Fundraising is an essential part of many nonprofit organizations’ operating budgets and can directly affect their ability to fulfill their missions.
For many donors, fundraising is a balancing act between wanting to give back or make an impact and avoiding oversolicitation.
Here we discuss 10 questions a donor might ask when deciding between making a donation to your nonprofit or choosing another organization or cause.
1. Are you a qualified nonprofit organization such as a 501(c)(3), and how long have you been around?
There are two thoughts behind these questions:
- Donors may want to know if the organization is trustworthy.
- Will the donation be tax deductible? Most donors look at this status as a major sign of legitimacy, confirming their donation will be used for its intended purpose.
They also will likely want to know how long your organization has been around; in our experience, it is rare that donors want a play-by-play history, but knowing how many years of experience your organization has can definitely influence donor perception.
2. Who is responsible for running the organization and/or making financial decisions? Who serves on the board of directors?
Donors generally work hard for their money and care how it is spent. Whether individuals, foundations, or corporations, donors want to know the money they donate is going to be used responsibly toward its intended purpose.
You want to be able to make it clear who is responsible for financial decisions, who safeguards the process, and who oversees/monitors it at the highest level.
Along these lines, it can also be helpful to donors to see management/director commitment. Seeing that your organization’s leadership donates their own time and/or financial resources can help donors to feel more comfortable with your commitment to mission success.
3. What does your organization do, what is your mission, and what are your operations/programs? Are there any current legal or operational challenges?
According to the 2018 U.S. Trust® Study of High Net Worth Philanthropy, personal values and interest in the so-called “issue area addressed” by the nonprofit organization ranked highest with individual donors (for example, a homeless shelter would have an issue area addressed of homelessness). Donors, whether individuals or others, are going to want to understand your organization’s mission, your history of achieving it, and plans for current objectives, programs, and operations. Questions like, “Has your mission changed over time” and “Will your mission be the same in 5–10 years” are increasingly relevant to donors, especially as they consider larger or longer-term support for your organization.
In a similar vein, donors might also want to know if your organization has been involved or is currently involved in any litigation, especially if it could take away resources from the donors’ intended impact or damage the reputation of the organization. Following best practices around nonprofit operational management is one way to help minimize the potential for litigation. Lawsuits do happen — if your organization is facing one, be ready to tell the truth so that donors feel comfortable that your organization is honest.
4. How do you measure the impact of your organization’s operations?
Perhaps more than ever, nonprofit organizations are being asked to show their impact. Additionally, is your organization shrinking, maintaining, or growing its operations, footprint, or scope?
Donors want to know their dollars are making a difference — whether that proof is in marketing materials, a regular email update or newsletter, or an annual report, it is important to have a strategy around answering this question.
This becomes especially important in encouraging donors to become repeat or recurring donors: If you can prove their contributions mattered, they will be more likely to want to give again.
Donors also want to understand your position on sustainability, diversity, and inclusion. In today’s environment, there is much greater awareness and emphasis on these factors as important drivers for positive growth in our communities. Donors want to know the organizations to which they donate are a cultural fit for the responsible values the donors personally embrace.
5. What reporting and transparency do you provide regarding the application of my donation?
At the core of this question are two related interests:
- How is the money being used?
- How much of the donation is going to the mission/cause relative to overhead costs or other related expenses?
Donors want to know their donations are making a difference, and to know that they need proof. If you can provide your potential donors with examples of this reporting, and your existing donor base with ongoing reporting of this nature, it can go a long way toward increasing donor confidence in your organization.
6. What does your organization do to protect donor information from an information technology perspective?
Unfortunately, cybersecurity breaches are a daily threat. Opportunists are constantly looking for ways to steal data, money, and information. Because nonprofit organizations hold a significant amount of data on their donors, including important financial information, they can be a prime target for hackers. Further, many nonprofit organizations are soft targets, given budget limitations around areas like network security. Following best practices for cybersecurity and data storage can help minimize the risks of a breach. We suggest having a plan in place and being able (and ready) to communicate that plan to prospective and current donors.
7. Could you share with us the profile of your donors? Where does your support come from?
It can help donors feel more confident in donating to your organization if they know there are donors similar to them or with similar values contributing to your cause. Does your support come from individuals, government sources, corporations, or foundations? Is there any operational/earned revenue? The answers to these questions can help reassure potential donors that your organization has been vetted and approved by these various sources. A representative donor list and key demographic information can be valuable in instilling confidence in future donors.
8. What is your strategic long-term plan? Will you still be here in 25 years?
No donor wants to give money today only to hear that you are closing up shop tomorrow.
They want to know your organization is financially stable; for example, are you staying within your operating budget or overspending and making special withdrawals from the endowment?
Donors want to know your organization is sustainable and that they are not going to have to write a new check every year to keep your organization afloat. Having well-kept and easily readable financial statements can help donors feel confident that your organization is prepared to continue its mission long into the future. Likewise, having a well-written strategic plan that you can share helps donors make a financial commitment.
9. What does your cash flow look like? Do you have regular, ongoing donations, or do you rely on big one-off donations and major capital campaigns?
Nonprofit organizations entering bankruptcy due to liquidity issues helped create the need for the Financial Accounting Standards Board (FASB) Accounting Statement Update (ASU) 2016-14, which changed the way nonprofit organizations report liquidity. Donors want to know your organization has the cash flow to sustain its mission and operations, whether through regular ongoing donations or big one-off donations and major capital campaigns.
Other important questions to consider include the diversification and concentration of your asset base: Are donations coming from a single donor type, a few sources, or do you have a wide support base? Being prepared to answer these questions can help reassure donors that your organization is not headed for financial insolvency.
10. Who are your competitors, and with whom do you collaborate?
There are many nonprofit organizations out there, each trying to do well by the communities and missions they serve.
Oftentimes there is overlap, and organizations that are able to collaborate can usually stand out and better achieve their missions.
How is your organization different, how does it collaborate, and how do you tell its story of delivering the promised impact? Knowing this will help donors feel confident that your organization is the right one to support with their donations.
While it might begin to feel like every year is “the most difficult time in nonprofit history,” it is easy to understand why consensus might agree that now is a time of challenge and change. Fundraising is an important part of weathering this storm, and following the Tax Cuts and Jobs Act of 2017, the philanthropic landscape has changed and perhaps gotten more difficult. Being prepared to answer donor questions can help your organization cultivate and steward today’s donors while preparing for tomorrow’s.
The Endowment & Foundation National Practice Group builds on PNC Bank’s long-standing commitment to philanthropy and is focused on endowments, private and public foundations, and nonprofit organizations. Our group is structured to help these organizations address their distinct investment, distribution and capital preservation challenges.