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Fundraising is a Catch-22 proposition. In order to raise money, a hospice has to spend money, and sometimes even lose money. The fiscal questions that hospices must answer year after year are whether they are spending enough to raise money and whether they are getting the best return on their investment.
The ability to raise money can mean the difference between a hospice being able to meet its year-end goals or having cut back on programs. That’s why experts advise that hospices approach fundraising not as an annual ritual but as a financial resource just like Medicare and other payers.
That means looking at the way you raise money with the same diligence you any other income source. When hospices evaluate care
and reimbursement, they compare costs of care
to reimbursement. The same approach should be used when evaluating fundraising efforts. Hospices must determine which type of fundraising will bring the greatest return based on the hospice’s fundraising goals, its current financial position, and its fundraising efforts.
The two most common types of fundraisers for hospices are direct mail solicitation and special events. The two, however, should not be considered interchangeable. Each should be used under the appropriate conditions to ensure the hospice is getting the best return for every dollar it invests.
Other avenues for fundraising include:
• personal solicitations;
• sales of goods and services;
• requests for donations from corporations or foundations;
• planned gifts.
"It really depends on the organization," says Daniel Shelles, a consultant with Sinclair, Townes & Co., an Atlanta-based public relations firm that provides fundraising advice to nonprofit organizations, including hospices. "It’s hard to say whether direct mail is better than special events because every organization is different."
Hospices must consider their current needs, says Dee Vandeventer, MA, president and partner of Mathis, Earnest & Vandeventer, a Cedar Falls, IA-based public relations firm that consults with hospices on fundraising.
"When I advise hospices, I look at their resources and whether they are visible in the community," Vandeventer says.
Building a donor base
The fundraising model looks like a pyramid, Vandeventer says. The tip of the pyramid represents the prized but small population of big contributors, and the lower section represents the base of small contributors that is so important to a successful fundraising strategy.
On the other hand, the effort to raise money is an inverted pyramid. The bottom tip represents the least amount of time and money that should be expended. The widest, highest portion represents the most effort and resources. Side by side, the two pyramids illustrate where hospices should be spending their time and resources — the smallest amount with the base of donors who contribute $100 or less and the most time in cultivating large donations from corporations and estates.
This, however, represents a hospice with a mature fundraising program. Direct mail fundraising allows hospices to focus on the base of the fundraising pyramid. Although the base is made up of contributors who have donated small amounts of money, the hope is that they will move up the pyramid by contributing larger amounts in the future.
The trick to meeting your fundraising goal is to decide what amounts constitute major, medium, and small gifts, and how many gifts you need at each level of the pyramid. For example, say you need to raise $300,000 and you decide that $5,000 or more is a major gift, $1,000 is a medium gift, and $50 is a small gift. In that scenario, you need at least: $100,000 from major gifts, or 20 people or organizations donating $5,000 each; $100,000 in medium gifts, or 100 people or organizations giving $1,000 each; and $10,000 in small gifts, or 2,000 people or organizations donating $50 each.
For young hospices and smaller hospices that are trying to build a base of donors, direct mail — written solicitation mailed to potential donors— is the most cost-effective fundraiser, according to Vandeventer. Expansion of a hospice’s donor base is required before a hospice can focus on raising money through special events and soliciting larger donations. For hospices in the position of starting from near scratch, the money and effort needed to stage a special event would far exceed the money that could be raised.
Because hospices with small donor bases must focus on increasing the number of donors, direct mail may not yield profits right away. Instead, the exercise is the beginning of a long-range fundraising plan that includes special events that not only raise money but also increase visibility, says Shelles.
The bulk of the cost for direct mail campaigns lies in printing and postage. If a hospice does not have a database of names — past donors, families that have had loved ones treated in their hospice, and volunteers — it will have to incur the additional cost of purchasing a list of potential donors.
Vandeventer says results from direct mail can vary widely. In some instances, a hospice may see as little as a 1% response (one donation for every 100 letters sent) or as high as 85%. She says hospices trying to build their donor bases should expect to lose money, but they should view that loss as an investment. The goal at this early stage of a hospice’s fundraising strategy
is to expand the base of donors. This base will provide the seeds for future campaigns and larger donations.
