualification, program packaging, offer development, MGO management and reporting.
  3. Major gifts, as a discipline, is rather young.
  4. Managers of major gift programs are too embarrassed to get help.  We see this over and over again.  The manager of the major gift program, whether it is the development director or  reporting into the development director, thinks that if they bring major gift counsel in it will expose their weakness and undermine their standing.  The opposite is actually true.  The professional inside manager knows how to use outside counsel.  Some of our best clients are superior major gift professionals.  They choose to use their talent in donor strategy and approaches to help their MGOs while we co-manage with them and they let us do the analysis and program packaging items.  It makes for a great team approach and a better result.

So, all of this nets down to people in a system who do not fully understand and value the contribution major gifts can make to the organization.  And so it remains resource starved even though it is generating the BEST return on investment of any other fundraising program in the organization.

If you find yourself in this situation, here is what I suggest you do, whether you are a one person major gift unit in a small non-profit or part of a larger team:

  • Make a list of the number of donors giving $2,500 cume per year for the last two calendar (donors think calendar vs. fiscal) years including YTD 2011 – so three periods.  If you are part of a major gift team in a medium to large non-profit, your cume number per year may be higher.
  • Divide that list by 450.  Why?  Because in our experience only 1 donor in 3, who meets the major donor criteria, will actually want to relate to you in a more personal way.  So, since you need a caseload of 150 qualified donors you will need 450 donors meeting  a cume giving criteria of $2,500 to qualify down to 150.  When you divide the list in point #1 above by 450, the resulting number is the number of MGOs your organization needs to serve those donors.

And, if each of those qualified donors gave $2,500, you would have, at a minimum, a caseload of $375,000 for each new MGO, which is not a bad place to start.  I think the average gift of such a caseload would be higher, which would result in caseload value higher than $375,000, not to mention what you could do with a couple of donors in that caseload who want to partner at a five or six figure level.

  • Using the rationale outlined in point #2 above, add MGOs if you have enough qualified donors they can relate to or, at least, a caseload pool of 450 per MGO.
  • Hire an assistant who is administratively excellent, research oriented and computer saavy.  This person will take a huge load off of you so you can spend more time with donors.  We recommend a full-time assistant for every two MGOs.  If you don’t have that kind of support, there is a solid economic case for you to add one.
  • Increase your operating budget to allow for more time and effort spent with (travel and meals) and on (resource) donors.

As you read this, you may be thinking “there is no way I will be able to add these things to my major gift effort!”  If you have qualified donors to relate to, and you don’t add capacity to relate to them, I guarantee you will leave way more money on the table than it costs to increase your internal capacity to deal with those additional donors.  Not investing in this situation is like taking $1,000 and burying it in your backyard when you could have invested it and it could have had a guaranteed return of $3,000 to $10,000!!

At the top of this post I told you about the non-profit that walked away from $4 million+ dollars.  I can just imagine the bureaucrats in the backyard burying the expense money they had saved, patting themselves on the back for a job well done, while the program people had their budgets slashed and, as a result, the organization served fewer people.

Crazy, isn’t it?  And stupid!

It doesn’t need to be this way.  We have good people to serve and good donors who want to help.  And there are a lot of good managers and leaders in our non-profits who, when they understand how the whole major gift thing works, will rise up and support the program as it should be supported.

That’s what gets Jeff and me up in the morning!

Richard

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About Jeff Schreifels and Richard Perry

Jeff Schreifels and Richard Perry have over 55 years of experience fundraising for non-profits. Richard Perry was co-owner of Domain Group until 2005. Jeff Schreifels was a Senior Strategist for Domain Group for 12 years. They came together a few years ago to start Veritus Group, a full-service major gift fundraising agency. Veritus Group has a unique, data-driven approach unlike any agency focused on major gifts. Jeff and Richard are passionate about their work, passionate about life and hopes this blog will provide you with insights and tangible benefits for you and your work. Thank you for reading!
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