Institute of Fundraising: How much money should be invested in fundraising?

Lyndsay Boswell, chief executive of the Institute of Fundraising

What is an acceptable amount to spend on fundraising? This is a question that is often asked and rightly so. However, there isn't a clear, definitive answer and those that pluck a figure out of the air "because it feels about right" are far too simplistic for their own good. Research shows that the general public, when asked to even consider this issue, assume that the amount spent is considerably more than the average calculated across a wide range of charities.

Different techniques have different cost loadings attached to them. To further complicate things, a technique that is new to one organisation is likely to have higher costs associated with it than another organisation that has been developing and refining that activity over a number of years.

Organisations need to carry out a variety of different types of fundraising to reduce the risk and reliance on one particular method. Imagine if all you did was use direct mail and there was then a postal strike?

Some forms of fundraising have higher costs in the early years, but then the "dividend" is rewarded over subsequent years. So it is also too simplistic to look at fundraising costs and performance over just one year.

Indeed, a FTSE-100 company that had excellent results this year, but had no evidence that this would continue in the future, would probably suffer a fall in its share price. Is it wise to support a charity that cannot show it is investing in its fundraising for the long term?

Take legacy fundraising. It takes time to generate a sustainable programme, yet the investment is all upfront. It looks bad this year, but in 10 years time if you are generating substantial legacies at very low cost your performance is going to shoot up.

So what should you do? If you are a charity, be open and upfront and tell your fundraising story. Let donors understand how and why you fundraise.

If you are a potential donor, then dig a bit deeper. Don't just get the calculator out and do a quick calculation based on the latest accounts.

Demand an explanation and ask to understand what is going on.

One charity I spoke to recently seemed to have doubled the cost of its fundraising in just one year. The overseas affliction they were dealing with was forecast to double almost overnight and they were worried they were going to fail an increasing percentage of their key stakeholders.

Therefore, they were doubling their fundraising efforts in response. They got my money!

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