Raising Money in Hard Times

Don’t treat giving as a financial transaction.

Many arts organizations, public-broadcasting stations, sports booster clubs, and other nonprofit groups offer special perks to donors, such as season tickets or DVD sets. Others send invoice-like reminders to people who have made multiyear pledges to ambitious campaigns. Especially in a bad economy, experts warn, any approach that seems more like a commercial transaction than a charitable exchange will alienate donors.

Many arts groups face trouble raising money now, which their fund raisers are quick to blame on the bad economy, says Ms. Williams, a Charlotte, N.C., fundraising consultant. After all, they say, the arts seem less urgent to donors compared with providing basic necessities to recession-battered families. But there is another reason: Arts groups and other charities have been too focused on the benefits donors get, she says.

“What seat do you get? Are you invited to the green room? These things are shallow,” Ms. Williams says. “These are philanthropic transactions, not gifts. It’s not about the mission but about what seat you get. Those relationships are the first to go.”

Back-to-back capital campaigns in many cities have led to another unfortunate type of charitable transaction, Ms. Williams says. Donors are now getting invoices for payments toward campaign pledges they made in better times, without any acknowledgment from the charity that they have an option to reduce the size of their annual payments.

“Resentment starts when we push donors to fulfill obligations, and they don’t have permission to give less now,” says Ms. Williams. “I still see institutions assuming that a contract is a contract.”

Instead, Ms. Williams and other experts say, charities would do better to treat long-term donors as they would a close friend or family member. For a growing number of organizations, that means learning how their donors have been affected by the recession before a making a pitch. Some charities are including donors who can’t give this year in special events, membership programs, and other activities, with the expectation that their contributions will resume in better times.

For example, UJA-Federation of New York raised $18.8-million in a single evening at its Wall Street dinner in December for stock brokers, hedge-fund managers, and others who work in financial services.

While that’s less than the $21.6-million raised a year earlier, officials say the event held up surprisingly well, in part because it reserved 50 seats at no cost for former Wall Street supporters who had lost their jobs or were suffering other financial troubles. In addition to laying the groundwork for future gifts when times improve, the federation is working to keep those supporters involved. For example, some prominent Wall Street executives announced at the event that they would chair charitable projects the federation supports and sought out volunteers. That was attractive to former donors who are seeking new jobs and want a chance to meet leading executives in their field.

“People who have been loyal, but haven’t been giving lately, we want them to understand that they are family,” says Stuart Tauber, the federation’s senior vice president of financial resources development.

Keep close ties to donors.

Don’t see every contact with a donor as an opportunity to ask for money. Show donors what was accomplished with their money and how much it means to a charity.

Most charities do a terrible job of thanking donors and staying in touch with them in meaningful ways, says Karen E. Osborne, a White Plains, N.Y., fund-raising consultant. “What most of the nonprofit world does is thank donors with a receipt, a newsletter, and then they ask for another donation,” says Ms. Osborne. That approach, she says, doesn’t work well even in the best of times, but is especially dangerous in a recession.

Ms. Osborne says a particularly emotional thank-you she received from a charity was a key reason she decided to keep supporting that organization, even at a time when she felt she needed to be more careful about her giving.

After she had been invited to tour the Easter Seals affiliate in Little Rock, Ark., Ms. Osborne and her husband gave the charity money so it could teach children with severe speech disabilities to use computerized equipment to help them talk.

The couple made similar gifts for two more years in a row, always sending checks near year’s end. In the fourth year, Ms. Osborne recalls, “we came to the conclusion that we had to cut some of our giving, so I said maybe we would cut back” on Easter Seals.

But three weeks before Ms. Osborne and her husband sat down to write their annual checks to charities, Ms. Osborne says, she got a call from a boy in the Easter Seals speech program who, because of his therapy, was able to speak to Ms. Osborne in his own voice. He wished her a happy Thanksgiving, she recalls.

“I was wowed, and I felt powerful, even though I know my gift did not pay for all of his accomplishment,” Ms. Osborne says. “In the end, we did not cut that gift. In fact, we found a way to give more than we intended.”

