The Biggest “Money Sinkhole” In Nonprofits Nobody Wants to Admit

The Biggest “Money Sinkhole” In Nonprofits Nobody Wants to Admit

Let’s pretend that I am presenting you with a choice of two envelopes, the selection of which will decide your next fundraising effort. The first envelope contains an index card with three names of people who like your organization and really get what you do, and you need to ask each one of them to give $10,000 to your cause. The second envelope is an index card with the words “dinner and live auction”. I guarantee four out of five nonprofit leaders would choose the dinner and live auction over three direct asks. With that in mind, the intention of today’s article is to nudge you to confront the realities of the next event you’ve got on your organization’s calendar.

When it comes to the decision to run a fundraising event, it seems the only part of the word “fundraising” a Board pays attention to is the first three letters – FUN. Board members who suggest an event follow it up with exactly that. It’ll be FUN. What is always forgotten is how the organization is left with massive labor to put out an event for 200 people to arrive, consume, and leave. There is no growth. They don’t make a pile of revenue. Instead, they make a pile of mistakes – including asking for everything to be donated.

What I know is most nonprofits go into an event hoping for a break even. Which tells me that a very basic question has gotten lost… WHY are you doing the event? Most will answer, “Profile, engagement, and connection”. My response? Absolutely not. Because an event has to make money at some point. There must be a solid model for cost control, staffing, and aligning your budget for surprises. When you do an event, things happen and things go wrong. You have to be able to write the cheque. Excitement, buzz, and fun is what historically drives fundraising events – but what should drive an event is strategy and fiduciary responsibility.

With good oversight, a good strategy, and attention toward a worthwhile outcome, everything is worth a try. So what is the process for deciding to do a fundraising event? Here are 10 questions you must answer before you embark on your next one…

  1. Is it a match for the mission? Is this something that aligns with what you stand for? Is this who you are as an organization?

  2. Do you have the expertise, the resources, the know-how to do this? If not, where can you get it?

  3. What is the projection for raising money? What’s the forecast for year 1, year 2 and year 3? Otherwise you’ll end up doing one-offs. If you buy into it, the first year might break even. But if you did the projection, year 2 is not going to be break even, because there will be a 20% to 40% increase. This is how you want to think about every event.

  4. What does it do to the organization? Does it kill the staff? Does it lose volunteers? Does it wear out people who are “event exhausted”? Have a look.

  5. Are you spending enough time asking “what if” questions? What if the tickets don’t sell? What if a planned part of the event costs more than you forecast? What if the community doesn’t respond the way you expected? Spend time looking at the what if’s so you can anticipate the landmines.

  6. What are all the other ways you can make money at the event that you haven’t thought of? How can you make more money in the room? The very best thing you can do is look for other ways to support that event before it ever happens.

  7. What is the best way to collect more information from the attendees while they are a captive audience? What more would you like to know about them? What different ways can you get that information from them, including the possibility of asking directly?

  8. What can you give your attendees that is compelling? Something that would make them feel good about having spent their time with you… and think further about becoming a donor in a much bigger way? Almost no one bothers to ask this question. You need to build a relationship for the future right there in the time you’ve got with them. You want to access their interest for the next 12 months.

  9. Does the community still want this event to take place? What are the indicators? I see so many nonprofits get caught up in doing the same event, completely ignoring that the public doesn’t want it anymore. But they keep putting it out there and wondering why it doesn’t get a draw. Things like bowling, curl for kids, golf tournaments, and runs are great examples of events that are held way beyond their shelf life. It’s time to confront the truth and kill events that no longer have any draw for the community.

  10. If you are repeating this event, did you do an autopsy on the last one you ran? What worked? What did NOT work? What did you learn? If you haven’t done this, you’re not ready to run the event again.

Look, I get it. Everyone loves a fun event. I do, too, which is why I put the strategy first. Feeling good about an event isn’t a reason to have one. Decide now that you will never again run an event without embracing a strategic mindset, and an eye toward making money. There is no benefit to exhausting staff, volunteers and resources only to break even. Let this be the year you turn the corner. I believe in you.

Want help? I offer individualized coaching and consulting specifically tailored to meet you where you are, with the people and resources you have available to you, and with your goals in mind.

Reply to this message directly to set up a conversation. Even if we don’t end up doing work together, I promise our conversation will highlight a direction and solutions you haven’t yet considered.

Let’s start there.