To get the maximum response rate, hospices should send their direct mail packages to those who are most familiar with their organization. Fundraising is a grass-roots effort. The easiest place to start is with family, friends, and business contacts of each member of the fundraising team. Each member should think about where his or her personal contacts fit into the fundraising pyramid — major, medium, or small contributors. They also should look at their contacts’ abilities to not only make a contribution but to raise money from their own relationships.
Small or young hospices are not the only ones that could benefit from direct mail. According to Vandeventer, hospices lose an average of 20% of their donors each year. If a hospice has neglected its donor base over a long period, it may have to focus on rebuilding it.
Special events, such as volunteer dinners or memorial programs, raise community awareness and are aimed at prompting larger donations from a smaller group of people. "I’m an advocate of a special event when you are trying to expand your image in the community," says Vandeventer.
Shelles agrees. Direct mail does little to increase community awareness, he says, but events that increase community awareness will contribute to the growth of a hospice’s donor base. "Raising awareness spreads the message to other potential donors, which equals more money raised," Shelles adds
Move up to special events
Hospices that have a strong base of donors can focus on moving those donors closer to the top of the pyramid by building on their past support and asking for a higher amount.
But many hospices already have established fundraising events and may rely more on those to raise money than on personal solicitations. Personal solicitations, while simple, can be a powerful form of fundraising for hospices.
Special events can be time-consuming to plan and execute, says Vandeventer. In addition, the cost could far outweigh the financial benefit.
"It’s a great way to get the hospice message out," says Vandeventer. "You can get valuable public exposure. There is a downside, however. The amount of time spent vs. the amount raised is often inverted."
Both Vandeventer and Shelles say that for hospices to get the most out of their event fundraisers, they should secure corporate sponsorship
to cover the cost of the event so ticket sales and donations will go straight to the bottom line.
Events have the ability to bring in new donors, but their real value is in promoting or reinforcing the hospice message. People who otherwise would not have contributed may be touched by the emotion present at the event, or past donors may be inspired to donate larger amounts.
Events address donor levels above the base. They allow hospices to cultivate repeat donors. Events should stimulate a sense of ownership among donors. "People give to people," says Vandeventer. "Sure, they are giving to an organization, but they are giving their money to help others. You need to show them how their money is helping others."
Vandeventer says hospices should offer larger donors a seat on the board to further nurture a sense of ownership. Major donors are often solicited by other charities. If you place these donors on your board, you can create a greater attachment to your hospice than to other charities that are competing for the donor’s money.
Perhaps often overlooked is the need to thank donors. All donors should receive a "Thank you" letter, with major donors receiving a personal thank you from a volunteer or the administrator of a hospice.
"Thank them in a timely manner," advises Vandeventer. "You should plan to give the appropriate thank you’ based on the gift."
Aside from recruiting annual donors, hospices also should solicit estates or planned gifts, which are assets set aside in an estate for the hospice upon the benefactor’s death.
A planned gift must be evaluated not only
on the basis of the impact it will have on the hospice, but also how it will benefit the donor. A full-service program for planned giving offers a wide range of options to potential donors. This kind of program can be very technical in nature and requires a significant amount of legal expertise.
Planned gifts fall into three basic categories:
• bequests or outright gifts;
• invested funds, with the principal going to the charity and the investment income going to the donor or the donor’s family;
• invested funds, with the principal reverting to the donor and the investment income going to the charity.
Charitable trusts are generally more complicated forms of planned giving. Depending upon the type of trust involved, the hospice recipient may receive income payments from a trust for a predetermined number of years. At the end of that time, the assets are returned to the donor. In this case, the income from the trust benefits the nonprofit, and the donor retains the principal.
For the smaller nonprofit hospice, some of these more complicated arrangements may be too ambitious. But no organization is too small to get started with the simpler options. At the very least, consider adding a line to your newsletter stating that you accept bequests. Contact attorneys in your area to let them know of your interest. Start with the simplest options and add others as you are able.
As hospices plan their fundraising strategies, they should understand how all these options play a role in their overall fundraising strategy. It’s not sound strategy to use direct mail alone or to use events alone. Once a donor base is established, direct mail can be used in conjunction with event fundraisers. The two can address both the need to spread the hospice message as well as the need to maintain a solid base.