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The power of private donors

The Management Centre

In this article, Angela Cluff, Principal Partner Consultant of The Management Centre, a London based consultancy that works to transform the performance of ethical organisations explores why private donors are vital to your success and how you can boost your fundraising from them.

Angela has been a fundraiser for over 20 years and currently works with a wide range of organisations nationally and internationally. Current and recent customers include MSF International, WWF International, UNICEF International and UK, Oxfam GB and the world famous Science Museum in London. She is also a Trustee of CARE International UK.

Who and what are private donors?

Private donors come in all shapes and sizes. They include global foundations like the Bill & Melinda Gates Foundation with assets of over $42.3 billion and grant payments of $3.6 billion in 2013 alone, through family foundations, corporates and corporate foundations, and individuals.

Individuals come in all shapes and sizes – from global philanthropists making multi million dollar gifts to small sum regular donors. Although each type of private donor needs and demands a different strategic approach, there are two broad approaches to private donor fundraising: a mass approach of securing many low value gifts or a major approach of securing few high value gifts. Some organisations have chosen one or the other; many pursue both.

In this article I’m going to concentrate on individuals rather than foundations or corporations.

Private donors are people

In a world where we often talk of difference there is a wonderful common quality. People everywhere share an innate desire to help others. Many charities, NGOs and INGOs can trace their roots back to an individual or group of individuals with a vision to change the world for the better, to right a wrong, or simply to help others in need. An enormous opportunity remains today for those running not for profit organisations – old and new – to capitalise on this basic human desire and generate money for their causes. This relationship is often characterised by the simple mantra – ‘people give to people.’ But raising money from people – private donors – while common is not necessarily easy.

Wealth and giving

You might assume that the easiest way to raise money is to approach the wealthiest. But perhaps the first challenge is that there is little correlation between wealth and giving behaviour.

Since 2005/6, the Charities Aid Foundation (CAF) has produced the World Giving Index to explore charitable behaviours in 135 countries across the globe, through consumer interviews. Globally in 2013:

  • 48% helped a stranger
  • 28% donated money to a charity
  • 21% volunteered time to an organisation

Countries are scored based on their average of these three measures of giving behaviour to create a single index. This year’s ranking was topped by the USA and Myanmar nations far apart geographically, culturally and economically.

It’s not just this result that’s surprising. This year’s report ranks just five of the G20 countries in the Top 20 places of the Index and eleven G20 countries are outside the Top 50 places in the Index. Additional studies from the USA and the UK – both key fundraising markets – also suggest that the poor give proportionally more than the rich even during economic recession.

So finding the wealthy either individually or by nation is not enough.

Mass market private fundraising

Mass private donor fundraising on a global scale is the business model for the biggest INGOs. It’s hugely attractive to these organisations, mainly because it is possible to raise significant sums. As important this money will be largely unrestricted income, the income that organisations like best and is key to their ability to both campaign and influence and to innovate new programmatic solutions. In this case the donors trust the organisation to make a good investment.

But there are some challenges. One is that the key to making mass fundraising work is having a simple proposition – a problem articulated in a way that a small sum donor can see that their gift can make a difference.

The big challenge, however, is that mass fundraising is expensive. You need large and continuous investment to reap the rewards of critical mass and a programme that is sustainable and predictable.

Return on investment (ROI) on mass private donor programmes in the traditional markets of European and North American is declining. For the most sophisticated and ambitious INGOs there is currently a geographical shift towards emerging markets where returns are higher and the opportunity of growing middle class populations beckons.

According to the OECD the number of middle class people will grow to 3.2 billion worldwide in 2020 and 4.9 billion by 2030. The explosion is biggest in Asia where the middle class population is set to triple by 2020. By 2030 it will be 10 times the size of North America and 5 times the size of Europe. Fundraisers are packing their suitcases and heading to emerging markets to invest for the future.