Karla A. Williams, the Charlotte, N.C., consultant, also urges charities to think hard about how they thank donors. “If the donor is treated personally, professionally, and kindly — no boilerplate letters but personal phone calls and letters — their confidence in being important to the organization has been affirmed,” she says. Donors don’t stop supporting a charity when they have been made to feel that their giving is truly critical to its work, she says.

“If you haven’t been doing a good job of this before, you may not be able to turn it around now in this economy,” warns Ms. Williams. “Donors are very observant.”

Offer matching grants.

Many charities are now offering to match donations to give people an extra incentive to make a gift. The matching money is usually provided by an individual or foundation. Some charities offer to match the gifts of individuals who have never contributed before or to donors who increase their contribution by a certain percentage. Others use matching funds to attract support from new foundations or to increase the number of people who give by participating in a walkathon or other special event.

LaGrange College, in Georgia, is taking $1-million from a much larger bequest to encourage new donations to the college’s annual fund, which typically raises $2.5-million per year. The money will match every dollar given, up to $500,000, with $2.

The college hopes that extra money raised for the annual fund can help make up for losses in foundation grants and other support, says B. David Rowe, the college’s vice president for advancement. “As donors are facing difficult choices, we hope this will help the institution bridge this difficult time.”

The March of Dimes is using a $150,000 matching grant from Farmers Insurance to offset a decline of 1 percent in the returns from its “March for Babies” walkathon, which raises $115-million annually. The grant matched the $25 fee walkers paid to sign up in December, one month earlier than the charity normally registers participants.

The offer recruited 6,000 early participants, and March of Dimes officials say that those individuals, along with efforts to promote the walkathon online, are likely to recruit people who will work longer and enlist others to participate in the April event.

Shore up relations with grant makers.

Many foundations and government agencies say they will give the same amount this year as they did last year, but they plan to reduce grants and contracts in 2010 because of falling endowments and tax revenue. Some charities are acting now to reach out to such grant makers in the hopes of influencing their choices about who gets money next year.

Easter Seals Colorado, in Denver, is embarking on a yearlong effort to get in touch with more than two dozen foundations and state agencies that have long provided 25 to 30 percent of the charity’s operating budget.

“At every meeting I go to hosted by a foundation, they’re saying they are not so impacted in 2009, but 2010 will be a different story,” explains Lynn Robinson, chief executive officer of Easter Seals Colorado.

Giving by individuals has already dropped by 15 percent, she says, so those donations will not make up for the foundation losses the organizaiton is likely to face in the coming years..

“I am going to meet with as many funders as I can to make sure they understand we are not taking them for granted,” Ms. Robinson says. “I am also writing them a letter to talk about the internal steps we are taking.”

Those steps, she adds, include canceling raises for the organization’s staff members and looking for other ways to cut costs without reducing services in any significant way.

In addition, Ms. Robinson says that she has armed herself with statistics, showing that Colorado is 46th among the 50 states in the amount the state provides to aid people with disabilities.

In some studies, Colorado also ranks at the bottom in charitable giving, even though its per-capita income is in the top 10 among the states.

“Funders need to know: The fact that citizens and the government are not overly generous means that nonprofits are picking up the tab for services to special-needs populations,” says Ms. Robinson.

Ask donors to give monthly.

Some charities are trying to persuade donors who tend to give once or twice a year to make monthly donations. They urge donors to let the organization automatically bill their credit card for a specific amount or authorize a bank withdrawal every month.

World Vision and the American Society for the Prevention of Cruelty to Animals, as well as many other charities, have converted large numbers of donors into monthly supporters, learning in the process that monthly donors keep giving for far longer periods than individuals who give less frequently.

The ASPCA, for example, has recruited 140,000 donors, who give an average of $21 per month, through direct mail, telemarketing, and television spots. Most of those donors have continued giving for several years, much longer than donors who give once or twice a year. Charities frequently lose half or more of their newly recruited donors in the year after they make their first gift.

Among the organizations seeking monthly donors now: The Monterey Bay Aquarium, in California, has begun asking for monthly gifts from people who have signed up to receive its e-mail messages and other online communications. And Russ Reid, a Pasadena, Calif., fund-raising consulting company, says that two national charities in the last two months have asked the company to test efforts to recruit monthly supporters by sending their donors a letter followed by a telephone call.

