Recurring Donation Fundraising Strategies for Nonprofits
What is Recurring Crowdfunding? (The Short Version)
1. A nonprofit sets up recurring bank drafting through an organization such as PayPal.
2. Dedicated donors sign up for this bank drafting at a rate of $5, $10, $20 per month, etc.
3. The nonprofit cultivates this core community while advertising the benefits of Recurring donations to potential donors who are not so convinced.
4. "Not-so-dedicated" potential donors are swayed to give on a recurring basis.
5. The nonprofit then moves forward with its projects, secure in the knowledge that a certain amount of funding will be coming in every month.
6. The nonprofit must then retain the loyalty of its recurring donors using anything from thank you e-mails to donor incentives and personalized expense reports showing where these recurring donations are specifically helping the community.
7. The nonprofit can still raise funds and apply for grants, as needed, while still bringing in more monthly donors.
8. Happiness, security, and a solid donor community :)
Overview of Typical Fundraising
Over the past 300 years, nonprofits and charities have become more and more an essential part of modern society. Churches, hospitals, homeless shelters, and others have all brought in billions of dollars over the past several decades to fund their operations and to reach out in their communities and into the global community as a whole. With the invention of the 501(c) 3 IRS designation coupled with the proliferation of urban living, the average citizen's surplus dollars can impact the lives of our neediest neighbors in increasingly meaningful and personal ways.
Traditionally, nonprofits and charities have been funded almost exclusively in one of three ways:
1. One-time donations
2. Fundraisers and Benefits
3. Government grants and Foundational grants
However, as the number of nonprofits in our society grows (there are over 1.5 million 501(c)3s who earn over $25,000 per year in the U.S. alone), the ways they receive funding cannot stay the same. These three methods will not sustain the financial missions of all these groups. But, don't take that as a grim outlook on the future of these often amazing, dynamic organizations. Instead, view this as an opportunity to take fundraising in a new direction, a direction inspired by the great need for personal moments in today's digital age: Recurring Crowdfunding.
Research supporting Recurring Donations
Short Term Benefits for the Nonprofit
The employees, directors, and founders of nonprofits are often highly underpaid for their services relative to the money they could be making in the private sector. As such, it is at least somewhat safe to assume that they are taking this pay cut in order to serve a higher cause or the greater good. No matter your opinion of the nonprofit world, it is difficult to argue with the fact that many millions (even billions) of lives have been bettered by the sector's individual employees working toward a meaningful goal.
However, life as a nonprofit worker can bring many stresses and financial worries that the average private sector worker may not have to contend with. This is where Recurring Donations come in, especially in smaller nonprofits (25% of nonprofits make less than $50,000 per year) with only a handful of employees. Giving a one time gift of $20 can show a belief in this person's cause. But, a recurring gift of $20 per month shows a commitment that can truly inspire the men and women striving to make our world a better place.
Recurring Donations are obviously the most effective over a long period of time. But, there's something special about that initial sign that another human being is out there and is "putting his money where his mouth is" when it comes to his belief in your work. That moment can be transformative in a person's career.
Paypal Get Started Guide (For Nonprofits
PayPal is one of the most trusted names in the world of financial transactions. Using their services does incur a slight cost to the nonprofit for each monthly drafting. But, this cost is normally quite preferable to the average fees of fundraising.
Long Term Benefits for the Nonprofit
Recurring donations are huge in the long term. Statistics show that one-time donors only return to give the next year less than 30% of the time. That means that of the 100 people donating to [insert nonprofit here] in 2013, only 30 or so will give again in 2014.
Now, compare this with the statistic that Recurring Donors will give between 600-800% more over their lifetime to an organization than the sporadic donor. That's huge! Like, really huge!
Recurring Donations do more than just statistically vamp up financial giving. Recurring Donations foster trust. Take Speak Up Magazine, for instance. This nonprofit magazine based in Charlotte, NC writes about social justice issues in the area and offers its magazine to "homeless vendors" so that they can become their own independent, micro-entrepreneurs. As a magazine, Speak Up's employees, volunteers, supporters, and vendors are always assuming a new issue will be coming out soon. However, without a proper source of reliable income, how can this nonprofit assume anything about its future?
The same goes for the majority of minor and even some major nonprofits in the U.S. today. These nonprofits must operate under the assumption that their projects will eventually find the funding they need.
What if donors were able to change that? As we have been learning here today, they can! A steady stream of donations from monthly givers allows the nonprofit and its employees to move forward on more than just blind faith and assumptions. Thus, they can dream bigger, plan better, and execute in a more timely manner.
Nonprofit Revenue Graph (2004)
Recurring Donations Cut Down on Overhead
Overhead is one of the biggest considerations that most donors consider before giving.
A major benefit of recurring donations is the very low fundraising costs associated with this method. Most giving platforms offer a very good rate to nonprofits.
Normally this rate is something like:
2% of each monthly donation+ $.30
This is an almost unheard of level of overhead cutting for many organizations and brings great peace of mind to potential donors that their money will be going toward the cause and not toward fees.
How do you normally give?
Short and Long Term Benefits for the Donor
Typically, a recurring donor is the most informed, most appreciated donor that a nonprofit deals with on a consistent basis. Examples of normal incentives/programs for recurring donors include:
-Detailed electronic/paper newsletters
-Thank you letters from actual clients aided by the nonprofit
-Detailed expense reports of how donations are being used
-Special incentives (t-shirts, tickets, products, etc.)
-Being a part of the polling/voting block of the organization, potentially influencing key decisions
-Sometimes, a larger voice in the organization's actions
-A partnership/forum/community of recurring donors to join
On a less objective note, long-term recurring donors feel a much, much tighter bond to their nonprofit than the occasional donor. Even donors who give very large sums on a sporadic basis do not report the level of commitment and partnership that the recurring donors do.
Recurring donors often see themselves as jumping into the ship with the nonprofit instead of just pushing them off the dock.
Specific Process of Recurring Donations
The single largest obstacle for nonprofits attempting to sign up Recurring Donors is education. The concept of allowing an organization to draft money from one's bank account can sound very scary to certain people. Even if you're a local homeless shelter or an established organization like GreenPeace, education is the key to turning occasional donors into recurring ones.
The same is true for the other side of the coin. If you are looking to become a Recurring Donor, you should read about some of the more reputable giving platforms and even inquire with your potential nonprofit partner about which one they use.
If you are a nonprofit looking to set up Recurring Donations, I recommend looking at the PayPal PDF to the right of this section for specifics on the actual process of setting up payments (Typically, PayPal gives an extremely competitive rate for nonprofits).