Events are critical to non-profit organizations. They come in many shapes and sizes from grand galas to press conferences and everything in between.
There are many reasons organizations hold events:
they can raise money
they can be used to introduce the organization to members of the community
they can be used to recognize and thank donors and volunteers
they can generate community excitement and provide public relations opportunities for new programs or services or projects, or remind people about existing programs
Events are a lot of work. They require financial resources and time to plan, market and produce. After all of that effort, no one is going to be happy if the event does not achieve its objectives.
Every event must have a specific purpose. And it is important that everyone involved is clear about that purpose from the very beginning of the event planning process so that every decision about planning the event can be framed from the perspecitve of whether or not it promotes the purpose of the event. One of the things that must be decided is whether the event is a fundraiser, with the purpose of raising money or a fun raiser with the purpose of building relationships.
Put in context, if an organization had a banquet with the purpose of thanking a long time board member for their years of service which attended by 100 people and budgeted for $10,000 which came in under budget at $8,000 everyone would be thrilled that there was $2,000 left over at the end of the event as long as the event goal of expressing the organization’s appreciation was acheived.
On the other hand, if an organization held a “fundraising” event that raised $10,000 and everyone had a great time it might seem like a great success on the relationship development front. However, if there was only $2,000 left to show for the effort because $8,000 was spent on printing, postage, advertising, space rental, entertainment, food, and decorations, no one is going to be thrilled.
Fundraising margins can vary greatly depending on the type of event, but the rule of thumb is that fundraising events should have expense ratios of less than 50%, preferably in the 35% range.
After all of the time and effort put forth, the organization, staff and volunteers aren’t going to feel good about only keeping 20% of the revenue from a fundraiser. And if the organization has to file a form 990 with the IRS, it isn’t going to look good to the public to see an 80% expense ratio for fundraising events.
Even though both events above had the same financial outcome, the difference between success or failure was the initial purpose the events. The purpose determined the expected financial outcome for each event.
In the second case, either fundraising goals were not established at the outset, revenue projections and expense projections got out of line, or expectations were not realistic. That’s what happens when the purpose of an event isn’t clearly understood by all from the very beginning.
Once a non-profit decides that the purpose of an event is fundraising, whether it is a gala, golf tournament, 5K, or any other creative way to raise money, then all budget decisions regarding revenue (ticket pricing and sponsorship levels) and expenses (printing, postage, advertising, space rental, entertainment, food, and decorations) should be made with the bottom line goal in mind.
Creating a budget with expenses at 35% of revenue will provide a pathway to a successful fundraising event, and the difference between a fundraiser and funraiser.
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My intention is to be thought provoking. As always, I’d be happy to see your comments and thoughts and questions in the space below, or email me directly at [email protected].