A Dollar Earned: Making

Cents of Donations and

Fundraising for Non-Profits
By: Bob Starr

Even as we slowly begin to find our footing after the unfortunate state of economics
communities, and individuals, are looking to give back to those in need. Goodwill has never
been more present but it has come with a price, literally in this case. Donors want to know
non-profits are spending their gifts wisely; with most if not all of the money going toward
the cause itself.

click2cause.com recognizes this very important consideration when it comes to

donors. To start with click2cause.com has implemented the 80% rule, meaning 80% of
every donation goes to the cause itself. This is our promise to all our donors and to the
champions of each cause. Further to this, all donations are held in trust for the Beneficiary
in Federally Insured Deposit Accounts.

The 80% rule has become a standard in the fund-raising industry. While there are
government grants and the like which can be applied for those infusions of funds are not
enough to keep a non-profit running. Ongoing donations are the life blood of charitable
organizations, the cash flow that keeps the lights on.

When people think of a charitable or not-for-profit organization it's easy to forget

these entities incur operational expenses. Functionally speaking, non-profits act much like
any other business save for the fact the "profit" they generate goes to the cause being
supported. As great as it would be to see donations applied on 1:1 ratio the simple fact is
they can’t be. Every dollar raised must be split between the cause itself and those
championing the issue.

So, just how much does it cost to raise a dollar?

Some would have you believe the answer to that question doesn’t exist. In
particular, Mal Warwick is quoted as saying:

"The 'overall fundraising Cost to Raise a Dollar' is a myth. There is NO

such standard, and anyone who tells you there is one should survey the
real world of fundraising in all its diversity. One organization might be
embarrassed to spend more than a dime to raise a dollar, while another
might be fortunate to squeak by with 40 or 50 cents on a dollar -- and
both might be ethically run, well managed organizations."
 A Dollar Earned: Making
Cents of Donations and
Fundraising for Non-Profits
By: Bob Starr

The statement itself does have merit, but can also be challenged. While no standard
may exist to determine the exact cost of raising a dollar there is enough historical data to
determine a spending threshold. That is to say, how much or little a non-profit is willing to
spend to maximize the cash-flow for the cause itself? Given the unique nature of non-
profits that exact figure can be somewhat elusive.

Typically, the overall cost to raise a dollar (CTRD) is 20 cents. For every dollar
raised 80 cents goes to the cause while the remaining 20 goes to the fund-raising
organization. For click2cause specifically that 20% goes to such things as H.S.T, credit card
processing fees, web development, security, and hosting etc. To put this into a somewhat
exaggerated real world perspective let’s take a look at Apple Inc.

In 2011 Apple’s net income was $211 billion. If they were functioning as a non-
profit it would mean $169 billion of their earnings would go to their charity of choice,
leaving “only” $42 billion to operate with. Okay, that’s still a pretty high number to get
one’s head around. Let’s make it a little easier and replace billions with hundreds. This
would mean that of the $211 earned only $42 would remain for operating costs. Not a lot of
money to run a business with. Again, this is a hyper-real example but helps illustrate just
how small the portion of donations is that goes to the organization itself.

In addition to the average CTRD value fundraising activities themselves can each
have a different ratio in regards to how much is earned for the charity and organization. The
Association of Fundraising Professionals breaks down activities as follows:

1) Direct Mail Acquisition: $1.25 to $1.50 per dollar raised, with 1% rate of
return
2) Direct Mail Renewal: $.25 per dollar raised with 50% rate of return or better
3) Special Events: Net return of $.50 per dollar raised
4) Corporations and Foundations: $.20 per dollar raised
5) Planned Giving: $.25 per dollar raised
6) Capital Campaigns: $.05 to $.10 per dollar raised

Of course, it will be the non-profit’s sense of efficiency that will be the most critical
variable when seeking to maximize the CTRD. Organizations such as click2cause.com,
with well thought out work-flows and delegation procedures, will find a greater return on
the dollar than others. Charities that capitalize on technology can also get more out of each
donation. While processing online payments may cost 3 - 7% on the dollar, the ease of
 A Dollar Earned: Making
Cents of Donations and
Fundraising for Non-Profits
By: Bob Starr

completing such transactions for the donor helps to build a consistent model for continued
gift giving.

As one can see, the cost to raise a dollar can vary greatly. Moreover, it takes a
considerable strategy to align fundraising initiatives with organizational spending. When
properly structured, however, non-profits can find a successful balance between a scalable
organization and advocating a worthy cause to help those in need.

click2cause.com makes it a priority to always evaluate the 80% rule. By

demonstrating best practices and making use of growing social networks online donations
can be better utilized. Recognizing this, click2cause.com will continue to invest in the
future, becoming a safe harbor for donors and their gifts which ultimately make the world a
better place.

Further Reading

● Fundraising Costs. Fundraising and administrative costs. Benchmarking and best

practices. - The Center on Philanthropy at Indiana University
● Return on Investment in Fundraising: Using ROI to Your Advantage. Michael W.
Gerrity
● Article in the University of Alberta's Advancement Services newsletter on
fundraising costs.
● Offord Group. Perspectives on Canadian Philanthropy (2007)