Chapter 2

What's the Money For?

Project orientation

Your success in fundraising depends first and foremost on how you answer one deceptively simple question: “What is the money for?”

There are other important factors, such as who you ask, who does the asking, and what techniques you use. But they are secondary, because they depend upon how you answer the first, central question.

There are right and wrong answers. Wrong answers focus on internal organizational needs.

The Wrong Answers

“The money is:

• for our salary, rent and phone bills.”
• to reach our goal of X dollars.”
• because we have a deficit.”
• for core costs.”

Very seldom will you be able to get substantial sums of money for core items. In the past, government departments occasionally covered core costs, but these resources are declining or gone. Many programs now restrict themselves to short-term startup grants, if they give for anything other than projects at all.

“People give to people”

“People give to people” is one of the oldest truisms of fundraising. People do not usually give because the organization itself needs funds. They want to help other people. Your task is to show how their donation will help people.

Results have motivational power; monetary figures do not. If the donor knows the potential results of a donation, it changes the nature of the decision-making process in the donor's mind.

Instead of “Why are they always after me for money?”, the donor is more apt to say, “Do I want to make a difference or an impact in this way?” Donors think about the effect of their donation, not just whether they can afford to give to the organization.

Keep track of who benefits from your work. The more detailed statistics you have, the better. Donors are often interested in supporting projects for specific populations such as women, or native people, or youths under 24, or people in northern Saskatchewan. Be prepared to show them how many of each you help (whether through service or advocacy).

Here are some specific suggestions for techniques you can use. Help people to understand how your expense budget translates into real people needing help. This will help you as a fundraiser to develop the case statement, which is the quick explanation of why your agency needs the money.

Write in terms of people, not large issues

• number of people affected by the problem;
• number you help through advocacy now;
• number you help through direct (or indirect) service now;
• number you could help with $x more funds;
• types of people helped;
• total hours of service they received;
• types of problems dealt with.

Document positive case studies and past successes

Write down testimonials, especially from people you have helped. (Be sure to ask for permission to use them, and change names to protect confidentiality if that is an issue.)

Imagine “What if our agency didn't exist?”

Write down your dreams and your wish list (what you could do with more resources).

In transforming costs into benefits, you may wonder what to do about administrative costs (eg, providing for staff, office space, computers, etc). Paying for these basic costs does not motivate donors, as you probably already know.

The key to resolving this is to apportion a percentage of the administration costs to each program. This is more exciting and motivational, but also more realistic. A program can't operate without rent, and wear and tear on desks and computers. If each project doesn't pay its share of meeting costs, vacation pay and hiring expenses, it will fall between the cracks and end up a burden for all.

Marketing the budget

Approach your budget in four steps:

Step 1
Separate the projects

List all the different activities your group will undertake next year. You may call them `projects' or `programs', or any other name.

Uncover hidden projects that are masked by overhead expenses. Does the executive director, for example, talk to journalists or service clubs? Identify that as a separate project called `public education'. Seek funding for this important work.

Don't include only new projects created just for funders. Focus on existing programs, too. Groups often create new projects that are not high priorities, simply because funding is available. This is called “the tail wagging the dog”. It is a symptom of ill health, and often interferes with a group's ability to meet its original challenges. It may be tolerable if the new project contributes significantly to core costs. However, with poor cost accounting, it is all too common for the project to drain economic resources as well as energy. Beware of this problem.

Step 2
Include All Costs

Make sure the cost of your project includes a fair share of all the costs of your organization. Don't just include the obvious direct costs. Integrate the budget fully.

For example, a group may decide it wants to buy a van to transport senior citizens. Getting the money for the van is only the beginning, however. Many groups have discovered, to their grief, how many other costs are actually involved. For example, a full expense list for the van project might include:

• purchase of van
• refitting with safety equipment
• licence fees
• insurance
• maintenance
• gas, oil and other consumables
• replacement costs
• parking spot
• salary for a driver
• printing costs for a brochure to let people know the van is available
• salary for people to design and write the brochure
• postage to mail out the brochure

Every Pizza Includes a Slice of Broadloom

When a person phones for a pizza delivery, their mouth is watering for the food they are about to eat. But imagine this scene: you order a pizza, and ask how much it will cost. The pizza guy on the phone replies:

“Well, the flour costs $13,421 a year. The cheese, tomato, pepperoni and the other pizza ingredients total $26,721 a year. The restaurant's budget also included $43,500 worth of beef, chicken, pork and lobster. You didn't have any of that in your pizza, but it's all part of our budget.”

“But,” you try to interrupt, “how much for one pizza?”

