In November’s e-Teaching, I made the case that all nonprofits and charities incur inevitable expenses for fundraising and administration. That was true when Paul raised funds for poor saints in Jerusalem (a fact I elaborated on in my last e-teaching), and it has been true every time funds have been raised ever since. Even in the case of an all-volunteer organization, there are still expenses incurred for fundraising and administration, expenses that are often paid by the volunteers themselves.
So let us admit it: It costs money to inform potential donors of needs, and it costs money to use donated funds properly in order to meet the needs for which they were given.
And just as business leaders must decide what percentage of their budgets to allocate for advertising, so nonprofit leaders must decide what percentage of their budgets to allocate for fundraising. The same is true for administrative expenses. And the reason that many nonprofits fail or underperform is the same reason that many businesses fail or underperform: poor allocation of funds.
One reason that Heaven’s Family has succeeded in our mission to the degree that we have (and I’m not saying that we could not have done much better) is simply because we’ve made our best effort to effectively allocate what God has entrusted to us. And we’ve unashamedly allocated a small part of what God has entrusted to us for fundraising.
A Corny Example
Fundraising is like planting seeds of corn. There is an element of risk. When you plant corn seeds, you are burying something that you could have eaten instead. If it doesn’t rain, you’ll regret planting those seeds and wish you’d used them to make cornbread! But if things go as you hope after planting, you’ll end up with a whole lot more corn than if you had “played it safe.” In fact, one harvest insures that you’ll have a chance at another harvest, while the farmer who eats all his seed is a farmer for only one year.
I’ve watched quite a few fine missionaries come off the field permanently because of failure to understand this. They invested 99% of their money and time on their target beneficiaries, and 1% on the people who made their ministry possible through their donations. They made very little effort to communicate to their donors what their donations were accomplishing on the field, often with the excuse of “not wanting to waste time and money.” Consequently, their donors didn’t feel like they were an important part of the missionary’s ministry when, in fact, they were its lifeblood!
So those donors stopped giving, and before long, the missionary returned home, and often bitter that “no one wants to give to missions.” (Meanwhile, Christians give hundreds of millions of dollars annually to support Christian missions.) The real problem is that missionary violated the Golden Rule. He didn’t treat his donors like he would want to be treated if their roles were reversed.
At Heaven’s Family, from the very beginning, we’ve considered our ministry to our donors to be just as important as our ministry to the “least of these.” When we raise funds, we’re giving our donors an opportunity to invest in building God’s kingdom around the world. And we know that without those wonderful “investors,” we can’t do anything. So we’ve worked hard at acquiring new investors and letting our current investors know that we’re all enjoying a great ROI (Return On Investment)!
A Confession of Sorts
So what is my confession this month? Actually, it is really not much of a confession at all, because it is not something of which I’m ashamed. But it might be a surprise to some of my readers—whom I’ve been trying to prepare for what I’m about to reveal.
Here’s my confession: In 2012, Heaven’s Family bought full-page ad space in World Magazine (an excellent Christian periodical to which I subscribe, by the way). We negotiated the best rate we could, and we didn’t use money from our General Fund, but rather a portion of a sizable, single donation concerning which the donors were OK with our using part of it for strategic advertising. Our four ads in World cost us $11,410. That is money, of course, we could have used to meet some very pressing needs around the world. But we decided to take a risk at multiplying our seed by planting it in soil that might give us a harvest.
Our ads in World offered readers a free copy of a book that I wrote, titled Forever Rich, that is somewhat disguised to the undiscerning as a book that promotes the “prosperity gospel,” but which is really all about laying up treasure in heaven. 724 of World’s readers requested a free copy, and our printing and postage costs to fulfill their orders totaled $3,875. So our total investment was $15,285.
We’ve since tracked donations from the people who ordered a free copy of Forever Rich. To date, they’ve cumulatively given Heaven’s Family about $124,000. That’s an ROI of over 700%, enough to turn even Warren Buffet green. (And that ROI is only going to grow larger every year as those donors continue to invest in Heaven’s Family projects.) With that $124,000, we’ve done a lot more good around the world than we could have done with that $15,285 “seed” money. And the folks who gave Heaven’s Family that $15,285 know it was a good investment on their part.
Let me make another confession related to fundraising. This one is a genuine confession, because it is something about which I am ashamed.
Have you ever attended a Christian concert during which, at some point in the show, the lead singer spent time encouraging everyone to peruse child-sponsorship packets in the lobby after the concert in hopes that everyone will sponsor a poor child for about $30 per month? I confess that I was shocked to learn some years ago that Christian bands are often paid a $75 commission for every child who is sponsored at their concerts. On some concert tours, child sponsorships can result in tens of thousands of dollars in commissions for Christian bands.
In fact, some of the larger child-sponsorship ministries approach popular Christian bands before their tours begin and offer advance commissions. Using a formula that calculates how many children will likely be sponsored if they follow the script, those child-sponsorship ministries can sometimes offer a check that exceeds $100,000, or even enough to buy a tour bus. The bands are told, “If you can get x number of children sponsored by the end of your tour, you don’t have to return any of this check.” (Which could explain why the passion displayed by some Christian bands for the child-sponsorship ministries they plug increases towards the end of their tours!)
I don’t know why I ever thought that Christian bands promote Christian ministries out of the goodness of their hearts and for free. But when I discovered that some are making tens of thousands of dollars doing it, I was grieved. I concluded that they were not motivated by love for poor children, but love of money for themselves. And I told people about my discovery, speaking very negatively about this “industry secret.”
