Major donors and the fizzle effect

Charities should build relations with entrepreneurs before they sell their businesses, reports Patrick McCurry

Developing a major donor programme has been near the top of the agenda for many fundraising teams, but it is still an area where many of them struggle to make an impact.

Some of the reasons for this lack of progress were tackled by Angela Cluff, principal fundraising consultant at the Management Centre consultancy, in her session yesterday. Dispelling the Myths - the Truth About What Really Works in Major Donor Fundraising was intended to pass on some of the secrets of effective major donor programmes.

"Most larger charities have been talking about major donor fundraising for the past 10 years but, even now, they're raising much less than they'd like to from this source," Cluff told Third Sector.

Fizzling out
One of the big problems, she says, is that major donor programmes often fizzle out before establishing themselves: "Few organisations have the number of major donor fundraisers needed to build a critical mass, and often programmes get started but aren't able to grow to a sustainable size."

Cluff adds that the problem is particularly acute for medium-sized charities, which will often recruit a major donor fundraiser, only to find that he or she moves on after only 18 months or so, and the programme fails to really establish itself.

For those charities that are able to develop a major donor programme, one potentially lucrative pool of donors is entrepreneurs who sell their businesses to private equity houses or corporate buyers for
large sums. But it is important to identify potential donors before they have cashed in their business
fortune, according to Philip Beresford, who compiles the Sunday Times Rich List.

He says that if charities simply try to target a business person who has recently sold a company, they will
face fierce competition from other charities and good causes for a significant donation. But if charities can develop a relationship with entrepreneurs before they sell their businesses and the scale of their wealth becomes common knowledge, then charities will stand a much better chance of recruiting them as major donors.

Each year, about 100 of the 2,000 people named on the Sunday Times Rich List sell their companies and find themselves with £40m or more in the bank.

"These people have more money than they really need, and they know it, so it's important for charities to have got to know entrepreneurs before they sell their companies because, as soon as the sales happen, they will be in the press," says Beresford.

The challenge, therefore, is to try and identify prospective donors among entrepreneurs who have not yet sold their businesses, but might do in the future. If charities can identify prospects of this kind, it is important to try to get an introduction to the entrepreneurs concerned through someone they know, rather than simply trying to contact them out of the blue. After that, it is a case of building the relationship.

"It's not about asking for a donation immediately, but just getting to know each other," says Beresford.
He stresses that, in the current economic climate, few company sales of this kind are going through, but says this should not put charities off.

"Sales have dried up for the time being," he says. "But now is the time to develop those relationships that could pay off further down the line."

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