This article originally appeared in the November 2015 issue of 425 Business.

How nonprofits are raising the funds to survive and grow

Mary Pigott is passionate about composting and about Little Bit Therapeutic Riding Center in Redmond, to the extent that she championed and funded the purchase of a composting machine at Little Bit’s Dunmire Stables. Thanks to Pigott, used bedding from the horse stables is now made into compost and recycled, saving Little Bit the expense of constantly buying new bedding. Pigott’s name is inscribed on a decorative plaque sitting in front of the machine.

Plaques honoring philanthropists are nothing new, but Pigott’s story highlights a trend sweeping nonprofit giving: Donors increasingly want to know exactly how their contributions are making a difference.

“The single most important thing is a one-on-one relationship” between the charity and the donor, said Robin Callahan, executive director of the Issaquah Schools Foundation.

Jenny Metz, special events manager at Little Bit, echoes this sentiment. “What’s important is finding out what matters to donors and helping facilitate a gift that’s meaningful to them,” she said.

Charities need to be flexible to maximize donations. “What we do changes in response to how people want to give,” said Helen Banks Routon, director of development and community relations at Eastside Baby Corner. “Younger donors especially want to see some impact; they aren’t giving just (to give).”

The youngest generation of donors — those under 35 — doesn’t just want a tote bag or mug emblazoned with the organization’s logo. Instead, they might prefer the chance to meet a local luminary or to get VIP tickets to a performance or sporting event.

Elaborate charity galas are not as popular as they were 20 years ago, but organizations such as Little Bit would face opposition from loyal supporters if they stopped holding annual galas; Little Bit’s has been running for 30 years and generates more than $400,000. The event’s success is in part due to the social connection it facilitates for those involved with the organization.

Changes in Corporate Partnerships

Individual donors always have been the backbone of fundraising, but local businesses also provide an important source of income for philanthropies. Gone are the days when for-profit companies were happy to throw money at charities to get their name plastered on T-shirts and banners. Instead, businesses are supporting nonprofits with missions that fit their corporate values, and that support is given in a variety of ways.

Microsoft, for example, rewards employees who donate time to their communities by contributing money for each hour of volunteer work, be it at their child’s school or at a food bank. A group of AT&T employees, to cite another example, recently spent a day at Eastside Baby Corner sorting donated goods.

Eastside Baby Corner held its Diaper Derby in May. Businesses competed to collect the largest donation of diapers, and some 35,000 diapers were collected.

The Redmond Business Showcase, a group of small business owners, recently organized a golf tournament to benefit Little Bit. At recent New Tech Seattle and New Tech Eastside networking events, 12 percent of each participant’s fee went to the Washington State Opportunity Scholarship, an organization that gives scholarships to low- and middle-income students studying science, technology, engineering, or math at state colleges and universities. The partnership makes sense to New Tech, as the scholarship helps build the pipeline of new engineers and scientists.

From left, Eastside Baby Corner’s Director of Development and Community Relations Helen Banks Routon and Executive Director Renee Zimmerman sort donated goods at their Issaquah hub. Photos by Rachel Coward

From left, Eastside Baby Corner’s Director of Development and Community Relations Helen Banks Routon and Executive Director Renee Zimmerman sort donated goods at their Issaquah hub. Photos by Rachel Coward

The Overhead Myth

Some donors have been conditioned to believe that the lower the charity’s fundraising and marketing costs, the more worthy it is of a donation. But three of the nation’s leading sources of nonprofit information, GuideStar, Better Business Bureau Wise Giving Alliance, and Charity Navigator, have teamed up to spread the message that the cost to raise a dollar is not the only metric in evaluating a charity.

To that extent, the organizations wrote two letters. The first went to donors in 2013; the second to nonprofits in 2014. The latter was titled, “The Overhead Myth: Moving toward an Overhead Solution,” and emphasized the need to manage nonprofit organizations with an eye on results rather than costs, and to educate donors on the costs required to advance their missions.

