Capitalize Your Development Operation!

by Robert Osborne

Every organization wants more money for its programs but I am constantly surprised at how few organizations are actually willing to spend money to make money. I know of organizations that have cut back their development staff even as they have raised their fundraising goals. I know of organizations that refuse to do stewardship because they think it is too expensive. And I know of “national” organizations that wish to fundraise across the United States but have no travel budget.

The problem becomes even larger when we talk about capital campaigns. Organizations that wish to raise 10x or more of their annual operating budget and tens of millions of dollars often balk at spending even a $100K to do so!

Your development office is a “profit center”, another way of saying that your development office makes you money. But only if it is properly capitalized. While different types of fundraising have different costs associated with them, a good rule of thumb is anticipating spending somewhere between $.15-$.20 for every dollar you want to raise. Events have the highest costs associated with them with a cost of roughly $.30 on the dollar and major gifts have the least with a cost of roughly $.12 on the dollar. But there is no such thing as free fundraising.

Every organization should ask itself what it needs to be successful to meet its fundraising goals. Do you have enough personnel, not just “front line” fundraisers but also administrative support? Do you have the proper technology to operate efficiently and effectively? Do you have the marketing pieces you need including video? Do you have a budget for any necessary travel? Have you built in contingency?

My suspicion is that organization try to do fundraising on the cheap because they do not have the cash on hand when they begin their fundraising. They realize that they are undercapitalizing the effort but are unsure what to do. Ideally, our supporters would help us in this area as Dan Pallotta discuss in this post in the Harvard Business Review and truly leverage their investment, but lamentably capacity building tends to be way down on investors lists of things to fund.

Sadly, there are no short cuts. An undercapitalized effort may even cost you more than not doing it at all. If you don’t have the cash on hand to properly capitalizing a fundraising effort you need to make raising the necessary capital part of your plan. This may take longer but it will be worth it. To not do so is to spend money on what is likely to be an unsuccessful effort. But the right investment can go a long way.

You can follow me on twitter:  @bobosborne17