Wednesday, October 29, 2008

A Little Note on Raising Funds

A working rule of thumb for those who send out mass mailings asking for donations is that a response of 1-6% is considered an excellent return.

Let's take the following hypothetical situation. An organization sends out 100,000 pieces of mail asking for donations. Let's give them a cost of 25 cents per piece of mail as the cost of the mailing (They should be paying postage at a lower rate for mass mailings. But postage is not the only overhead cost. There is printing the request and the cost of the return envelope. Many of the organizations include return postage on the envelope they enclose.). That would mean that the cost of the mailing is $25,000. If the organization gets only a 1% return on its mailing, and assuming an "average" of $18.00 per check (some will be less, some more, this is only an average) then the organization will be getting $18,000 in donations, a loss of $7,000 on the mailing. Let's say they are fairly well known and get a 3% return on their mailing. That would give them $54,000 in donations. Subtract their "operating costs" and they will net $29,000 out of that $54,000. This would give them overhead costs on the mailing alone in the high 40% range. Have that organization do 4 mass mailings a year, based on the idea that if someone doesn't give you for one of the mailings they might give you for a different one. And then add in that because there are so many organizations sending mail that once you have given to one tzedaka this year you might not give to them again until next year and you drop your total donations to 2% across a year. Four mailings at $100,000 in expenses and a return of $144,000 in donations, for a net of $44,000.

Now multiply the number of pieces of mail that a person receives from competing tzedaka organizations. Assume that money to donate to tzedaka is a finite number--you can't give more than you have. If you get 10 tzedaka envelopes you can divide the money you have available by ten, so theoretically each envelope will get 1/10 of what you have to donate. But if you get 200 envelopes and you attempt to give everyone something then each envelope will get 1/200 of the money available. Now imagine that there are 400 envelopes that arrive to you; responding to each envelope would mean that each appeal would get 1/400 of the money you have available. BUT, keep in mind that mass mailings are NOT the only way we give to tzedakas. There are shul appeals for tzedaka organizations. Local entities such as yeshivas and mikvas etc. may make phone appeals. There are meshulachim that come personally to collect funds. Thus the money available for those mass mailings is not the full amount of money you have to give to tzedaka.

Obviously some people have more money to give to tzedaka than other people do. Obviously, some people will give more to one tzedaka and less to another. Obviously, some tzedakas get more in donated funds than other tzedakas do. But the more tzedaka organizations that there are out there looking for you to donate to them, the less money available to each individual organization. Obviously, the less money an organization gets in donations, the higher the ratio of overhead costs to actual charity disbursements.

In short, sending out mass mailings asking for tzedaka donations is an iffy business. You may or may not make back your overhead costs. You may or may not have a large amount of money left over after subtracting overhead costs for the mailing. And keep this in mind as well. The overhead costs for the mailing may not be the only overhead costs an organization has. If they are paying for office space, office workers etc. then these costs also have to be paid for before any money can be disbursed for the intended tzedaka purpose.


Lion of Zion said...

"If they are paying for office space, office workers etc. then these costs also have to be paid for"

that may or may not be a priority, depending on the institution or org.

Allen said...

So mail campaigns are a crap shoot with no way to know if you are even going to cover your expenses. What are the other options for raising funds that won't require putting out so much money up front without knowing what you are going to get back, even if approximately? Obviously some organizations are getting the funds to do their work.

Mitchell said...

My firm works with a number of NPOs, both Jewish and not, and what differentiates the better ones from the others is their more businesslike attitude towards the work of fundraising. Two of the largest organizations we work with, both not Jewish, use specialized targetted marketing techniques when doing mailings. They both use computers to coordinate and track who is sent to and who sends back. When a person on their mailing lists has not responded in 4 mailings they are deleted from future mailings. They also vary the content of the mailings they send out so that certain demographic groups are getting one mailing while other groups get mailings written specifically for them. These organizations have also worked with professional fundraisers and advertising people so that whatever they send out is prepared in such a way that it will elicit a positive response.

Sad but true, people don't just donate out of the goodness of their hearts. What they give and when they will give it depends on how they are asked, when they are asked and what they are asked for. From what I've seen show up in my own mailbox far too many of the tzedaka organizations are shooting themselves in the foot in the way they solicit funds. They need professional help and they either don't know that, don't want to know that or believe that wanting to help trumps being businesslike.