Are you a fundraiser or an event planner?
Do you know the costs and benefits of your fundraising events?
Let me get to the point. If you are a fundraiser and spending significant time deciding on such things as the venue location, the font of the invitations, or the color of the centerpiece, you are losing money.
Have you considered your opportunity costs when assessing the cost and benefits of your fundraising events?
I’m not talking about recognition, gratitude, or other types of events.
We’re talking about fundraising events – the costs and benefits of your fundraising events.
As a fundraiser, how you spend your time matters.
Fundraising events may not be providing your organization with the financial benefits you think.
Take a close look at the cost vs. benefit of your fundraising events.
I want us to get granular here and look at some numbers.
Using an example, let’s say you report to the board that your team raised $100,000 from your recent signature fundraising event. Sounds great, right? Until you consider the costs associated with the event, that number may not be so rosy. You want to look at both direct and indirect costs. That means reporting the net revenue. Net revenue is when you subtract the direct and indirect costs from the gross revenue.
Event Gross Revenue –Direct and Indirect Event Fundraising Costs = Event Net Revenue
The $100,000 fundraising event is about to look drastically different.
Here’s a conservative and straightforward example of looking at direct and staff labor costs:
Gross Revenue (ticket sales, sponsorships, and other cash donations) $100,000
Direct Costs* (catering, venue, entertainment, decorations, printing, valet) $20,000
Staff Labor Costs* (CEO, development director, event planner, assistant) $40,000
Net Revenue from Event (excluding indirect costs) $40,000
*There are other costs you must consider not included here.
Nonprofit Staff Labor Cost of Fundraising Events
One of your largest expenses of fundraising events (often overlooked) is staff time. This includes the meetings, phone calls, and time spent planning before and follow up and debriefing after the event. This example is a scenario of the time spent by the executive director, director of development/donor relations, and possibly others, depending on your staff size. When you calculate the hourly cost (pay rate and benefits) of staff multiplied by the number of hours worked, you will be shocked at the cost in staff time alone.
Below is my illustration of staff labor cost from the example above using a conservative percent of time allocated to an event.
$125,000 x 10% (200 hours) (Executive Director) $12,500
$75,000 x 15% (300 hours) (Director of Development) $11,250
$50,000 x 33% (Event Coordinator/Assistant) $16,500
Cost in Staff Time for Event $40,000 (rounded)
Now, add the direct out of pocket costs such as catering, venue, entertainment, decorations, printing, and valet ($20,000) to your direct labor cost ($40,000) of staff time, the total cost easily hits $60,000!
Following the event, ask your accountant to provide the actual costs to host your event. There are other costs, both direct and indirect costs not included in this simple example.
Compare Net Revenue of Fundraising Events to Major Gifts
What if you created a top 100 list of major donor prospects (individuals, corporations, and foundations).
You, the development director, meet with an average of two donors a week for one hour each week for 50 weeks (one year). That’s 100 hours of your time. In this process, you are cultivating and eventually seeking for their support. That is to say, there are strategy meetings, preparations, phone calls, and travel time for each visit. Many on your list are already engaged. However, others are not. You may need a second visit to cultivate some of your prospects.
Therefore, let’s estimate another 100 hours for preparations and second visits. That is 200 hours, not 300 hours as noted in the event fundraising example. Furthermore, let’s suppose you succeed in securing gifts from about 25% from your list. In about 1/3 less time, you could have secured more than $100,000 in one year. That’s an average of about $4,000 per donor.
Sample Major Gift Distribution
I project your gift levels might look like this:
Prospects Donors Gift Amount Total at Each Level
4 1 $20,000 $20,000
11 3 $10,000 $30,000
15 4 $5,000 $20,000
30 8 $2,500 $20,000
40 10 $1,000 $10,000
100 26 $100,000
You should have three or four prospective donors for each gift you need. For example, if you need a top gift of $20,000, identify at least four prospective donors who could contribute at this level. The three who say no may drop to the level below.
The cost to raise $100,000 in staff time alone is $7,500 from just the director of development – not $40,000 for the event in staff time!
Opportunity Costs of Your Fundraising Events
Additionally, when you compare this to the untold hours spent of all staff, board members, and other volunteers planning and working an event, you must consider the opportunity cost.
Opportunity cost is the loss of potential funding when the decision to focus on a less profitable alternative is chosen. Your opportunity costs are a huge cost not calculated in event costs.
The enormous amount of time spent on events could be directed to securing large gifts from a greater number of major donors.
Above all, the funds secured from your donors go directly to your program and services, not to the cost of the event.
Do you see where I am going with this?
My point – you must know your costs in event fundraising – recognize your net revenue.
You may have a very profitable signature event! I hope you do! I love a good, creative, engaging fundraising event.
Ideally, you are getting the right people to your event, connecting with your donors at the event, and following up with prospective major donors in attendance to secure major gifts. This is all critical to your fundraising success.
Assess all of your revenue-generating events. Go deep in your analysis. Then decide if the fundraising event is bringing the value you expect.
Don’t focus on fundraising events year after year just because you have always done it. Certainly, calculate your net revenue from your events. If you do this, you will see more clearly where to spend your time.
Focus your efforts and resources in areas that bring higher net revenue. Your analysis will be transformative for your organization. Most importantly, think of the increased impact additional revenue will have on your programs and services.
Question: Are you aware of your opportunity costs of your fundraising events and where to focus your time?
Nancy Rieves, Ed.D. is a fundraising coach. She provides overwhelmed nonprofit leaders of small organizations with a roadmap to maximize and sustain major gift fundraising. She prepares leaders to be confident and successful in raising money. Reach her at [email protected].
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