“Wait,” the pizza guy says, “there's also our overhead: salaries for the chef, waiters and dishwasher are $35,760, including benefits. The phone bill and the electricity and stuff were $2,321. Printing menus was $1,500. We had to put in a new stove. They are really expensive, so that was $4,500. The roof repairs were $12,000. And rent was $13,400. There's the van, gas, oil, speeding tickets, phone bills and all. Also the staff had to go to a special conference in Rome on “The Changing Role of Pizza in the Twenty-First Century”. That was $5,600. Oh yes, and the boss put new broadloom in his office. So altogether our budget was $147,523. Please give as generously as you can!”

What a restaurant that would be!

Of course, a restaurant calculates the price of each pizza to include all those things and more.

The pizza barons don't say, “Let's just ask the customer for the money for the cheese, flour and pepperoni — we'll get a government grant for the operating costs.”

They'll take the grant if they can get it — and still make sure every customer's pizza includes every item, right down to a tiny slice of the new broadloom.

They also calculate the cost of one pizza or even a single slice.

Nonprofits can afford to do no less.

• salary for staff to develop the mailing list, print labels and stuff envelopes
• envelopes in which to mail out the brochure
• a phone people can call to arrange pick-up
• salary for a person to answer the phone
• a desk for the person
• an office for the desk
• heat, light and other utilities for the office.

All of these are legitimate parts of the project. They must be included in any realistic budget. Yet many people would consider the items on the list to be `overhead'. The box below contains a story from the business world, which shows why this approach doesn't work.

Step 3
Include Core Costs

Forget about the idea of `overhead costs'. There is no such thing. Every cent you invest is spent to make the projects work.

Build the unappealing costs into the projects. Note that these projects are your organization's core activities, not just special add-on works.

Allocate every expense to a project or program.

Now you can ethically raise funds by saying that the cost of project 1 is $1,724 and that will accomplish (transporting senior citizens, for example).

Please note: the figures above are only examples. Totals may not add up.

Relate costs to a specific number of services: the `unit cost'. If project no 1 transports 146 senior citizens, for example, the unit cost is $1,724 ÷ 146 = $37.50 per senior citizen.

A `bite-size' contribution of $37.50 is realistic to ask of an individual — and they can see what a donation will accomplish.

How to handle old-fashioned grantors

Some grantors still insist on separating administration costs from the projects they fund. Then they provide grants only for the `project' portion.

Fortunately, more and more grantors recognize the value of project accounting.

However, faced with a funder who insists on rigid segregation, it is simplest to comply. He who pays the piper calls the tune!

If the donor funds only the direct costs, remember that this is not the full project cost. The balance of the expenses must be shared by other funders.

Project Ride, for example, was budgeted for $10,000, using True-Cost Accounting. The government, however, called 25% of the budget `overhead', and gave a grant of only $7,500. How do you handle that?

Wrong: “Project Ride is 100% government-funded but we have $2,500 left over in administrative costs.”

Right: “Project Ride is 75% government-funded. The children need another $2,500. Climb on this winning bandwagon with the government.”

Step 4
Make It Appealing

Put all this information together to help donors understand why they should give. Tell a story. Appeal to the whole person. To do this well, give reasons for the head, heart and wallet.

Reasons to give for the Head

• What is the societal problem that needs fixing?
• Why is it important?
• What is the specific solution?
• Why should I trust your group's ability to solve the problem?

Reasons to give for the Heart

• Why should I care about the people helped?
• Will my donation change someone's life?
• Is the problem so big that my little donation is insignificant?
• Is the problem so small that my money would be better invested in another nonprofit's work?
• Is there an urgent reason to act now, not wait for later?
• Will giving a donation increase my own feelings of hope for the future or leave me drained?

Reasons to give for the Wallet

• Is this a bargain? Will you help a lot of people for relatively little money?
• Does this focus on future activities, or are you telling me what you used to do in the past?
• Can you break costs down into `bite-sized' chunks that I can afford to give?
• What will the group give me in return? a newsletter, my name on a plaque, Christmas cards, or address labels? (This isn't essential but will help motivate people who are wavering. The wrong incentives can also offend people. Test carefully.)

Your answers will help the donor to concentrate on what results can be achieved with his or her money. Emphasize the ends, not the means. Ask for money to fund specific achievements, not for organizational expenses.

Look at how one of the world's best fundraising organizations explains this. Here's what Unicef wrote in one of its fundraising appeals:

“$253 provides a pump for fresh water in a village”

Note this is an odd number. If it was rounded out to $250, it would be less believable. You can almost picture them taking your cheque to a hardware store, buying a pump, slapping a few stamps on it and dropping it in a mail box to go on its way to drought-stricken Africa.

“$100 provides enough oral rehydration salts to save the lives of a thousand malnourished children.”

That's very impressive, very emotional. Look at how many lives can be saved. Much better than discussing the problems of nutrition and sustainable development, or diarrhea and death.

“$75 provides enough vaccines to immunize 2,500 children against diphtheria, whooping cough and tetanus.”

“$44 provides Vitamin A protection against blindness for 1,200 children.”

Note the odd number again. And the number of children being helped goes up as the dollars go down.

