February 3, 2023

A fundraising guide for nonprofits

Nine steps to help ensure your nonprofit’s fundraising game is stronger than ever.

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1. Invest in research to identify donors aligned to your cause and values

Most organisations undermine the value of research while fundraising, which results in them spending a lot of time on reaching out to a laundry list of potential donors that they have a very small chance of converting. Identifying the optimal potential donor and understanding what they stand for is crucial when planning your fundraising strategy.

Platforms like Candid, which have a database of more than 100 foundations, can help you identify donors most aligned with your cause and geography. Similarly, Tamuku is a subscription-based platform that identifies, curates, and provides high-quality and relevant information, opportunities, tools, and resources for fundraising. To identify relevant high-net-worth individuals (HNIs), you can look up the annual Hurun India Philanthropy List.

Learn more about the decision makers in funding organisations, their motivation to give, alignment with your cause, theory of change, and the way they engage with other nonprofits. The best way is to listen to them in forums, follow them on social media, read their thought articles, and speak to peer nonprofits that have been supported by them. Then, create a sharp, targeted donor list and aim for at least a 50 percent conversion rate from e-mails to a meeting.

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2. Reach out to your targeted donors

The most effective way to reach out to your target donor base is by finding a shared contact within your network, especially advisory and/or governing board members who can introduce you to them. If a common contact doesn’t exist, look for common interests that can help you initiate a conversation with them. You can find senior corporate leaders and young philanthropists on multiple online platforms, where you can enter into a meaningful dialogue with them on social issues.

Fundraising is also ‘friend-raising’, so invite potential funders to roundtables, webinars, conferences, or any other knowledge-sharing events that you plan for your stakeholders. Create opportunities for those who are interested in contributing with their time as well.

3. Diversify across multiple donor types (HNIs, CSR and non-CSR foundations, retail)

Although there is no perfect recipe or ideal composition, a single donor should ideally not contribute more than 25 percent of your total expenditure. Different donor types fulfil different funding needs; therefore, one needs to be strategic in acquiring a diverse array of donors as early as possible.

CSR donors can be easy to acquire if your organisation’s cause is aligned with their focus area.

Philanthropic foundations provide mid- to long-term grants (three to eight years) but offer high credibility and the flexibility to support organisation building. On the other hand, HNIs offer short- to medium-term funding and greater flexibility, and their support can increase year on year. However, HNIs are quite difficult to bring on board as donors because organisations often lack access to such individuals. CSR donors can be easy to acquire if your organisation’s cause is aligned with their focus area, but they typically provide short-term (one to three years) grants. Additionally, their funds are typically reserved for programmes and only a limited portion can be used for capacity building.

Flexible funds are significantly more valuable than programmatic funds, so it is critical to onboard, retain, and engage retail funders as well. Retail funding comprises donations obtained from individual donors through online and offline campaigns and events, and such funds offer immense flexibility and improve brand visibility. Retail fundraising can prove to be resource-intensive, but these unrestricted funds can be used for corpus building, capacity building, and other experimental ventures that restricted grants do not fund.

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4. Engage donors meaningfully

Creating opportunities for your donors to experience and contribute towards the impact of your programmes can help deepen your partnership and lead to long-term support to the cause. Every organisation should aim to have 70–80 percent donor retention rate; this also builds credibility for new donors. But this requires going beyond merely sending quarterly and annual reports.

Start with identifying donor strengths and expertise and inquire about their area of interest and availability. For example, Arpan utilises the DRK Foundation’s in-house expertise to update their theory of change, mission-critical indicators, and impact assessment framework. This offers Arpan’s team a fresh perspective to review their program impact and elevates the donor’s trust and confidence in seeing their work. Similarly, the DRK Foundation works closely with Arpan to enhance their fundraising and communications functions, which helps Arpan position its work suitably for international audiences, especially international funders. Antarang Foundation, on the other hand, invites corporate leaders from their donor pool to engage with their alumni student community as mentors and career coaches. This gives the donors an opportunity to directly interact with the students and learn more about their career aspirations, and understand the value of the career guidance and counselling support offered by Antarang.

Additionally, it is equally important to identify and acknowledge your anchor donors—the ones who stood by you during your highs and lows and always advocated your work in their networks to influence others to join the cause and contribute. They are the ones who rooted for your organisation’s success and invested in long-term impact. Involve them in building your organisation’s strategy and growth plans.

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Building home-grown teams instead of working with fundraising agencies is more sustainable in the long term. | Picture courtesy: Pexels

5. Educate donors on institution building

One of the most common challenges for nonprofits is raising funds for building their core functions, including human resource management, monitoring and evaluation, fundraising, and communications. They fail to sufficiently account for these costs, and this affects the long-term sustainability of the organisation and its programmes.

Avoid asking for short-term quick fixes.

