Fundraising

What nonprofits in China have to do with your overhead

on April 30, 2018

“As the nonprofit employees in the room struggled and strategized whether or not 30% or 25% overhead margins were realistic, one man in the crowd stood up. He was there at the fundraising conference representing a Chinese nonprofit. He told the group that it wasn’t uncommon for mature nonprofits in China to have an operational overhead under 8% and sometimes as low as 5%. And he attributed the ability to achieve these low numbers to one simple thing — the move to online.”

No, this isn’t a made up story from some dystopian future where supporters no longer care about a nonprofit’s overhead margins. It was a real occurrence that happened at the International Fundraising Conference in New Orleans last month.

The session was titled, What right do you have to tell us how much to spend on fundraising? And the conversation was around how fundraising-related costs make up a significant amount of overall nonprofit overhead.

The physical cost of fundraising

Total organizational overhead typically falls into two categories: administrative expenses and fundraising expenses. In the United States, three-quarters of organizations have fundraising expenses between 2% and 9%, and they typically include costs like advertising around fundraising campaigns, creating and distributing fundraising manuals, maintaining donor mailing lists, and many other physical materials.1_PhysicalFundraisingThe ratios can change a bit when you break them down by sector and organization size. But when you look at fundraising efficiency — the amount an organization spends to raise $1 — the numbers vary a lot less by sector... and not at all by size. Nonprofit Quarterly reports that three-quarters of organizations have a fundraising efficiency between $0.09 and $0.29.

But for China, who hardly has a concept of direct mail and whose financial system does not include paper checks, their biggest fundraising obstacle is size and reach — figuring out how to reach and engage billions of supporters and micro-gift donors, and how to make it as easy as possible for donors to give in as many ways as they can. And this is why making the move to digital fundraising has been so successful.

The move to digital

With online fundraising, even small organizations can have a huge impact when they use digital communication efficiently. In 2016, 8.2 million users donated to the online fundraising platform Tencent during Giving Day China. But these gifts weren’t all from massive corporations or wealthy donors. Of the Tencent platform donors, 40% were high school students, with US$1.45 being the average gift size after currency conversions.

These large amount of micro-donations were generated through collaborations that made maximum reach possible, such as digital fundraising platforms that allowed for mobile communication, social reach, instant mobile payment, and more. The end result was low fundraising costs that centered on online investments in tools and technology, and an impressive return on mission for both small and large organizations.2_ShareOnlineHow to replicate low-overhead digital success

So, this is all great and wonderful for China. But how can U.S. nonprofits take what China is doing so right and apply it to the success of their own organization? To start, move the following costly fundraising efforts online:

Direct mail

Direct mail is the cornerstone of many nonprofit’s communication plan. It’s used for everything from direct ask letters to thank yous to organization updates. But email messaging can be just as effective, if not more so, at reaching and engaging supporters.3_EmailThe 2018 M+R Benchmarks Study revealed that nonprofits received an average of 28% more online gifts in 2017 than 2016, and email messaging drove 28% of all nonprofit online revenue in 2017. For every 1,000 fundraising messages sent — an email that solely asks for a donation, as opposed to an email newsletter, which might ask for a donation and include other links — nonprofits raised an average $42. This number jumps to $71 for small nonprofits with under 100,000 email subscribers.

When you break down the cost of direct mail (printing, postage, time, etc.), the fundraising efficiency of email messaging just makes sense.

Traditional advertising

There is value in driving supporters to your organization’s website… $1.13 raised per nonprofit website visitor, in fact. Plus, every time a supporter visits your website, you are establishing and deepening their relationship with your cause. And these small interactions add up to a valuable relationship over time.4_InstaThis is why nonprofits should make it as easy as possible to drive supports directly to their website. Traditional print advertising makes this hard because you are reaching people when they are not online — while they’re watching TV, driving, or sorting through their mail. So even if your call to action is to visit your website, your supporter has to remember to take that action the next time they are online.

But with email or digital ads, you can drive people right to your website when they are already online and engaged with your message. Plus, you have much more control over who sees your ads, because you are able to target your audience by interest or location, or even expand it by uploading lists of email addresses to discover new lookalike audiences.

Calls for Support

Online channels are a great opportunity for exposure for nonprofits, thanks to the value that social sharing provides. According to the 2018 M+R Benchmarks Study, for any given Facebook post in 2017, 38% percent of the audience reached was not already following the nonprofit. That means that 38% of the people who are viewing your Facebook content likely have no previous connection to your nonprofit or your cause.

That’s a great group of new supporters you could be reaching with one single social message, who you couldn’t reach all at once with a phone call or direct mail piece.5_Facebook_v3Plus, another benefit of reaching out for support on social is that you are not only connecting with a single supporter, but also that supporter’s network when they promote your cause on their own page. And we know from our Social fundraising report for nonprofits how valuable a share on social can be.

According to the data report, someone who visits your campaign page and shares it on social bring in an average of $13 per share to a campaign. Even better, if they donate and share their donation to a campaign on social, it brings in, on average, $15 in new donations.

These statistics don’t even take into consideration the amount of exposure and awareness gained from these shares.

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Want to learn more about the different ways that you can bring your nonprofit campaign online to get more fundraising exposure and lower overhead costs? Click below to talk with one of our digital fundraising experts.

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Gary Wohlfeill

Gary Wohlfeill is the Director of Marketing at CrowdRise. He works with partners to develop highly engaging fundraising campaigns, and leads the marketing team in developing the CrowdRise brand. Gary has been named as having the “3rd best haircut of people under 6 feet tall at CrowdRise" and hopes one day to slip to 4th.