The Donor Development Process Presented by John Elbare, CFP Florida Philanthropic Advisors, LLC Copyright 2013 Florida Philanthropic Advisors, LLC

Donors or Donations? What is more important in your organization, donations or donors? Your answer has a lot to do with your success! Copyright 2013 Florida Philanthropic Advisors, LLC

Transactional Approach Transactional approach is inherently inefficient. It provides no positive reinforcement for the donor. It misses out on most of the economic value of a donor: a large gift at the end of life.

The Problem A fund raising strategy based mainly on raising funds usually results in revenue stagnation. Why? Lapsed donors. Donor who make a gift and never give again.

Donor-Centered Approach Recognizes the economic value of a donor’s giving over a lifetime Focuses on helping the donor feel involved with the mission. Encourages a sense of investment in the mission

Why is This Important? The key to sustained success is a base of loyal donors. If you do not retain your donors, you are spinning your wheels.

A Typical Case Clarence donates through Giving Challenge -- $50. He becomes a steady donor at $100/year He is personally solicited and starts giving $1000 annually He leaves his home as a gift in his will

The Economics Year one……….......................$ 50 Years 2 – 6 = $100/year........ 500 Years 7 – 14 = $1000/year.... 8,000 At death = $125,000............ 125,000 Lifetime Giving 133,550 Average per year: $ 8,900

Questions: How would this donor be treated by your organization? Would you have noticed him? Would have cultivated a relationship with him? If not, why not?

What is the Real Value of a Donor? This year’s gift? Past Giving? Current Giving? Potential for Future Giving? An Entire Lifetime of Giving?

Development Pyramid Larger Gifts Planned Gifts Major Gifts Smaller Gifts Annual Gifts New Donors

What’s the Solution? Growing a Loyal Donor base This is the key to building a growing, sustainable source of revenue.

A Critical Question What does it feel like to be a donor to your organization?

Warning Signs You have a high donor lapse rate (or you do know your lapse rate) You do not know why your donors drift way Your revenue is not increasing substantially every year.

So, How Do We Do It? By intentionally building strong relationships with our donors By helping them feel good about their support and involvement By providing positive reinforcement By providing opportunities for involvement

What Does A Donor-Centered System Look Like? Donor Acquisition Donor Retention Donor Upgrading Major Gift Planned Gift

Donor Acquisition Continuous new donor acquisition is essential for long-term success in fund raising. Your organization needs a steady flow of new donors to grow your donor base. Without a growing donor base, your revenue decline, not increase, over time.

The Acquisition Challenge A donor’s first donation is usually: That donor’s smallest donation The hardest donation to get The costliest donation to raise A way to test the charity So, why don’t we work hard to keep the new donors we do acquire?

Donor Renewal It is far easier to retain a donor than to go out and find another one to replace a lapsed donor. Personal renewal letters Exemption from frequent solicitations Reports on the organization’s work Donor recognition club Opportunities for involvement

Your Opportunity Every gift is an opportunity to provide positive reinforcement and strengthen the relationship. It is also an opportunity to harm the relationship and send the donor elsewhere.

Why Do Donors Give? Donors give because they care about your charitable mission. Your success in fund raising depends on how well you make your case for support.

Positive Reinforcement A behavior strengthens if it is immediately followed by a positive reinforcer (reward) A behavior reduces if it is not followed by any reinforcer (extinction) A behavior is suppressed if it is followed by a negative reinforcer (punishment)

Gift Acknowledgment Use personal thank you letters Get their names right Connect the gift to the cause Get letters out fast Treat every donor well, despite gift size Make follow-up phone calls Involve Board Members Find out how they want to be involved Begin relationship building with the first gift Use a new donor kit

Keep Good Records You need a good information system: Record of all transactions Donor giving histories Gift acknowledgments Mail sort capability Contact management

Goals of Good Donor Relations Make sure every donor is properly thanked after each gift. Proactively manage your donor renewal and upgrading process Identify donors who are ready for personal cultivation and begin that process Work to maximize each donor’s lifetime support for your organization.

The Giving Decision People give from the heart They give to help people they empathize with People do not give because your organization has needs

Opportunities for Involvement Tours of your programs, facilities Lunches with the CEO Opportunities to meet clients Opportunities to meet/shadow staff Opportunities to volunteer Good communications Invitations to all events

Donor Recognition Clubs Avoid a lot of levels Recognize both annual and cumulative giving Annual recognition event Publish an Honor Roll Consider a Donor Wall Offer Certificates Avoid Expensive Gifts

Donor Upgrading Monitor donor giving histories Raise the ask amount, based on past giving Tie the new amount to service levels Consider a monthly giving program Move to personal solicitations when loyalty is established.