While the Pay What It Takes collaborative is working to educate and influence donors, you too can contribute to this. Share reports and case studies with your donors and initiate a dialogue about similar needs for your organisation. Avoid asking for short-term quick fixes; instead, develop a strategy and operational plan for a three- to five-year capacity-building endeavour, and pitch this with clear success metrics. The best way to start is by conducting a need assessment of all your non-programmatic functions and understanding the organisation’s strengths and challenges.

It is also beneficial to indicate that your organisation will be ready to absorb the cost and sustain the capacity-building investments post donor exit.  

6. Build reserves and a corpus

The key to building a financially resilient organisation is to have reserves (six months) and a corpus (12 months) that will enable you to survive any adverse situation.

An operating reserve is an unrestricted ‘rainy day’ fund that can protect the organisation against unexpected financial shocks. A corpus is a separate emergency fund that can be raised from either surplus (15 percent of the total organisational income or surplus can be allocated to the corpus) over time or through a donation with a donor’s written consent. It takes years to build this kind of financial resilience, but it needs to be worked on as soon as possible. Your anchor donors and HNIs are your best bet to help you fundraise for this cause.

7. Engage your leaders strategically and build your fundraising team

Fundraising in smaller organisations is founder-driven. It takes up a lot of their time as they are building out their donor base and nurturing relationships. However, as an organisation matures and stabilises, it is advisable for the founders to spend no more than 25 percent of their time on fundraising. Instead, they can invest time in developing the organisation’s growth strategy, second line of leadership, and culture. Therefore, it is essential to build a fundraising team that can lead donor research, outreach, and engagement.

It is necessary to bring in talent or expertise that will complement your existing team skill set and solve for missing gaps.

Before deciding to hire a senior resource, you must clearly understand your organisation’s current skill set, competency, and bandwidth gaps, especially if its a small to midsize nonprofit. You must recognise where your organisation’s challenges lie. Do you need help with churning out proposals? Do you need doors opened? It is necessary to bring in talent or expertise that will complement your existing team skill set and solve for missing gaps. 

In addition, building home-grown teams instead of working with fundraising agencies is more sustainable in the long term. Courses such as the ILSS Fundraising Program can benefit team members who are new to the fundraising domain or have crossed over from the corporate sector. It is critical to provide them with the right toolkit and mentorship and set them up for success. In a recent analysis of ATE Chandra Foundation’s portfolio organisations with a median budget of approximately INR 10 crore, we saw that fundraising accounts for approximately 3 percent of an organisation’s total expenditure and it starts paying for itself within two to three years of investment. This cost may increase if you invest in building a retail presence.

8. Engage your board meaningfully

Board members are often the most underutilised resource in most organisations. Therefore, conduct a board governance evaluation to understand the effectiveness of your current board. Create a role and accountability system to engage your board meaningfully and develop a culture of rotation to ensure that there are new ideas and connections that the organisation can leverage. This can be achieved by bringing on a board member with a fixed tenure (less than five years).

Identify board members who can become your fundraising champions and can play a catalytic role in your fundraising journey. There should be clear targets in place that require actively involving them and not limiting their role to solely providing advice. You can engage organisations such as Atma to help you review your current structure or join the board governance programme offered by ILSS or ISDM to bring in new board members.

9. Build internal success indicators 

Once you start putting some of the above practices in action, how do you measure success? It is advisable to look at some critical indicators to ensure everyone involved in the fundraising endeavour remains accountable. Start with simple metrics such as donor conversion rate, engagement rate, retention rate, funding diversity (percentage of funding from CSR, HNIs, etc.), reserves and corpus as a percentage of total annual expenditure, and the percentage of time spent by founders on fundraising. Having these in place will help you track your efficiency and effectiveness.

Fundraising is a particularly challenging yet rewarding function and has the capability to secure the highest return on investment. The team hired to fundraise should be excited about research, communications, networking, and relationship building to ensure the long-term sustainability of an organisation. However, every organisation will be at a different stage of maturity. Therefore, you need to decide what is best for you based on your strengths and challenges. A good way to start is by assessing your funding models using the methodology provided by Bridgespan. You can then create a fundraising plan for the next year in a manner that leverages your resources effectively. 

Know more

  • Read about the basics of building a retail fundraising model.
  • Read this article to learn how nonprofits can tap into the potential of individual giving.
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ABOUT THE AUTHORS
Poonam Choksi-Image
Poonam Choksi

Poonam Choksi heads ATECF’s capacity-building vertical, which is focused on building the capacity of individuals, organisations, and the ecosystem. She has previously worked with UnLtd India, an incubator for social start-ups, and led their monitoring and evaluation function. She has also worked with Adhyayan and led the scale-up of their flagship school evaluation programme to more than 300 schools across India.

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