Nonprofit Organizations

Effective Solicitation and Revenue Management

In order to prosper, nonprofit institutions not only need to know where the sources of funding are, they also need to know how to solicit those funds and how to effectively manage that revenue when it comes into their possession.

Certainly, solicitation of donors (whether they take the form of individuals, corporations, or foundations) is a vital component of many organizations' operations. After all, most activities can only be executed with funding. But many nonprofit institutions are not accomplished in this area, either because they do not allocate adequate resources or because of problems with execution. Writing in Fund Raising Management, Robert Hartsook listed the following as common solicitation errors that nonprofit groups make:

Not listening to donor expectations
Unwarranted assumption of a donor's willingness to contribute
Lack of follow-up after initial contact
Inadequate research on potential donors and their ability to contribute
Inability to close presentation with donor commitment
Neglecting to establish rapport with potential donors prior to solicitation
Framing solicitation as "begging" rather than as a reasonable request for help with a worthy cause
Neglecting to tailor solicitation to individual donors
Approaching potential donors without knowledge of how donations impact them in the realms of tax deductions, etc.

Of course, even the most effective solicitation campaigns will wither if the organization proves unable to allocate its financial and other resources wisely. Fundraising begins by determining exactly what financial and human resources are needed to accomplish the organization's mission. In the short run, fundraising may be successful based on the organization's vision and the promises it makes to help its clients and community. In the longer run, contributors will want to see results. Performance is what counts. Indeed, an organization may be devoted to addressing a perfectly worthwhile cause, and its membership may be enthusiastic and dedicated, but most nonprofit organizations—and especially charitable ones—rely on funds from outside sources. And poorly run nonprofits will find that their revenue streams will dry up quickly if they do not leverage their funds wisely.

TRENDS IN THE NONPROFIT WORLD

Observers have pointed to several trends in the nonprofit community that are expected to continue or develop in the next few years. These range from changes in fund-raising targets to expanded competition between nonprofit organizations to regulatory developments. The following is a listing of some issues that nonprofit organizations will be tracking in the coming years:

Increased emphasis on retaining donors—According to Robert F. Hartsook of Fund Raising Management, "Non-profit organizations will focus on the renewal of donors rather than on the acquisition of new ones. As our country's population growth begins to plateau, it will be necessary for non-profits to more keenly target their marketing efforts."
Corporate giving—Corporate giving to philanthropic causes has emerged as a major marketing tool for corporations in recent years, and this source of funds is expected to assume even greater importance as federal and state governments pare back their spending on various social programs.
Increased reliance on volunteerism—Reduced government expenditures on social programs is also expected to spur increased demand for volunteers who can meet the expected growth in organization activity. This need will be especially acute for nonprofit organizations primarily involved in charitable activities.
Competition with for-profit enterprises—Many analysts believe that this issue could have tremendous implications for nonprofit organizations in the future. Spurred by representatives of the for-profit small business community, regulatory agencies have undertaken more extensive reviews of ways in which some activities of tax-exempt groups allegedly damage the fortunes of for-profit businesses (who, of course, are subject to local, state, and federal taxes). Much of the controversy in this area centers around the definition and treatment of unrelated business income (income generated by tax-exempt organizations from ventures that are unrelated to their primary mission). "There is a potential that all of this will lead to nothing," wrote Hopkins, "or it could bring an in-depth inquiry into the federal and state law distinctions between for-profit and non-profit organizations, the rationale for the tax exemption of certain types of nonprofit organizations, and whether some existing tax exemptions are outmoded and some new forms of tax exemption are required."
Continued emphasis on planned giving—"Nonprofit organizations will enjoy a significant increase in realized bequests," said Hartsook. "This will happen as a result of planned giving programs put in place 10 to 15 years ago. With the evidence at hand of how successful planned giving can be, many institutions will increase their dependence on this methodology."
Continued dominance of women in the nonprofit community—According to Fund Raising Management, women occupied approximately two-thirds of all staff positions in nonprofit organizations in the mid-1990s, a percentage that may increase in the coming years.
Increase in government regulation among nonprofits—Government oversight of fundraising activities may continue to increase at both the state and federal levels, at least in part because of the solicitation practices of some "fringe philanthropic groups," said Hartsook. "Unfortunately, telemarketing for nonprofit organizations has received a bad name because of fringe philanthropic organizations that solicit and collect large sums of money—while dedicating most of those funds to the costs of fund raising and salaries." According to Hopkins, this increase in government regulation may be especially evident at the state level: "States that have formerly foregone the desire for a fund-raising law have suddenly decided that their citizens now need one. States with fund-raising regulation laws are making them tougher. Those who administer these laws—the state regulators—are applying them with new vigor."
Growth in self-regulation within the nonprofit community—Self-regulation within various sectors of nonprofit operation underwent a noticeable increase in the late 1980s and early 1990s, and this trend is expected to continue with the introduction of new certification systems, codes of ethics, and watchdog groups.
Major donors will maximize benefits from contributions—According to Hartsook, major donors will increasingly incorporate aspects of planned giving into their philanthropic efforts in order to maximize their tax deductions. "Significant gift giving will incorporate an aspect of planned gifts in order to afford the donor maximum tax deductions," he stated. "As the level of tax recognition diminishes, major donors will turn to this methodology in order to maximize tax advantages."