This is a short response to an article by 80000hours, asking why charities don’t spend more on fundraising.
People often think it’s bad for their charity of choice to spend money fundraising. Up there with percentage spent on administration, people want the portion of the budget spent on fundraising to be low.
This has always been a mystery to me. If a charity can use your money to go out and raise even more money, that’s great! They’ve just multiplied the impact of your donation.
An even greater mystery has been why charities don’t spend even more on fundraising. The returns from fundraising seem to be huge. For each £1 spent on fundraising, studies have shown that charities typically raise £4-10 (2). That’s an incredible 300-900% return. Why wouldn’t they do as much of this as possible?
One theory is that the social norm against heavy fundraising prevents them from doing as much as they would like. This may be part of the reason. It looks like the sector, and in particular the most effective charities, might under-fundraise.
So far, so good. But what follows fails to be an argument based on out-of-context facts..
- In 2006, charities in the UK raised an estimated £27bn from fundraising. They spent about £5.7bn on fundraising.
- In 2010, charities raised £31bn. They spent £7.8bn on fundraising. (inflation-adjusted)
- So, over this time, an extra £2.1bn was spent on fundraising, raising an extra £4bn. If you assume the extra fundraising led to this increase, then it made a profit of £1.9bn – a return of 90%.
But what is the point of this comparison? Is it meant to show that above a certain point it isn’t as worthwhile spending on fundraising? Even though a 90% return is something any company could dream of? Sure, it isn’t 900%, but with any realism, this is not a figure you can expect all the time.
Besides failing to appreciate that 90% is an amazing figure, the whole data comparison also fails to take note of the fact that by 2010 the banks were being bailed out, government austerity was being announced, jobs lost — and generally charity income plummeting. I know from personal experience, as mighty charities like Oxfam started to tighten their belts. No wonder the 2010 figure isn’t as glowing as the 2006 figure.
And here is my final point. The returns from fundraising can be huge. For each £1 spent on fundraising, studies have shown that charities typically raise £4-10. That’s an incredible return by any measure. Proving that it truly pays to invest in fundraising, and that the higher value the fundraising effort, the better the returns can be. If you’d like to hear our ideas or details about projects we have worked on, do get in touch!
For the full 80000hours.org article and data references, click here.