Events in Fundraising—opportunity costs

Fundraising events that are designed to generate revenue are known to be costly.  About $0.50 to $0.75 of every dollar raised, on average.  So you say, “That’s OK as I’m still raising more than I’m spending.”  Are you?

The cost estimates that are cited for fundraising events include direct costs only.  That is, money that is spent directly in connection with planning and executing the event.  These costs are the proverbial “tip of the iceberg”, however.  Lurking under the surface are other expenses some of which continue to cost your organization long after the event is over and done with.

Take staff hours, for example.  Paid staff costs money.  No one would dispute this; but since they are already on staff, the hundreds—sometimes thousands—of hours that staff invest in a well-executed event appear to be free.  Add the staff costs into the mix and now an event begins to look more like a wash—inputs equal outputs.

But we use volunteers, you say.  They are free.  True, your volunteers aren’t on the payroll.  These highly-motivated individuals give of their time and expertise without expectation of direct compensation.  Now the costs are again down around 50%-75%.

Lurking in the background, however, are two very real costs that, more than any other, sink the viability of most revenue generating fundraising events.  First, there’s something called “opportunity cost.”  That is, what is the value of staff and volunteer time in income generation if the same time devoted to an event were redirected to another fundraising approach.

The return on investment (ROI) of a fundrasing event is between 75% and 100%.  The ROI of a direct-ask high-end cash program, however, is 800% to 1,000%.  The cost of this lost income by using valuable staff or volunteer time in event-fundraising is then any actual payroll cost plus the eight to ten times greater revenue that the same effort would have achieved directing that time to the direct-ask program.   Now the event is a bonifide financial loser—a net revenue negative to your organization.

The other, perhaps even more insidious, cost to your fundraising program is the corrupting nature of transactional fundraising events.  Difficult to quantify but real nonetheless, event fundraising artificially lowers giving levels by positioning the gift as a transaction while giving your constituency the impression they are being generous when they are not.

There are lots of very good reasons to hold an event which can positively affect fundraising revenue.  Community awareness and donor appreciation are two that come to mind.  There’s even value in holding a great party for the sheer joy of it.  Just don’t try to tack on “revenue generator.”  If you do, you’re only deceiving yourself.

Larry C. Johnson
Twitter:  Larry_C_Johnson
Facebook:  The Eight Principles

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.