Overhead Costs Can Limit Fundraising

Nonprofits have to operate like a business even if their business is raising money to provide programs for a worthy cause. The organization has salaries it pays and expenses it incurs for doing the work it does. That’s all perfectly understandable, although, it can often lead to issue to overcome when trying to secure donations.

In the charitable world overhead can be a real obstacle for some donors. This is especially true when they see and read stories in the news about the lavish spending and big salaries taken by executives at some nonprofits.

Many people are fine wanting to help the cause but not at the expense of helping the CEO and others at the top. Unfortunately, that is the underlying sentiment among most donors these days. Research conducted backs that up.  In a recent study to determine the extent of the problem, 40,000 letters were sent out soliciting donations. However, the letters were sent to four different groups of people with each group receiving a slightly different version.

The first group got a standard fundraising letter, the second, a similar letter but one that mentioned that a private donor had already given seed money for the cause.  In the third, a matching grant was outlined but in the fourth group, people were told specifically that the organization had already secured donations to cover overhead costs and any donations made would go entirely to the cause.

The fourth letter had a big effect on donations with almost 9% percent contributing compared to less than 5% for each of the other groups.  All told, more than $23,000 was pledged nearly tripling the amount raised from the standard letter and doubling the total from the 2nd and 3rd groups. The results seem to indicate that it doesn’t matter to people how much overhead costs are as long as they are not the ones to pay for it.

Some charities do try and explain to their base why the costs involved in running their organization can be so high but that can appear somewhat condescending. Instead, many believe charities would be better served by securing funds for their overhead costs from wealthy donors.

Their argument is that most wealthy donors were probably business owners at some point and therefore understand the price of doing business and would probably be more inclined to help in covering overhead costs when asked to do so.

Overhead is always going to be there whether donors like paying for it or not. Although, changing the way it gets covered and how prospective donors perceive that can be beneficial.

 

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Posted in Nonprofits.

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