High value private fundraising

There is a second approach – towards high value individuals. This is different. Major private donor fundraising tends to generate restricted income, but at a much higher ROI than the mass approach. The ‘story’ is critical here too but the donor will want to understand and be inspired by your strategic plan, believe in your ability to deliver and trust your people. They are less simple donors, more partners aiming towards a shared goal.

For some, this is an effective and efficient form of fundraising. For others it raises concerns. For example, some worry that very significant private donors – like Gates – might dominate the agenda, focusing on issues important to the donor that the organisation may not see as the most pressing.

Competition is increasing

Whichever approach your organisation chooses to take, there is a third challenge: the competition for is growing. The main driver for this is the combination of reduced Government funding alongside the continuing growth of not for profit organisations.

In parallel, donors of all types are becoming more informed and demanding, seeking accountability, transparency and value for money.

6Cs for success

So with all of this at play how do you succeed? Here’s a framework for deciding what might be possible for your organisation in your specific market – the 6Cs. The 6Cs are: case, context, competition, competence, cash and culture.

Case

You need a case for support – a powerful and engaging argument of why a donor or prospect should consider supporting your work. This is vital. It sits at the heart of all good private donor fundraising. Sounds easy? In practice many organisations – whether new to fundraising or not – fall at this step. You need to challenge your organisation to explain

  • What’s the problem?
  • What’s your organisation’s solution to the problem?
  • What difference will you make if you succeed?
  • What will happen if you fail?
  • Why is your organisation uniquely qualified to tackle the problem?

The level of detail at which you need to explain it will of course differ between small sum and high value donors, but in both cases you need to explain in a simple, externally focused way that is memorable and emotionally engaging.

Context

The start point for thinking about private sector fundraising is the market context – what is it like to raise money in this nation or culture. What do you need to know? This will most probably involve desk research on fundraising potential, including an assessment of political, economic, social and technological drivers.

Competition

Assessing the competition – other organisations in your market raising money from private donors – will give you a clue into what works. For INGOs wanting to enter a new geographical market, the presence of key competent competitors is a very strong indication that private fundraising can work and that the required infrastructure exists.

Competence

For organisations embarking on private donor fundraising for the first time, there is usually a need to develop new organisational knowledge and abilities. First there is the need to acquire the specialist fundraising competences – and for mass market particularly this will include sourcing and contracting key suppliers. They may also include understanding specific cultural issues or working though specific channels such as online.

Cash

A key aspect to consider in thinking about how to approach private sector fundraising is access to capital – the investment envelope you can commit and for how long. For high value the investment is likely to be in ‘good’ – possibly expensive – people, for mass market it will also include significant spend through specific channels to generate high volumes of supporters.

Culture

Different organisation cultural traits are key to success with different types of private donor fundraising.

To succeed with high value donors you will have to be prepared for donors and prospects challenging your plans. You will need to develop an open approach to sharing progress. Donors are keen to understand what hasn’t worked, as well as enjoying your success stories. You will need to work with your few donors as genuine partners striving to reach your organisational goals.

To succeed with mass fundraising you will need to be clear of the requirement to invest over an extended period of time. Mass market fundraising can become predictable and sustainable but that’s not guaranteed, especially in the early days, and you will need to understand and manage the associated risk.

Private donors – potential and pitfalls

In summary private donors are an important source of income for a wide range of causes and organisations, especially as they offer the potential to raise significant sums of unrestricted income – vital to enable organisations to innovate new solutions.

But private donor fundraising is challenging, especially if your organisation is new to it. The 6Cs represent a rigorous challenge.

If you choose to embark on it the rewards can be high – if you plan well and are in it for the long haul.

What’s next?

For further information on how =mc can help with your fundraising, visit our Fundraising Consultancy pages or contact Angela Cluff on +44(0)20 7978 1516 or email a.cluff@managementcentre.co.uk

We also run various fundraising training programmes which are delivered in-house at a time of your choosing.

You may also be interested in the National Arts Fundraising School – a six-day residential programme that has trained over 2,000 fundraisers in it’s 26 year history, and has a unique 100% money-back guarantee. Click the link above to visit the School website.

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