Types of Fundraising for Nonprofits
Believe it or not, there are lots of ways to raise money for your nonprofit organization. Unfortunately, because starting a nonprofit doesn’t come with a handbook on how to do … literally anything … most of us spend days, months, even years learning about fundraising through trial and error.
We pick up little ideas here and there from social media and what we see other nonprofits around us doing. But imagine how strategic you could be if someone taught you about all the different types of fundraising that exist. That’s exactly what I’m doing with this blog!
Read on to learn about the most common types of fundraising.
Donations
This is probably the most common form of nonprofit fundraising. Individual donations to a charitable entity are tax deductible for the donor.
Charitable contributions can come in the form of cash, check, or other monetary gift. Think bank transfers, Venmo for nonprofits, Paypal gifts, etc. The IRS requires tax exempt organizations to provide a donor receipt to individuals who contributed over $60 in a calendar year (Jan. 1 - Dec. 31). Most of these receipts are dispersed in January of the following year. To learn more about donor receipts check out my blog, “Everything You Need to Know About Nonprofit Taxes.”
Recurring Donations
One way to build a more stable stream of donations is to setup a monthly donor program. This program encourages donors to commit to a specific amount each month. And with many donor management systems, donors can setup automatic withdrawals for their monthly charitable gift.
To be successful with a recurring donor program, it’s important to clearly communicate what their monthly gifts will support.
See below for an example. Maestro Cares NFP clearly outlines what monthly contributions are allocated for.
Donor Matching
Donor matching is when an entity - usually an individual, corporation, or a foundation - agrees to match all individual donations up to a certain amount.
For example, if your organization needs $15k to launch Phase 1 of a new project, a good strategy might be to look for an entity that will commit to matching donations up to $5k. Then, launch an online giving campaign with the goal of raising the first $5k required to receive the match donation.
Individuals will likely be more motivated to give because a matching donation means their gifts go twice as far. In this instance, if you can raise $5k through individual donations, then the additional $5k match comes through, you are 2/3 of the way there to funding Phase 1 of your project.
The final $5k needed can be raised through a variety of ways. And it’s important to communicate to possible funders that you already raised $10k towards the project. Knowing that other individuals are supporting your work will put a potential donor at ease. And it gives you more credibility as a nonprofit professional when you have an established level of support for your project.
See below for an example of a donor matching campaign.
Major Gifts
A major gift is a donation made by an individual (or sometimes a for profit entity) that is equal to or greater than 1% of your operating budget.
If it costs your organization around $200,000 to operate in a single year, then gifts equal to or greater than $2,000 may be considered “major gifts.”
Depending on how many major gifts come through on an annual basis, it may be nice to recognize anyone who gives more than ~$500 or more than ~$1,000.
If you want to be able to rely on major gifts as an income stream for your organization, then it’s important to follow up with the donors through a personal thank you note, phone call, or email. Everyone appreciates when their generosity is recognized, even if it takes place one-on-one and not publicly.
Corporate Giving
At the end of the year, many companies will offer to match donations made by their employees to charitable organizations. This is one reason that end of year giving is so popular. Because again, just like with donor matching, gifts go farther and multiply.
Sponsorships
A sponsorships is a donation designated to a specific program or event. It is normal that in exchange for sponsorships, companies receive social media promotion, shoutouts at the events, and/or opportunities to have promotional materials at the event.
Cause Marketing
While a little less clearly defined (depending on who you’re talking to) cause marketing is the idea of raising money for certain causes. For example, when you are checking out at the grocery store and you round up your purchase to donate to a specific cause - that is cause marketing.
Some restaurants and breweries will donate a percentage of sales on a specified date to a cause. As well, for-profit entities may create events with charitable beneficiaries who receive the funds raised at the event.
Fundraising and Events
These are any events / programs that you host with the specific intent of fundraising. This includes but is not limited to:
Online auctions
Galas
Dinners / meals
Raffle drawings
And more…
Peer to Peer Fundraising
You likely encountered this type of fundraising without knowing it. An example of peer to peer fundraising is when a person raises money on behalf of an organization. See below for an example.
Crowdfunding
Crowdfunding looks similar to peer to peer fundraising, but it can also originate from the organization itself. If you ever participated in a “GoFundMe” or a “Kickstarter” campaign, then you participated in crowdfunding.
Crowdfunding for nonprofits is a little bit different because donations to a tax-exempt organization are tax deductible for the contributor. It requires an online platform that will collect donations, names, addresses and/or emails of donors. You are required by the IRS to provide donor receipts to anyone who contributes more that $60 in a calendar year, and therefore it is critical that you are collecting names, amount donated, and contact information. To learn more about the tax requirements for nonprofits, check out my blog “Everything You Need to Know About Nonprofit Taxes.”
Regional/National Giving Days
If you’re on social media, then you know to expect an onslaught of fundraising appeals every Tuesday after Thanksgiving. While Giving Tuesday is well intended, the social media landscape is becoming increasingly saturated with fundraisers, and it can be nearly impossible for grassroots organizations to execute a worthwhile campaign on this day.
Which is why your efforts may be better spent on a regional giving day. Do you know if your city, region, or state has a designated giving day? Where I’m located (in Northwest Arkansas) we have a day called NWA Gives.
Here are some tips for running a successful online giving day campaign!
Start posting at least 2 weeks in advance. Share mission moments, stories, statistics, and tease any incentives you may have. This is the time to “pull on heartstrings.”
"Each person who donates over $25 will get a sticker in the mail."
"On April 6, your donation will go twice as far thanks to our matching donor!"
Social media space is highly competitive on regional and national giving days. Ideally, your audience should see your content leading up to the day 5+ times, so they decide ahead of time, "Oh yeah, I definitely want to give to [insert org name] on NWA Gives." Then, on the designated day, the sight of your profile in their feed will trigger them to go make their donation.
Do NOT expect to take people through the whole donor journey on the designated giving day. Your content on said-day should be quick, consistent appeals and updates on your fundraising goals.
Any long-form content should be dispersed in the 2 weeks leading up to the day of giving.
Program Fees
It is not uncommon for a nonprofit to charge a fee to participate in a program. The fees should be considerate of the audiences that you are trying to reach and any socioeconomic factors that may impact those audiences.
As well, there is an expectation that nonprofits provide free and low-cost programs and resources to the communities they serve. So, be mindful of the optics when you are setting program fees.
A good tip is to practice transparency about your program fees. For example, “The $30 program fee goes directly towards paying our instructors, curriculum development, and printing participant workbooks.”
Memberships
Of all the fundraising tactics, I see this one implemented the least in the early-phases of nonprofit development. And for good reason. Membership implies that a supporter can buy into an exclusive level of participation and/or benefits with your organization. Examples of member benefits may include additional communications, early access to event tickets and merch drops, etc.
Grants
Ah, yes. Some folks refer to grants as “big money.”
It’s true that a 5-, 6-, 7-figure grant is a significant step in the life cycle of a nonprofit.
But grants can also come in micro-amounts too (think under $10k). Micro-grants are great if the application is something that can be pulled together in under an hour!