Nonprofit organizations can be philanthropic, religious, educational, artistic, or scientific in nature. Some churches and universities qualify as nonprofit organizations as they don’t keep a profit — any money received is spent on its cause or on maintaining the organization itself.
Fundraising is often the primary means of revenue for these organizations. That’s one reason why nonprofits and charitable organizations dedicate so many resources to it.
The other reason is to meet the requirements of the public support test, among other nonprofit fundraising rules.
To qualify as a 501(c)(3) tax-exempt organization (meaning that donations are tax-deductible with a donation receipt), a nonprofit organization has to receive a “substantial portion of its income” from the public … hence the public support test. Non-exempt organizations can still raise money, but their donors won’t be able to write off their donations as a tax deduction.
Nonprofit fundraising is heavily regulated by state law. This holds organizations accountable for how they approach and treat donors, and it ensures donors are giving money to the proper parties.
Before soliciting any donations, organizations must register with the state government in whichever state they’re operating. If the organization goes to another state to fundraise, they’ve got to register there, too. Also, if an organization hires a fundraising consultant or grant writer, he or she must also register with the state. (TL;DR: Fundraising requires lots of registration.)
Cause-related marketing, also known as commercial co-ventures, are also regulated by law. Commercial co-ventures exist when a nonprofit organization makes an arrangement with a business to receive a percentage of sales. This also refers to when two charitable nonprofits that agree to sell something together and jointly benefit from profits. We talk more about these below.
Overall, all nonprofit organizations should follow ethical fundraising practices. The IRS doesn’t enforce specific structural policies, but it highly encourages certain management and operational practices so organizations can better “obey the tax laws, safeguard charitable assets, and serve charitable interests”.
Note: This legal information is not the same as legal advice, where an attorney applies the law to your specific circumstances, so we insist that you consult an attorney if you’d like advice on your interpretation of this information or its accuracy. In a nutshell, you may not rely on this as legal advice, or as a recommendation of any particular legal understanding.
Understanding the legalities of nonprofit fundraising can help you navigate the wide variety of fundraising methods — which ones you can and can’t do, and which ones are best for your charitable organization and donors.
There are so many ways to raise money for a nonprofit organization. Some equip individuals to donate whereas others are designed for businesses and corporations.
Lots of charitable organizations have had success using a multi-channel fundraising approach. When you diversify your fundraising methods, donors have more ways to contribute. Also, donors might be motivated by one method but submit their donation via another method (such as seeing a direct mail piece but donating via text).
Before you implement any of these ideas, don’t forget to review the fundraising guidelines from the IRS.
Individuals give the most money to charitable organizations. In 2017 alone, individuals gave $286.65 billion, accounting for 70% of all giving to nonprofits.
Direct mail is a tried-and-true fundraising tactic. It’s cheap, quick, and can be repeated time and time again. The key? Writing a great fundraising letter. In today’s world, direct mail should only be one of many fundraising tactics you use. Don’t forget to provide a way to donate online, too.
Online donations refer to any donations made online — through your website, social media, or on a crowdfunding site, for example.
Online giving is pretty straightforward. It also serves as the primary donation method for most other fundraising tactics: last year, over 30% of online giving was motivated by email, and 25% was motivated by direct mail. Even if your donors don’t discover your fundraiser online, they’ll likely check out and donate via your website when they’ve been prompted elsewhere to give.
Social media has become a booming fundraising tactic. Facebook allows individuals to run fundraisers on their news feed and for their birthdays. The platform has also released a “Donate Now” button for organization’s Pages. At the very least, Facebook and other social media serve as a very effective means of marketing your nonprofit and its purpose.
People are rarely without their phones, and charitable organizations know it. Nowadays there are multiple ways to donate using your mobile device. Some charities have apps through which you can give.
Other apps, like Charity Miles, Feedie, and Walk for a Dog allow people to give back while doing everyday activities like running, walking their dog, or posting their food on social media. Companies can sign up to sponsor nonprofits through these apps.
Let’s not forget about texting, the most popular way to give using your smartphone. Last year, almost 50% of donations came from a text link. You can send out links via text or encourage your donors to give through a text message.
Events are probably the most common means of nonprofit fundraising. These types of events include a 5K runs, golf outings, silent auctions, charity dinners, craft sales, and talent shows.
Company and Corporation Fundraising
Nonprofit fundraising isn’t reserved for individuals. About $5 billion dollars are raised through workplace giving annually. There are many ways businesses can easily give back to organizations — and encourage their employees to do the same.
The process of matching gifts is when a company matches employee donations. 90% of companies offer some kind of matching gift program. These programs help companies give back and help donors give twice as much. Tools like Double the Donation make these programs easy to market and implement.
