Why Do Consultants Tell Nonprofits to Cancel their Fundraising Events?

On a weekly basis, there is a new webinar or article about how nonprofits need to ‘rethink’ or cancel a fundraising gala. Yet, everyday there is a new gala on the calendar. 

 “A Gala is Not Philanthropy” by Jeff Schreifels on Nonprofit Pro is entirely correct and yet also incorrect. The comments on the blog post show the discord among us on the topic. Some swear by the benefits of a fundraising event while others quickly suggest canceling events. The short, very blunt answer is that consultants dislike events because most nonprofits host bad events that are not measured or designed correctly.  

The gala, referenced by Schreifels, is simply a party measured by net revenue when it should be designed to (1) create a pipeline of new donors OR (2) move mid-range donors upward in their giving. The gala described achieves neither and, thus, he is right. I personally believe auctions (unless it’s truly excellent) further inhibit the benefits of fundraising events. With rare exception, auction buyers do not make the philanthropic connection to a cause that a donor makes and retention is difficult.  

I know this conundrum first-hand. In my 16 years involved with a nonprofit, we created an event, canceled that event, and then created another event. For the last 8 years, I’ve witnessed the same in many nonprofits and the event ALWAYS returns. It was this experience that was a catalyst for launching Swell Fundraising - event software designed to acquire new donors.  

Why do nonprofit consultants encourage nonprofits to forego event fundraising?  The reason is that event fundraising has a low ROI (both direct expenses but especially staff time) when evaluated by net revenue alone. This is true in every respect when compared to major gift fundraising. 

Why do nonprofits host events? There isn’t a clear path to major donors and the organization needs a catalyst to acquire donors for the cause. Staff and volunteers instinctively default to an event to generate first-time gifts. However, over time that event (created to acquire new donors) does not change and is only measured by net revenue. As the years progress, the attendees at the event are no longer first time donors (many are now major gift prospects) and the ROI on the event declines. Plus, the staff and volunteers turn over and no one knows how the event even started.  

Layered into the problem, nonprofits (after the first year) host poorly designed events focused entirely on net revenue. In their defense, nonprofit staff are using 10 yr old laptops, hand-me-down office furniture and working hard to make budget with few resources. As a result, they cut corners that would enable them to curate a wonderful experience for new donors.  Over the years the pressure to increase revenue builds and they add revenue gimmicks like auctions, wine pulls, raffles etc. which have a low donor retention score.  These revenue additions require significant staff time and yield very little when measured by net revenue ROI.  

What type of fundraising event would a consultant approve of?

A successful nonprofit event should be designed and measured by the following key performance indicators: 

(1) New prospects created;

(2) New donors acquired*; Please note that purchasing an auction item is not a donation ( the IRS agrees) and should not be included in #2. The entity or person that donated the item is the donor.  

(3) Lapsed Donors re-engaged;

(4) Awareness created;

(5) Revenue (especially if it creates a new channel like corporate sponsorships) 

Events designed with these goals typically do not have fundraising gimmicks, focus on guest experience, plan an inspiring program, push social media / PR reach and create a strong fundraising ask (Fund-A-Need works here).  In this regard, the event becomes the first step in the donor experience and pipeline.   

When positioned correctly, the event can transform the major gift and planned giving functions by flooding them with prospects.   

Example: In the case of a nonprofit client from 10 years ago, we created a new event that strategically targeted a younger donor base. The event generated the same net revenue as the previously cancelled wine auction with an entirely new base of donors. Board members and strategic donors who once attended the wine auction are now enjoying living room conversations about a major gift, the annual fund increased 13% due to new donors acquired by the event and today many of those early donors are now serving on the board and emerging as major donors themselves.  During its first 6 years, the new event acquired over 1000 new donors to the organization. No auction, No Gimmicks - simply a focused Fund A Need.  

When nonprofit events drive the donor pipeline, it provides a valuable 'assist' for the organization's growth metrics that ultimately can drive the major gift programs. Designed correctly, the nonprofit consultant community will cheer you on. 

For more articles written on this topic visit the following: 

Are you Throwing a Party or a Fundraiser?

How to Decide What Type of Fundraiser to Host

10 Ideas to Include in Your Event Sponsorship Package