Even though fundraising consultants are often a key part of your operations, it might come as a surprise that many nonprofit professionals are in the dark about the costs associated with hiring a fundraising consultant , what these fees pay for, and other financial details. Before your team starts planning your next big fundraising campaign or overhauling your strategy, take some time to brush up on how much hiring a fundraising consultant will cost. Is your nonprofit ready to learn the ins and outs of hiring a fundraising consultant?
When first searching for information on fundraising consultant fees, the question many individuals wonder about is exactly how fundraising consultants are compensated.
The answer is a little complicated. However, there are a core few methods of compensation that most fundraising consultants use. These compensation methods are typically your best best when it comes to increasing your fundraising ROI. In other instances, firms charge a percentage of the money you raise over the course of the campaign as their payment. Even worse, partnerships with these kinds of firms often end up costing more in the long run and eat into your fundraising progress.
Depending on the kind of compensation agreement your nonprofit and fundraising consultant can come to, you can always expect to sign a contract before your engagement begins.
Size matters as well. In larger operations there is also an economy of scale that can be achieved. It is important to bear in mind the words of Mal Warwick who has written extensively on fundraising. There is NO such standard, and anyone who tells you there is one should survey the real world of fundraising in all its diversity.
One organization might be embarrassed to spend more than a dime to raise a dollar, while another might be fortunate to squeak by with 40 or 50 cents on a dollar -- and both might be ethically run, well managed organizations. Giving a commission to only development staff diminishes these contributions.
Commission-based pay is out of line with compensation practices for other staff and consultants within the non-profit. Additionally, commission-based compensation can be seen as going against the implicit understanding that successful fundraising efforts are reliant on how successfully the organization carries out its mission, and therefore the entire staff.
Thus, this practice can create resentment and can lead to a failure by other staff to support fundraising efforts. If the methodology for calculating the value of in-kind donations is not clearly set and written down in advance, by wholesale value, retail value, or another method , this too can create ill will and bitterness. A common justification for commission-based pay is that it is commonly and successfully used in for-profit company sales position.
However, incentive-driven efforts for the sale of commercial products involves a selling and buying environment which customers understand and expect. The motivating factor in commercial behavior is primarily personal gain. In raising funds, non-profits are not selling a market good to prospective donors, they are presenting them with an opportunity to contribute to something in which they believe and which they want to support.
Staff working on commission are, to some extent, motivated by private benefit at a level greater than non-commission employees, which creates an inherent conflict of interest with the charity employing them, which would be founded without intent of profit or private benefit. Ask someone if he or she expects salespeople to get a percentage of the price paid for a purchase and ask a donor if he or she expects the person asking for a charitable gift to get a percentage of that gift.
The answers will be different. According to Tony Poderis, The Argument Against Paying Development Professionals Based on Amount of Funds Raised , too often, especially in smaller organizations, nonprofits charge development officers with the responsibility of raising their own salaries, which belittles them and damages the organization. Organizations should budget for development staff salaries and expenses, just like rent, utilities, supplies, and programming salaries.
After that comes work on capital and endowment campaigns. However, if development staff are charged with raising their own salary, they cannot maintain that order.
That automatically prioritizes funding their salaries. Pedaris gives several more arguments against the requirement to have development staff raise their own salary. When they are worried about the short-term goal of covering their paycheck, they may be unable to concentrate on the long-term goals of building a successful pool of volunteer solicitors. If they are unsuccessful in raising their salaries, will they get paid and how will the organization cover this shortfall? Can an organization attract the best development professionals if they provide them with an insecure environment?
These policies must be approved by its governing body and may not be limited to fundraising activities. The amount of the bonus cannot, in any way, be determined using a percentage of contributions received. In The Nonprofit Consultant Blog , author Ken Goldstein examines situations when a contingency fee for grant writing or other fundraising may be appropriate.
While he believes that a set fee for services is the proper way to go in most situations, he explores the situation of small or startup nonprofits that require professional services, but cannot afford a set rate for the services until the funds are raised. He argues that the professional standards set forth by organizations such as the AFT, while serving a good purpose, could serve as a roadblock for grassroots organizations struggling to serve their mission. This guide was researched and written by Elana Richman and edited by Andrew Loza.
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