“$20 provides writing pads for 300 schoolchildren.”

What a visual image that is. Far more effective than saying “school supplies”, or “support our literacy program”.

Even if you aren't Unicef, and you can't pull at quite so many heart-strings, you can (and must) still use the same techniques.

Remember: Don't talk about what you will spend the money on. Talk about what the money will achieve!

While the example that follows is over-simplified to prove a point in limited space, it highlights key methods.

The wrong way: “Disability Support Group (a fictitious organization) needs $5,000 for 4 month's salary, $2,000 for postage, $1,500 for printing, and $1,000 for rent, phone bills and other overhead. We are advocates for disabled people concerned with public building accessibility, among other issues.”

The right way: “A drunk driver hit 19-year-old Judy while she was riding her bicycle. She survived, but she is paralyzed. After therapy, Judy got out of the hospital only to discover a new problem. The office where she had been working was not wheelchair accessible. Neither was her church, or the fitness club where she used to work out. Needless architectural barriers make the tasks of daily life an almost overwhelming challenge in our community for people with limited mobility.

“This story has a happy ending. With help from donors like you, our group showed Judy how to get ramps installed, washrooms modified, and other changes so she could get on with her life. Three weeks ago she called to say she got a promotion.

“You, too, may be affected by a disability that will restrict your mobility during your life. One person in four will be. Perhaps it could be a stroke, or the infirmities that can come with old age. It may mean years in a wheelchair, or the temporary problem of a simple broken leg in a cast. Over 8 million Canadians are affected today. This project may help all of them, as well as future generations. “You can help improve life for other people like Judy who need access to public buildings. Here's the plan: an innovative professional education campaign will cost as little as $20 to reach one of 5,000 influential architects and city planners. Will you give $20 to help people like Judy?”

This example, although with many of the characteristics of a good fundraising appeal compressed into far too few words, does serve to illustrate the techniques available.

Caution: There are dangers in this approach.

Use only positive emotions (such as hope) to highlight the excitement of what you are doing, without being exploitive of either the donor or the person being helped.

Concentrate on the essential work you currently must do to survive. Do not seek funding for exciting new projects, at the expense of essential day-to-day work. Too many organizations end up taking on projects they wouldn't otherwise consider, because they hope for surplus income to fund core costs. The surplus is seldom there. Distractions from your original direction may have serious consequences. Be extra careful when new priorities for grants are announced, that the tail doesn't wag the dog.

Be sure each project contributes its full share of overhead costs, so that nothing is left over in the budget. If you have five work projects, be sure that you include time and money for all the indirect costs. These might include coordination meetings, a portion of the computer shared by the projects, bookkeeping, fundraising and time spent planning for the future. Otherwise, the projects will drain your energy.

Budget 10% for contingency costs into each of the projects. Then if one is not fully funded, it shouldn't become a burden on all the others.

Show your `cost per units of service'. Even advocacy organizations should be able to show how many people are helped by a particular piece of work, and break down the costs by person-year (or month or week or day).

The constant challenge is to explain what you want to spend the money on, in terms that make the donor want to give it. Here are additional examples:

Special problems with advocacy

Service organizations can seem more appealing to a donor, unless advocacy organizations build a good case for the importance of what they do.

It sounds concrete and believable that a donation can buy a wheelchair or fund medical research. But often the promise of helping change the system seems unglamorous or completely impossible.

Donors must be shown clearly how their dollars can help more people more effectively by advocating changes in laws, or reducing discrimination against disabled people, or making self-help a reality.

Here are more quick tips in addition to those above, that may help with this difficult task:

• Share success stories of effective advocacy, either by a group or an individual.
• Show how many people will be affected by your advocacy work.

In the context of fundraising, don't try to make yourself look better by pointing out all the flaws in established organizations. This may make donors defensive. Concentrate on giving positive reasons why they should support you, not why they shouldn't support others.

Avoiding the Negative `Charity' Appeal

Many organizations are justifiably angry at appeals for donations that have portrayed people as helpless, inferior, or objects of pity. Disabled persons' groups have led this attack on damaging images.

It is never necessary to use this approach to be successful in fundraising.

Many people respond well to appeals for self-help projects. Success stories that emphasize what can be done — not what can't — bring in good results. This manual is dedicated to the positive approach.

At the other extreme, consumer groups occasionally consider launching campaigns that are purely rational, in direct contrast to the highly emotional appeals they dislike. The approach may be dry, confrontational and angry.

Like the people who build a better mousetrap and expect the world to beat a path to their door, they are usually disappointed by the results. They may become cynical and suspicious of the public's willingness to help genuinely good causes.

Good campaigns recognize that people give with both the heart and the head. Do not expect to be effective if you use an intellectual approach alone. Emotions are a legitimate part of everyone's personality.

Avoid negative pitches that emphasize guilt, pity or fear.

Focus on positive feelings of hope, caring, shared vision and pride in accomplishment.