Look for ways to save money on fund raising.

Charities are reducing fund-raising expenses by cutting back on travel, training, filling open positions, and other staff costs. They are also canceling or slashing expenses of special events and replacing direct mail and other marketing efforts with online appeals and Web efforts.

The San Diego Zoo is cutting costs on direct mail and special events by renegotiating contracts with its vendors and turning its live auction of donated items into an online auction.

The zoo is also making efforts to reach out nationally in its solicitations, thereby lowering the costs of raising each dollar. For example, by adding an online component to its “Cans for Critters” campaign, in which children in and around San Diego raise money by collecting and recycling cans, the zoo plans to reach out to schoolchildren nationwide. They will now be able to use the zoo’s Web site to register and log their progress in a contest to see who can collect the most cans.

KERA, a Dallas public-broadcasting station, is starting a “green membership program,” giving donors the option to receive all communications online rather than through direct mail. The station touts the new program as an environmentally friendly way to keep costs down, while also ensuring that a greater portion of members’ donations go to programs.

The station began another online effort six months ago by creating a multimedia section on its Web site called Art&Seek. The new section, which highlights cultural affairs, has already produced a pledge of $25,000 from one supporter who wants to aid the station’s arts coverage. The section features news reports, a blog, and a calendar of arts events in North Texas; it received 72,000 page views in December and has raised another $5,000 in online donations.

Meanwhile, some charities are looking at ways to eliminate events and other activities that are not making much money, given the time and effort they consume. “Now is a great time to get rid of sacred cows that are not cost effective and should have been killed a long time ago,” says Bruce Flessner, a Minneapolis fund-raising consultant. “If you have a special event or a special giving club that people make a big fuss over, take advantage of a tough budget to say, ‘We can’t afford to do this anymore.’”

But getting rid of fund-raising efforts can be tricky, consultants say. Charities must be careful not to cut efforts that might show little payoff now but will matter a lot in the long run. For example, some charities want to hold off on seeking bequests, since such gifts can take many years to materialize. But bequests are among the largest single gifts that many charities receive, note fund-raising consultants.

Seek alternatives to soliciting private donations.

In recent months, many charities have been experimenting with new ways to get beyond solicitations from private and government sources. Some are developing products related to their missions that can be sold to individuals or businesses. Others are charging for services such as renting or leasing space in their building or on their property.

The Maryhill Museum, in Goldendale, Wash., expects to earn $100,000 to $150,000 annually, or about 10 percent of its operating budget, from a new arrangement with an alternative energy company, Windy Point Partners, to place 15 wind turbines on its 5,300-acre property. The company is paying to lease the land and will also pay fees based on its sales, in addition to committing more than $1-million to a local conservation effort to protect scenic areas around the museum.

Brewster Place Retirement Community, in Topeka, Kan., along with nine other retirement communities, is working to develop new products to help elderly people stay in their homes. Among the products: an automated medication-dispensing device that can alert people when it is time to take multiple medicines and dispense the correct dosages.

And the Cancer Research Institute, in New York, has started a new fund so that donors can invest in scientific trials to develop and test new vaccines and other ways to strengthen the immune system against cancer; the charity hopes to produce revenue from biotechnology companies’ use of medical discoveries advanced by the fund.

In California, the Boys & Girls Club of Laguna Beach, has found a simpler, more immediate way to generate money: renting parts of its building to other organizations such as performing-arts groups and a local parents’ club, which use the space for meetings and short-term projects.

The rental agreements generate an extra $3,000 each month and have resulted in other benefits, says Pamela Estes, the charity’s executive director. For example, she says, a church that rents space from the Boys & Girls Club each week has visited the charity’s Web site and donated toys, school supplies, and other items on the club’s online wish list of items needed by local children.

Collaborate to raise money.

By working with one or more other charities on fund-raising events and other efforts, a nonprofit group can attract more contributions and produce more publicity and public awareness than it could manage on its own. And by sharing fund-raising costs, the charities can all save money.

