There were several big surprises for me when I started working in prospect research. How casually we toss around numbers like “billion” and “million.” How much personal information is publicly available in the U.S. How volatile exchange rates and currency markets are*.
But the biggest surprise for me was learning that individual giving makes up the vast majority of donations for American nonprofits.
Like a lot of folks outside of fundraising, I assumed that government grants and foundations made up the majority of donations. Here is the reality, courtesy of Giving USA:
Source: Giving USA Foundation, 2014
In addition, I assumed that program-services income (tuition, memberships, tickets) and government grants made up most of the income for nonprofits. Which half true, in 2010 program services revenue generated about 72% of non-profits’ income (Source: National Center for Charitable Statistics 2011). 22% came from donations and grants. Of which, as previously stated, almost two thirds came from individual donors, not government grants. (That’s Prospect Research Fuzzy Math™. You’re welcome.).
Now, for old-school front-line fundraisers, none of this is new. But for me, a brand-new prospect researcher, this was astounding information. Despite working at nonprofits since I was 14, and a lifetime of listening to NPR membership drives, I never realized what a large chunk of nonprofits’ operating budgets were dependent the whims and good graces of donors. I had the vague sense of doom that accompanies many nonprofit workers and I knew that donations “were important” but I never knew the details.
Understanding that individual fundraising is not about getting extra money, it is about ensuring the lifeblood of the organization doesn’t hemorrhage and it survives another year, helped me make sense of and value fundraising in a way I hadn’t before. It is (generally) not optional, it is (ideally) not about greed, it is about supporting the mission of an organization. It also drove home that if organizations don’t want to fundraise, they will need to radically change their financial model. This isn’t impossible, but fundraising does provide a cushion for nonprofits that allows them to do activities that are more in line with their mission, but not cash-generating.
In many ways, understanding the financial structures of nonprofits is similar to understanding the financial aspects of being a working writer. Despite a lifetime of reading and buying books, many people don’t truly understand the relationship between sales (of books, sub-rights, workshops, etc.) and the ability of writers to diseminate their “mission” i.e. good writing, whatever that means to them. Every dollar raised from donors and program services is money that can go to future services and the overhead that makes services possible, like electricity, rent, salaries, etc. Every dollar raised from book sales is a dollar that writers can put towards their overhead, like food, mercurial laptops, and wages for their babysitter, all of which enable more writing. So book sales and fundraising are not obtuse or crass parts of the mission, they are a fundamental component of the machine that makes the mission a reality. If one doesn’t like fundraising, or selling things (and those are valid feelings) then the solution cannot be to just take that component out, the solution must answer the question, “how do I get the necessary resources another way?” Ultimately, conversations about fundraising and sales are conversations about resource management.
If you are interested in learning more about the business of writing, I highly recommend my friend Mike Underwood’s recent article 25 Publishing Secrets Revealed, Or Inside the Bookish Shatterdome. If you are interested in reading about some non-traditional resource-gathering, I recommend checking out the financial model of Cristo Rey High School, a Jesuit** dual language school in my old neighborhood.
*Seriously, currency is like the wacky roommate of global economics who just decides they want to paint the living room red because Currency dreamt about Christina Hendricks last night after passing out from too many shots of baijiu. Never mind that there isn’t any real connection. Currency is going to get excited and paint that room red/plunge in value goddammit, no matter how many people it annoys. OUR GLOBAL ECONOMIC SYSTEM IS RUN BY MOODS, PEOPLE.
**Jesuits, a.k.a. “We Were Social Entrepreneurs Before It Was Cool”