Since then, I’ve reconsidered my judgment. Christian bands, consisting of very talented vocalists and musicians who could well make more money in secular music, have chosen to use their talents for God’s kingdom. To that degree, they’re making a sacrifice.
Second, they endure the misery of life on the road, often away from their families. What may appear to be a glamorous life is not. They sing the same songs over and over and over again. And they always have to look like they are enjoying themselves. It is work. And workers should be paid.
Third, I’ve learned that the money generated from child-sponsorship commissions actually defrays the costs of concert tours, which means concert tickets can cost less, which means more people can afford to attend. That also means more people can hear the gospel (if the gospel is shared).
Fourth, tens of thousands of children are sponsored every year as a result of band promotions, and poor children, their families, and their communities are helped as a result. Child sponsorships result in hundreds of millions of dollars flowing into service and ministry in poor countries.
Fifth, the Return-On-Investment for child-sponsorship is incredible, one that may well supersede that of any other means of fundraising. If the cost to acquire a child sponsor is $100, and the average child sponsor gives $30 per month for 7 years, that is an ROI of 2,520%! A good ROI is actually an indication of good stewardship, and everyone knows that who has read Jesus’ Parable of the Talents (see Matt. 25:14-30; Luke 19:12-27). The goal of every Christian fundraiser who wants to be a good steward is a high ROI (unlike those nonprofits that spend $100 million to raise $105 million).
All these things being so, I’ve asked God to forgive me for being critical of Christian bands that plug child-sponsorship ministries. I suppose I still wish that Christian bands would tell the whole story, and as they push child sponsorships, add, “Not only will you be helping a child, a family, and a community through your sponsorship, but you’ll also defray the costs of our concert tour through the commissions we earn.” But it occurs to me that rarely do pastors say on Sunday mornings, “Your offering this morning will, in part, help me make the payments on my new SUV!”
Speaking of SUVs, General Motors spends about 3% of its total revenue on advertising. So when you buy a $30,000 car, you paid $900 to be persuaded to buy it.
You can be sure that General Motors has spent a lot of money to arrive at the perfect percentage of its revenue to invest in advertising in order to realize the highest profits. If GM’s president suggested that the company save money by eliminating all advertising, he would soon be looking for a new job.
The average percent of revenue spent by publicly-traded companies for marketing is about 10%, a cost that is passed on to consumers. So it is safe to say that about 10% of what you spend on purchases is what you pay to be persuaded to make those purchases. But you shouldn’t be upset about that. If those companies had not advertised their goods and services, you probably would not have known about them, and therefore would not have enjoyed the benefit of the goods and services that you purchased. (Yes, I know that advertisers often persuade people to purchase what they really don’t need or really can’t afford, but that is another subject…)
Heaven’s Family, and most Christian ministries, don’t spend anywhere close to 10% of their revenue on fundraising. But I’m wondering, if the average publicly-traded company allocates about 10% of its revenue on marketing, that obviously reveals part of the formula for success in business. In light of how much less of a percentage most ministries spend on advertising/fundraising, could that be an illustration of something Jesus lamented: “The sons of this age are more shrewd in relation to their own kind than the sons of light”? (Luke 16:8). (And I’m uncertain if I’m correctly interpreting the intent of Jesus’ words.)
I’m wondering, if you made a contribution of $10 to Heaven’s Family, and Heaven’s Family used $1 of your contribution for advertising that would generate $10 in additional contributions, would you be upset? I suspect not. (And for this reason, in 2016 our staff and board members are going to be praying about and discussing, for the very first time in Heaven’s Family’s history, if we ought to increase our current minimal advertising/fundraising budget.)
I’d like to close this e-teaching by quoting a letter addressed to America’s donors, written and signed by the CEOs of three significant nonprofit watchdogs: Charity Navigator, GuideStar and the BBB Wise Giving Alliance. They titled their letter, “The Overhead Myth”:
To the Donors of America:
We write to correct a misconception about what matters when deciding which charity to support.
The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as “overhead”—is a poor measure of a charity’s performance.
We ask you to pay attention to other factors of nonprofit performance: transparency, governance, leadership, and results. For years, each of our organizations has been working to increase the depth and breadth of the information we provide to donors in these areas so as to provide a much fuller picture of a charity’s performance.
That is not to say that overhead has no role in ensuring charity accountability. At the extremes the overhead ratio can offer insight: it can be a valid data point for rooting out fraud and poor financial management. In most cases, however, focusing on overhead without considering other critical dimensions of a charity’s financial and organizational performance does more damage than good.
In fact, many charities should spend more on overhead. Overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems—as well as their efforts to raise money so they can operate their programs. These expenses allow a charity to sustain itself (the way a family has to pay the electric bill) or to improve itself (the way a family might invest in college tuition).
When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called “The Nonprofit Starvation Cycle.” We starve charities of the freedom they need to best serve the people and communities they are trying to serve.
If you don’t believe us—America’s three leading sources of information about charities, each used by millions of donors every year—see the back of this letter for research from other experts including Indiana University, the Urban Institute, the Bridgespan Group, and others that proves the point.
So when you are making your charitable giving decisions, please consider the whole picture. The people and communities served by charities don’t need low overhead, they need high performance.
Art Taylor, President & CEO, BBB Wise Giving Alliance
Jacob Harold President & CEO, GuideStar
Ken Berger President & CEO, Charity Navigator
(You can view the letter in its entirety here.)
I agree wholeheartedly with these three men. The “Overhead Myth” is one that I have helped perpetuate in the past, and one that I hope to help eradicate in the future! — David