Easter Seals Colorado is trying to lift giving through joint advertising with two other local charities that serve people with physical disabilities: the Multiple Sclerosis Society and Special Olympics. Through speaking engagements, and both paid and public-service advertising on radio and television, says Ms. Robinson, the chief executive, the three organizations are encouraging Colorado residents to help people with disabilities by taking advantage of a provision on their state income-tax forms. The provision enables people to make a tax-deductible contribution directly to any of 15 charities approved by the state legislature, including the three charities now collaborating.

In addition to saving money, Ms. Robinson says, the joint promotion is likely to help all three organizations raise more money by increasing awareness of an easy way to give, which less than 8 percent of the state’s taxpayers currently use. “We serve a lot of the same populations with our different services,” she says. “The more I can tell people about us, it will come back to us. They will access our services or tell relatives about us or choose to make a donation.”

Jan Masaoka, editor of Blue Avocado, an online magazine for nonprofit groups, advises charities to take advantage of the type of grass-roots activity used in Barack Obama’s presidential campaign by banding together for area fund-raising events such as walkathons, which have long been dominated by national health charities.

“Ten small organizations that serve children could put on an event to raise money for the children in our town,” says Ms. Masaoka. “We can tap into the energy of this new community activism, creating small campaigns in which people do things on the fund-raising side.”

Scale back ambitious campaigns, but don’t give up on them.

A growing number of charities are delaying capital campaigns that had been in the planning stages. But fund-raising experts say that most big campaigns, which often last five to seven years, will go on for longer than any economic downturn is likely to last. Instead of postponing a campaign indefinitely, they say, charities can consider readjusting the goal or lengthening the campaign’s first phase, when the biggest gifts are solicited.

Some charities in the planning stages of a big capital campaign have recently decided to postpone the drive until they have a better sense of whether the economy is going to start improving or get worse, says William Krueger, president of Capital Quest, a Louisville, Tenn., campaign consulting firm. Increasingly, charities “are more in a survival mode than a growth or expansion mode,” he says.

However, the problem with waiting for the economy to clear is that it creates pent-up demand, says Mr. Krueger. “At some point, it is going to become conventional wisdom that the economy is better, and then everyone is going to want to do a campaign. That will create a different set of problems.”

Among them: so much competition among campaigns that donors become fatigued, and charities are unable to recruit volunteer campaign leaders, says Mr. Krueger.

There is an alternative solution, says Leo Arnoult, a Memphis fund-raising consultant.

He points to one of his clients, a large environmental charity that wanted to start a capital campaign to raise more than $200-million this year. The organization was forced to reconsider after several board members who had planned to make big campaign gifts lost large sums in the market collapse. Instead of a five-year comprehensive campaign, Mr. Arnoult says, the charity “deconstructed” its drive and is now holding a much smaller campaign to coincide with an important anniversary of the organization’s founding in 2010.

“They have pulled back and dropped the goal to one-fifth of what they originally planned,” says Mr. Arnoult. “They will take their nearest and dearest donors to do this and wait for better times.”

Avoid emergency solicitations.

Emergency appeals that ask for donations to keep a charity or a program afloat financially can backfire by giving donors the impression that the organization is not well managed and likely to fail, experts say. The same is true of frequent urgent appeals.

“We are seeing organizations, whose income projections are the product of happier times, panic by ramping up the number of hard-ask e-mails, to the exclusion of almost everything else,” says Mark Rovner, president of Sea Change Strategies, a Takoma Park, Md., online fund-raising consulting company. “Not only is that unlikely to work,” he says, “it is likely to antagonize people who are sympathetic to your situation.”

That said, it is not inappropriate to focus on the financial crisis in solicitations, to relay how the economy is affecting a nonprofit organization’s charitable work and its clients, says Bruce McClintock, president of Marts & Lundy, a fund-raising consulting company in Lyndhurst, N.J.

For example, he notes, many colleges and universities have long sought gifts to their annual funds, which generally pay for operating expenses, by telling donors that such unrestricted gifts “mean a lot.” But now, Mr. McClintock adds, “it is tough to relate to an unrestricted gift when people are hurting so badly.”

Instead, he says, the institution would do better to seek contributions that help the growing number of students having a hard time covering their tuition and other educational costs because of the economy.

“Bring the economy home to the people,” Mr. McClintock says. “You cannot rely on the same messages you’ve been sending out for five years.”

This article was written by Holly Hall, with assistance from Paula Wasley.