What are the major types of fundraising sources?
The types of fundraising most appropriate to your organization will depend on the nature of your work, your size and your geographical presence (e.g., a neighborhood vs. a national organization).
The primary types of fundraising sources include the following:
- High-net-worth individuals: For many nonprofits, these individuals represent a significant portion of revenue. They are typically people who live in your community and have a personal commitment to your mission, and they must be cultivated in a very personal way. Companies like WealthEngine (www.wealthengine.com) can be very useful in identifying donors in your area. Your board plays a crucial role in developing and maintaining these contacts. In addition, a skilled director of development should be in a position to support this function by identifying and helping to steward donors.
- The public: According to Giving USA 2011 by the Giving USA Foundation, individual contributions accounted for 73 percent of all charitable giving in 2010. In other words, cultivating a broad base of individual donors is critical to fundraising success. Typically these donations are not tied to a specific program (whereas a grant might be), so the funds you raise can be applied to where they are most needed. Online giving, direct mail, and events are common ways to engage individuals. The most important thing is to continue the relationship after the gift has been received.
- Special events: Events are a fundraising mainstay for many nonprofits. The most effective ones tend to feature fun, unique content; a clear target market; minimal competition with other events; and a committed volunteer base to help plan, organize and spread the word. Most importantly, truly impactful events feature a clear connection to the organization’s mission and are hosted by an organization that connects with donors year-round.
- Foundation grants: Philanthropic funding can be an important part of fundraising, particularly as it relates to funding specific programs, events or capital campaigns. If you’re new to this type of funding, it’s important to set realistic expectations. Foundations of all sizes are inundated with requests and can usually only fund a small percentage of the proposals they receive. Relationships are as important here as they are with individual donors. Keep in mind that these funders will respond best when they see evidence of community support, including from your own board.
If you represent a small, local organization, start out by seeking grants from small community foundations in your area. Foundation Directory Online (www. fconline.foundationcenter.org) offers subscription-based services to research foundations of all sizes. You might also consider signing up for RFP alerts from Philanthropy News Digest. The Center for Nonprofit Management also offers a list of fundraising databases that will be useful to you. For more information, visit www.cnmsocal.org/category/fundraising-and-marketing.html.
- Government funding: Government grants cover a wide range of areas, from the arts and education to community development and technology. A great way to identify and apply for federal funding is through www.grants.gov, a clearinghouse of grants from numerous public agencies. For state and local grants, a search of agency websites can be useful, as can low-cost subscription services such as www.findrfp.com. It’s important to note that government funders are typically the least flexible (i.e., your services must be an exact fit with the stated needs) and often require the ability to closely track and report services and expenditures.
- Corporate gifts: Corporate giving makes up only a very small percentage of overall contributions, so unless you’re in a particularly unique situation, you should not expect this type of funding to comprise a large portion of your budget. Typically the odds are best when your project is aligned with a company’s business objectives. That having been said, corporate funding can be beneficial as it relates to sponsorships of events and activities, securing product for auctions/prizes, and small grants that benefit the local community. Many nonprofits also benefit from arranging volunteer opportunities with employees of large companies in their local area and involving key executives as board members. In addition to providing valuable support, it helps to establish relationships with the private sector.
- Don’t forget that many companies also have matching gift programs. Remind donors of this during the giving process. Be sure to collect employer information (so you can follow up as necessary) and let them know where to submit any paperwork.
- Planned giving: Planned gifts are those made through wills, bequests and trusts. These are frequently larger than annual campaign or one-time gifts and offer the donor a means of ensuring their legacy through an important cause. There are many ways to execute a planned giving program, but the various structures and regulations can get complicated. Engage legal counsel to establish such a program and design it in full partnership with your board.
- Annual campaigns: As the name would imply, these are fixed-time fundraising campaigns that take place annually. They are often board-driven, meaning that the board is actively engaged in soliciting donations and will often jumpstart the campaign with their own commitments. Annual campaigns are usually centered on a specific fundraising goal that is made public. If it’s practical, the beginning and end can be marked with a special event that recognizes donors, engages corporate sponsors, and showcases programs to the media.
- Fees for service: Nonprofits of all sizes use fees for mission-related services to meet programmatic and operating needs. These can include membership dues, publication costs, or fees for conferences, seminars and trainings. For more information on this type of revenue generation, see Legal.