Personal Cultivation Donor acquisition, retention and upgrading is designed to produce a steady flow of loyal donors for personal cultivation. Virtually all large gifts are obtained through personal, face-to-face relationships.

The Donor Relationship Cycle Identification Cultivation Stewardship Solicitation

Some Important Metrics Number of new donors Lapse rate Average gift size by donor Cost of raising funds Years of consecutive giving (loyalty) Number and timing of mailings

Fund Development Plan A written plan is essential for reaching your goals. A failure to plan is a plan for failure.

Your Plan Keeps You Focused Often, the fund raising staff is: Under-trained and overworked Given unrealistic goals Given insufficient resources Given little or no board support Provided with no systems, plan or policies Yet -- they are expected to raise money! Copyright 2013 Florida Philanthropic Advisors, LLC

Benefits of a Development Plan Stay focused on priorities Obtain sufficient support Engage the Board Use resources wisely Ensure feasibility Maintain balance Provide accountability

Characteristics of a Good Fund Raising Plan Strategic in Scope Written Feasible Clear Objectives Defined Activities Measurable Outcomes Easily Evaluated

Strategic in Scope Your fund raising plan reflects your strategic plan You are making your case for your vision

Making the Case Making the case for support requires both: Factual Reasons – why a gift is a good investment in a charitable cause. Emotional Reasons – how a donor can empathize with the people who are served.

Investment in the Program Without adequate investment, a promising fund raising program is doomed to failure. Undercapitalization is the biggest reason for business failure – applies to fund raising as well.

ROI for Fund Raising Strategies Low ROI: Acquisition Mail Special Events Renewal Mail Thrift Stores Memberships High ROI: Monthly Giving Personal Ask Major Gifts Planned Gifts Capital Campaigns

Typical Giving Patterns Initial Gift $25 - $100 Renewal Gift $50 - $500 Major Gift $ 1000 - $50,000+ Planned Gift $ 25,000+

Cost of Raising Funds Initial Gift 50-100% Renewal Gift 25-50% Major Gift 10-20% Planned Gift 5-10%

Feasibility The best fund raising goals are feasible yet ambitious Unrealistic goals can destroy your fund raising effort; they build in a sense of failure and demoralize your staff and volunteers

Fund Raising Systems A system ensures that policies, procedures and practices are consistently followed. A good fund raising program is system-dependent not people-dependent.

Examples 1. We need your support for our home nutrition program. We serve 580 seniors and now need to purchase a new van and hire 3 more staff. 2. Your gift will help feed homebound seniors in our community. With your help, we will make sure no senior goes hungry.

Elements of a Plan Strategic Goals Donor Development long-term and short-term Donor Development Acquisition Renewal Upgrading Personal cultivation/solicitation Major/planned giving Stewardship Metrics & Reporting

Example of a Goal “Our goal is to raise $500,000 this year to establish an endowment fund that will provide on-going support for client assistance every year. A $500,000 endowment will provide approximately $20,000 each year in client assistance funds.”

Sample Activities Target Group: Loyal Donors who have made a gift every year for the past 4 years and/or who have a cumulative giving of at least $ 1000. Activities: Compile prospect list Hold prospect review sessions, rate prospects Send approach letter and follow-up phone call Seek personal visit Solicit gift after appropriate cultivation Expected Outcome: 10-15 letters & calls per week; 3-5 visits per week; 2 solicitations per week; two gifts per month, avg. $ 7,500.00 = $180,000/year Expenses: Mileage, meals, postage, printing = $6,000 Staff Time: 25 hours/week Timeline: Start Oct 2005, then continuously

Are your reports focused on the money or the donors? Indicators Watch these data: Number of new donors Number of lapsed donor Lapse rate Renewal rate Size of donor base Growth (or decline) of loyal donor segment (5+ years of annual giving) Are your reports focused on the money or the donors?

Florida Philanthropic Advisors, LLC Planning Pays Off! Florida Philanthropic Advisors, LLC 813-562-9333 www.floridagives.org www.pgcoach.org Jelbare@pgcoach.org