The Issaquah Schools Foundation demonstrates the effect of focusing on results. For the first 15 years of its existence, the foundation was volunteer-run and consistently brought in about $100,000 for classroom grants to Issaquah schools. Then it hired its first executive director and began growing. The foundation now has two full-time and four part-time staff members and brings in $1.7 million per year, which funds 30 programs in the district.

“We take pride in being as lean as possible,” said executive director Callahan, but, she pointed out, the organization needed to invest in strategic planning and infrastructure to provide more opportunities for Issaquah students.

The Rise of Technology

Nonprofits can expand staffs to aid fundraising efforts, but they also are increasingly using technology to help their cause. Online giving is growing every year, and some organizations are supplementing or even replacing in-person auctions with online or mobile bidding.

Mary Hackett, founder of Delve Analytics, says charities must use data to better understand who their donors are, and how donors want their money spent.

Mary Hackett, founder of Delve Analytics, says charities must use data to better understand who their donors are, and how donors want their money spent.

Just as big data is a buzzword in the for-profit world, the topic also is increasingly finding its way into nonprofit discussions. The largest charities have been using it for years to analyze donor pools and find gaps in the giving pyramid. This allows charities to focus fundraising efforts where they are most likely to pay off. But for smaller organizations, the high cost of analytics has been prohibitive.

Mary Hackett founded Bellevue-based Delve Analytics after many years of working in nonprofit fundraising and being frustrated with the lack of tools available to track and analyze the donor pool. Hackett hired a developer and built her own solution, with fundraising reports that answer the questions she had asked.

Delve has been in business three years and works with small and midsize nonprofits around the country, offering a fixed-price model designed to be affordable for smaller organizations. Delve works like this: Customers submit two queries from their donor database in the form of Excel files. Delve then analyzes the data and returns a customized report that provides a snapshot of current development efforts, along with eight to 10 suggested strategies to fill in gaps in giving level or donor demographics. Delve then follows up to discuss how to best implement solutions.

“Every gap (in giving level or donor demographics) is a win,” Hackett said — they are opportunities to take action and close the gap. She cited one example in which a Seattle-area youth-development organization found a lack of female donors, so it changed its strategy and gained over 500 new female donors within a year.

Susan G. Komen Puget Sound recently hired Delve Analytics to determine why fundraising had gone downhill. Data showed that the organization was losing 60 percent of first-time donors who gave through an event.

Executive Director David Richart explained that follow-up research showed that donors didn’t feel connected with the organization. “What was missing was a true sense of the mission,” said Richart, and the path toward changing the culture “has been a huge, huge learning curve for us as an organization.” Shifting from an almost exclusively event-based fundraising model to one with a strong major-gift program is just beginning, but it seems like a necessity to survive in today’s nonprofit environment.

Susan G. Komen certainly isn’t abandoning events, though. Its popular 3-Day walk, which covered both Seattle and the Eastside and included overnight camping at Marymoor Park in Redmond, raised $2.1 million in September.

The Importance of Social Media

Social media represents another growing opportunity for local nonprofits. Most use Facebook and Twitter to communicate with donors and interested parties, but the effectiveness of these campaigns varies. Those who aren’t using social media as effectively as they could be typically chalk it up to lack of staff.

Brynn Blanchard, vice president of development at the Seattle Humane Society in Bellevue, says social media is most effective for short-term campaigns or emergency needs. When supplies in his organization’s food pantry — which provides free pet food for low-income pet owners — recently ran unexpectedly low, the Humane Society ran a social media campaign that generated many purchases through an Amazon wish list.

Little Bit uses the donation-distribution website Network for Good to implement its rider campaign, in which riders who use its services give back to the organization. This year, for the first time, Little Bit did away with printed materials and had riders solicit pledges online, making requests via email and social media.

Like many nonprofits, Eastside Baby Corner generates far less printed material than it used to, opting instead to use its blog, Facebook, and Twitter to showcase volunteers in action. Seeing themselves or friends in recent photos helps volunteers build a personal connection that can motivate them to contribute more time and money.

The takeaway for donors looking to invest in local charities? Do your research. Look at the scope of services nonprofits provide, as well as their financial health. Then see the organizations in action to gain more insight into how your contribution will make a difference in the community.