Volunteer and corporate grants
Companies give volunteer grants when their employees have volunteered a certain amount of hours. This encourages employees to donate their time and holds businesses accountable for charitable giving. Volunteering can serve as a great team or company outing, too.
Corporate grants are sums of money that companies and corporations give to nonprofit organizations. Companies can either give these grants directly to an organization or choose from a pool of grant applicants. Nonprofits should look out for grant opportunities and ways to apply for corporate funding.
In-kind donations describe non-monetary items given to nonprofits from companies and businesses. They usually include food, drinks, or supplies for an event, free professional services like accounting or legal services, or equipment for a construction project. In-kind donations are typically accepted from businesses with which a nonprofit already has a relationship.
Commercial co-ventures, or cause-related marketing, is when a nonprofit organization partners with a business to raise money. When restaurants donate a portion of proceeds for an evening or a retail store gives a percentage of sales — that’s a commercial co-venture.
Creating a nonprofit fundraising plan or strategy for your next campaign will help you focus your efforts and guide your day-to-day fundraising efforts when things get tough. It’ll also ensure your fundraising team is aligned on certain tactics or events that may be part of your strategy.
Walk through the steps below to start piecing together your nonprofit fundraising strategy.
Set Your Fundraising Goals, Mission and Story
Start with the end in mind. What’s your fundraising campaign goal? Better yet, what’s your overall goal for this year? For the next three years?
This number should be rooted in the needs of your organization. To figure out those needs, return to your mission statement. If your fundraising goal answers the question of “How much money do you need?”, your mission answers “What do you need the money for?”
Defining your mission statement will guide your fundraising “asks”. What do you plan to do with the money from your fundraiser? How will it contribute to your organization’s mission and purpose? Donors will ask these questions, so outline the answers now.
A recent study found that transparency among charities could increase donations by 50%. Also, two-thirds of donors say that understanding the impact of their donation would encourage them to give more. If you’re open about how you spend your funds, people may give more to your cause.
Lastly, don’t be afraid to tell your organization’s story, as well as the stories of those whom you help. A 2010 study found that “charitable choices are largely driven by the donor's own inclinations and preferences, a desire to help people they feel some affinity with, and a partiality for certain causes as a result of personal experiences.” A donor’s similarity to your cause or people you help can also motivate them to give.
Also, 62% of donors research charities before they give. Be sure to publish your story on your website for donors to read and connect with.
Identify Your Fundraising Team or Specialist
Fundraising campaigns involve a lot of moving parts. Even if your entire organization will be involved in the campaign, it’s best to appoint an individual or small team to manage the fundraising efforts.
These folks will be in charge of tasks like:
- promoting the fundraiser
- organizing fundraising-specific events
- training and leading any volunteers
- managing and analyzing the funds received
- measuring the fundraiser’s performance and looking for ways to improve
Some nonprofit organizations hire a fundraiser specialist to help with these tasks, too.
Build Your Prospect List
Who are you targeting for your fundraiser? What communities, companies, organizations, neighborhoods, and groups of people will you approach for donations? Can your volunteers, board members, and beneficiaries of your organization help you compile a list of potential donors?
This list will guide your campaign promotion. Whether you decide to fundraise via direct mail, social media, crowdfunding, events, sponsorships, in-kind donations or all of the above, having a prospect list will help you know exactly who to target.
Create a Fundraising Campaign Plan
This is your most actionable step and will define precisely how you’ll raise money. First, define which tactics you’ll use for your fundraising. (We cover these in the previous section.) Remember, providing a variety of ways to donate will likely increase the number of donations you receive.
Next, decide how you’ll promote your fundraising campaign as a whole. How will you market your organization and it’s drive to raise money? How will people hear about your events, sponsorships, commercial co-ventures, and more?
Note: How you receive your funds (fundraising tactics) and how you promote your fundraiser (fundraising marketing) are two separate things. This step of your nonprofit fundraising strategy helps you define both.
Lastly, consider how to establish recurring donations so that your organization doesn’t have to fundraise so actively and so often. Almost 50% of donors are enrolled in a monthly giving program, like this one for Charity: Water. Providing a recurring donation option can actually help you raise more money — the average monthly online donation is $52 ($624 per year) compared to the average one-time gift of $128.
Regardless of how you choose to raise money for your nonprofit, always remember to say thank you. Sending a thank-you note and donation receipt is good practice per the IRS, but it’s also beneficial to build relationships with your donors and supporters.
Donor loyalty is just as important as customer loyalty. Fostering relationships by maintaining transparency can alleviate the pressures of non-stop fundraising. Put your donors first (alongside the people helped by your organization), and your nonprofit will see long-term success.
Over to You
Nonprofit fundraising is critical for charitable organizations. By researching tactics and building a nonprofit fundraising strategy, organizations can set themselves up for long-term fundraising success — and impact.
Originally published May 23, 2016 8:30:00 AM, updated December 17 2018